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2 FTSE 100 dividends I’d buy with Woodford cash

Investors who were left locked into the Woodford Equity Income Fund when it was suspended in June should be receiving their first payout in the next few days.

If you’re in line for some cash, you may be starting to think about where to invest this money. I’d guess that if you put cash into Woodford’s funds, you were hoping he’d repeat his past success with big-cap contrarian investments.

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I’m going to look at two unloved FTSE 100 stocks you might not have considered before. Both of them look reasonably priced to me, with dividend yields of around 5%. I reckon they could prove to be profitable buys for a long-term portfolio.

Cruise ship blues

Carnival (LSE: CCL) is the world’s largest cruise ship operator. The FTSE 100 firm owns brands including Carnival, Princess Cruises, P&O Cruises and Holland America. It’s been in growth mode for a number of years and sales have risen by more than 30% since 2014.

However, growth has slowed over the last couple of years. Costs have risen and last year saw “a significant downturn” in demand from the group’s large Western European market. The company has also faced a number of disruptive one-off events that have affected its cruise schedules.

The Carnival share price reflects these changing conditions. The stock has fallen by more than 25% over the last year and now trades on just nine times forecast earnings, with a dividend yield of 4.9%.

I believe this could be a buying opportunity. The global cruise market remains in growth mode, especially in Asia. The demographic appeal of cruising is expanding, with more young people and families choosing this type of holiday.

Carnival owns many of the most famous brands in cruising and I’m confident it will remain the market leader. I think the shares looks attractive at current levels and have been buying for my own portfolio.

DIY nightmare

Another company that’s unloved at the moment is Kingfisher (LSE: KGF). This group owns B&Q and Screwfix in the UK, plus similar DIY chains in France and Eastern Europe.

Former boss Veronique Laury tried to unify these retailers’ product lines, which would have cut costs and improved profit margins. But she couldn’t overcome the impact of weak sales in France and slowing sales at B&Q.

Laury departed last autumn and has been replaced by experienced retail executive Thierry Garnier. He’s already indicated that he thinks the group is “trying to do too much at once” and may not be staying close enough to local markets. I suspect Garnier intends to find a way to slim down and refocus this business.

Kingfisher is unusual among big retailers as it has a strong balance sheet with minimal debt and good cash generation. Historically, profit margins have been significantly higher than comparable retailers such as supermarkets.

Given this fundamental strength, I think Kingfisher stock looks cheap at the moment on just 10 times forecast earnings. The dividend yield of 5.2% looks safe to me, too. I reckon this stock could be one of the safest bets in UK retail, and view the shares as a contrarian buy.

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Roland Head owns shares of Carnival. The Motley Fool UK has recommended Carnival. 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.