The aggressive sell-off that has gripped the market over the past few weeks has been extreme. Investors have been indiscriminately selling companies, without giving any regard to whether or not the coronavirus outbreak will impact them. This has thrown up some fantastic FTSE 100 dividend bargains.
Here are two companies that might be worth considering today if you have £5k to invest.
FTSE 100 dividend stock one
Accounting software group Sage (LSE: SGE) is one of the UK’s top tech companies.
It is also unlikely to be significantly impacted by the outbreak.
Customers tend to be very sticky in the accounting software market. Changing over your accounting provider can be a time-consuming and complicated process. Therefore, most businesses tend to stick with one software provider for years. They are not likely to change providers just because activity drops for a couple of months.
This suggests that Sage has all the qualities of a FTSE 100 dividend champion. Steady cash flows from software sales should ensure that the group can weather the virus storm, and there’s a good chance the business might come out stronger on the other side.
If smaller competitors fail thanks to the economic uncertainty, Sage can snap up their business.
As it has capitalised on its position over the past few years, earnings per share have grown at a compound annual rate of 7% since 2014. This has enabled management to increase the company’s dividend at a similar rate. Sage’s dividend yield currently sits at 2.6%. The distribution is covered 1.7 times by earnings.
If the payout continues to grow at 7% per annum, as it has done in the past, investors could receive a 5% yield on cost by 2030.
Protection against uncertainty.
European information group Relx (LSE: REL) is not entirely insulated from the Covid-19 outbreak, but it is in a better position than most FTSE 100 dividend stocks.
Relx, which provides information for scientists, lawyers and doctors, also hosts more than 500 exhibitions around the world.
The virus outbreak is almost certainly impacting the exhibition business. As of yet, management has not been able to provide any guidance on these losses.
Nevertheless, the information side of the business should provide some protection against this uncertainty.
In the data business, size is everything. As one of the world’s largest information groups, this puts Relx in a strong position. Even if revenues slump over the next few months, the company’s place in the market should enable it to make a healthy recovery.
Thanks to its competitive advantages, the stock has previously demanded a high earnings multiple. For the past five years, investors have been willing to pay an average of 25 times earnings to buy the stock. However, today investors can snap up the shares for just 18.9 times forward earnings.
On top of this, the shares offer a dividend yield of 2.6%. It is covered twice by earnings per share and has grown at a compound annual rate of 12% for the past six years.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended RELX and Sage Group. 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.