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3 FTSE 100 dividend stocks I’d buy with my last £1k

What should you buy for your share dealing account if you’re down to your last £1k? Choosing between good candidates can be tough.

Today I want to look at three stocks I’d buy if cash was tight. I’d probably only buy one of these with £1k, because I like to keep dealing costs down below 2%. But I reckon each of them should be a safe long-term bet.

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Pharma stalwart

The global population is getting larger and wealthier. This makes me confident that large, diversified pharmaceutical companies should be a fairly safe place for your cash, over the long term.

GlaxoSmithKline (LSE: GSK) is currently my pick of the UK’s big two listed pharmaceutical firms. One reason for this is the planned spin-off of the group’s consumer goods division over the next couple of years. Splits such as this often create value for shareholders by creating two more focused and ambitious organisation. I think that’s likely here.

The group’s recent results also looked fairly respectable to me. Underlying sales rose by 4% to £33.8bn last year, while adjusted operating profit climbed 3% to £8.9bn. Among the highlights were sales of shingles vaccine Shingrix, which doubled to £1.8bn last year.

Earlier this year, I felt that Glaxo shares were starting to look fully priced. But the GSK share price has now come down to a level where the stock offers a dividend yield of nearly 5%. In my view, that could be a good level to buy.

Sustainable packaging

Packaging remains big business despite environmental concerns. Two big growth areas driving demand for more sustainable packaging are internet retail and pre-packaged food.

One firm that’s a leading player in both of these markets is FTSE 100 group Mondi (LSE: MNDI). This £6bn firm reported its 2019 results on Thursday, bucking the market trend with a very stable performance. Sales were down 3% to €7,268m, while operating profit was 2% higher, at €1,221m.

These figures give the business a 2019 operating margin of 16.8% and a return on capital employed of 18.7%. In my view that’s an impressive level of profitability for a packaging business. This suggests to me that Mondi enjoys good scale and offers a product range that provides clear benefits over cheaper alternatives.

Mondi’s management warn that 2020 could be a difficult year. But I don’t see any reason to dislike the stock on this basis. The shares have already come off the boil over the last year and look reasonably priced to me, on 12 times forecast earnings and with a dividend yield of 4.1%. I’d be a buyer here.

Cheap fashion, sweet tastes

My last company is one of the more unusual businesses in the FTSE 100. Associated British Foods is still controlled by its founding Weston family and is an old-fashioned conglomerate.

Businesses within the ABF group include fast fashion retailer Primark and grocery brands such as Twinings, Ovaltine, Patak and Blue Dragon. The group also owns Allied Bakeries and is a major sugar producer.

Family ownership often means conservative management and strong finances. That’s certainly the case here, in my view. ABF is one of a handful of shares I’d be happy to buy and own forever. The valuation has come down somewhat since January and is starting look more tempting to me, on around 15 times forecast earnings.

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Roland Head owns shares of GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Associated British Foods. 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.