Even though the FTSE 100 index produced one of its best total returns on record for investors in 2019, there are still many income opportunities available in the index.
Such companies might face challenges in the short run, but over the long term, they have all the hallmarks of successful buy-and-forget income stocks.
With that in mind, here are three FTSE 100 dividend stocks that offer attractive yields and appear to offer the potential for capital growth over the long run as well.
Recent trading updates from Barratt Developments (LSE: BDEV) show that the UK housebuilding market is still booming, despite political uncertainty. Notwithstanding weak consumer confidence, people still want to get on the housing ladder, and the government is pursuing favourable economic policies that will continue to drive demand for the next few years.
As such, now could be a great time to snap up shares in this builder and pocket its market-beating dividend yield of 6%. Even after its large dividend distributions, the company expects to maintain a substantial cash balance in 2020. It ended 2019 with net cash on the balance sheet of £760m, which should act as a support for the group’s dividend distribution.
The stock also trades on a price-to-earnings (P/E) ratio of 10.5, which suggests that it offers a wide margin of safety at current levels, implying that now could be the right time to buy a piece of this business for the long run.
Another FTSE 100 income stock that appears to offer value is asset manager M&G (LSE: MNG). When the company was spun off from its parent, Prudential, in October of last year, M&G promised investors sizeable distributions in 2020. The business was targeting a combination of regular and special dividends over the following 18 months equivalent to 18% of its stock price at the time of the IPO.
It seems that management is still committed to this level of income, but recent share price gains have pushed the prospective dividend yield down. While we are still waiting for the asset manager to declare a special dividend for 2020, a regular dividend yield of 6.2% is expected.
In addition to this yield, and the prospect of special payouts over the next 15 months, the stock currently trades on a P/E ratio of just 6.5, a substantial discount to the rest of the market.
Therefore, it looks as if M&G could produce substantial capital gains as well as income for investors.
Media conglomerate WPP (LSE: WPP) fell on hard times in 2018, although recent trading updates from the business show that management is making good progress in returning the group to growth.
Organic sales growth has been outperforming City expectations and asset sales, designed to reduce borrowing, are taking place.
WPP remains the world’s largest media agency, so while the business will continue to face challenges from online advertising giants in the short term, from a long-term perspective, the business has the firepower to fight back. It can offer customers a better all-round package with its global presence and integrated supply chain. It is a one-stop-shop for everything advertising.
Since it offers a dividend yield of 5.6%, covered 1.6 times, and trades on a P/E ratio of 11.1, now could be the time for investors to buy into this recovery story.
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Rupert Hargreaves owns shares in Prudential. The Motley Fool UK has recommended Prudential. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.