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2 FTSE 100 dividend stocks I’d buy for my ISA today

The market’s recent decline has sent shockwaves through the investor community. After 10 years of relative stability, the sudden bout of volatility has caught many investors by surprise. However, this could be an excellent opportunity for investors with a long-term time horizon. The volatility has thrown up some fantastic bargains, especially for income seekers.

With that in mind, here are two FTSE 100 dividend stocks that appear to offer value after recent declines.

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British American Tobacco

Shares in global tobacco giant British American Tobacco (LSE: BATS) have slumped in value this year. After this decline, the stock is trading at a price-to-earnings (P/E) ratio of 9.2. The shares also offer a market-beating dividend yield of 7.2%.

These metrics suggest the company is struggling, but that’s not the case. According to recent trading updates from the business, revenues increased by 5.7% in 2019, and analysts are expecting further growth this year. The City has pencilled in an earnings rise of 12% for 2020, up from 7% in 2021.

These numbers imply the underlying operation is robust, despite what the market might be saying. As such, the stock’s current valuation appears to offer a wide margin of safety, at current levels. It also seems as if the dividend yield is secure for the time being. The distribution is covered 1.5 times by earnings per share, which gives management plenty of headroom to increase the payout further in the years ahead.

There’s also plenty of cash available to reduce the company’s debt pile. Indeed, last year the operation produced £2bn of free cash before the payment of dividends.

Overall, these figures suggest British American could be a great addition to your income portfolio.

M&G PLC

M&G (LSE: MNG) appears to be one of the cheapest stocks in the FTSE 100 right now. The savings and investment company is dealing at a P/E of 5.5 and supports a dividend yield of 7.6%. Further, the stock is trading at a price-to-book (P/B) ratio of just 0.6.

The question is, if the stock is so undervalued, why are investors avoiding the business? There seem to be two main reasons behind the undervaluation.

First of all, M&G is still a relatively new business that’s only been a public entity since the end of October 2019. Moreover, the company hasn’t, as of yet, published any results. It seems the market is waiting for further information before taking a position.

It also seems investors are giving M&G a wide berth because analysts are forecasting a decline in earnings this year. This is only a projection at this stage, and we’ll have further information when the company publishes its first set of results as an independent entity.

The issues above appear to be temporary factors. Therefore, long-term investors should focus on the group’s income and growth potential rather than short-term market uncertainty.

M&G is one of the world’s largest asset managers, which gives it an edge over competitors as well as impressive economies of scale. That isn’t going to change anytime soon. What’s more, management has already confirmed the company will hit the City’s dividend targets over the next 12 months.

Are you prepared for the next stock market correction (or even a bear market)?

It’s official: global stock markets have been on a tear for more than a decade, making this the longest bull market in history.

But this seemingly unstoppable run of success poses an uncomfortable question for investors: when will the current bull market finally run out of steam?

Opinions are split about whether we’re about to see a pullback — or even a bear market — in 2020. But one thing is crystal clear: right now there’s plenty of uncertainty and bad news out there!

It’s not just the threat posed by the coronavirus outbreak that could cause disruption — Trump’s ongoing trade-war with China and the UK’s Brexit trade negotiations with the EU rumble on... and then there’s the potential threat of both the German and Japanese economies entering recession...

It all adds up to a nasty cocktail with the potential to wreak havoc and send your portfolio into a tailspin.

Of course, nobody likes to see the value of their portfolio fall, but fortunately, you don’t have to go it alone. Download a FREE copy of our Bear Market Survival Guide today and discover the five steps we believe any investor can take right now to prepare for a downturn… including how you could potentially turn today’s market uncertainty to your advantage!

Click here to claim your free copy of this Motley Fool report now.

Rupert Hargreaves owns no share 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.