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3 reasons why I’ll be buying more FTSE 100 dividend stocks in my ISA in 2020!

The income appeal of the FTSE 100 continues to be high, despite its 12% rise in 2019. Compared to other assets such as cash and bonds, the index offers a high income return at the present time.

Additionally, FTSE 100 stocks could deliver strong capital growth due to them having exposure to fast-growing economies such as China and India. And, with the index’s track record of recovery from challenging periods being strong, the risks facing the index should not be a major concern to long-term investors.

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Income potential

With the FTSE 100 having a dividend yield of around 4.3% at the present time, it offers significantly higher returns than other major assets. For example, cash savings are unlikely to deliver an income return of more than 1.5% in most cases in 2020. It’s a similar story with investment grade bonds, with many issues unlikely to beat inflation when it comes to their income return in the next 12 months.

The FTSE 100’s dividend yield not only highlights its income potential, it also suggests that the index offers good value for money. This could equate to relatively high returns in the long run, with investors apparently unsure about the prospects for large-cap shares at a time when risks facing the global economy are high.

Growth prospects

Despite risks such as a global trade war and geopolitical uncertainty in the Middle East, the world economy is forecast to grow at a faster pace in 2020 than in 2019. This suggests that the continued strong growth prospects for major economies such as the US could benefit the FTSE 100 due to its international exposure.

In fact, around two-thirds of the index’s revenue is generated from international economies, as opposed to the UK economy. This may mean that while the UK faces a period of slower growth in the near term due to political risk, the FTSE 100’s prospects are relatively bright.

Track record

Even if the FTSE 100 experiences a disappointing near-term period, its track record shows that it has always recovered from its downturns to post record highs. This is a key reason why the index has been able to deliver an annualised total return of 9% since its inception 36 years ago, despite experiencing numerous setbacks during that time.

Therefore, even if the FTSE 100 experiences a downturn in the current year due to the aforementioned risks, long-term investors may still be able to enjoy strong total returns in the coming years. As such, investing in a diverse range of income shares now could prove to be a sound move. They may experience greater volatility than other assets in the near term, but their long-term income and growth prospects could lead to an improvement in your financial outlook.

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Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.