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FTSE 100 yields have surged! Here are 2 dividend stocks I’d buy

As the FTSE 100 has declined over the past few weeks, dividend yields on some of the market’s top dividend stocks have surged. Indeed, the index’s average yield now stands at 5.7%. That’s nearly a full percentage point higher than it was at the beginning of this month.

As such, now could be an excellent time for investors to snap up shares in high-quality FTSE 100 dividend stocks at a discount valuation. Here are two companies that look particularly attractive after recent declines.

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Dividend stocks on offer

When it comes to FTSE 100 dividend stocks, Royal Dutch Shell (LSE: RDSB) has always been a standout performer. The company has paid a dividend to investors every year since the end of the Second World War. During this time, the business has seen numerous recessions, depressions, wars and oil price slumps. Its dividend has survived all of them.

Therefore, even though the current market environment is unlike anything we’ve ever seen before, the company’s past resilience suggests it could come out on top this time as well.

For the past few years, Shell has been focused on cutting costs and improving efficiencies across the group. Management has been positioning the company for a low-oil-price environment. As it turns out, these were extremely well-timed actions.

OPEC and Russia’s price war has sent oil prices plunging. This is only adding to the economic pain the global coronavirus outbreak is inflicting.

This double whammy could be too much for some high-cost producers to handle, but Shell’s integrated operations should help the business pull through. The company is the largest energy trader in Europe and also has a blossoming electricity division.

After recent declines, the stock supports a dividend yield of 15%, which suggests that even if the payout is cut by 50%, the stock would still offer investors a market-leading 7.5% yield. On top of this, the shares are dealing at a price-to-earnings ratio of 5.8. This implies they offer a wide margin of safety at current levels.

Steady income

During the financial crisis, only a handful of companies managed to maintain their growth trajectories while the rest of the business community struggled. One of these was British American Tobacco (LSE: BATS).

For its 2009 financial year, the company reported a 20% increase in gross turnover. Tobacco volumes jumped 1% and basic earnings per share rose 11%. In other words, the company has a track record of being able to achieve growth in hard times. That’s why British American has a reputation as one of the FTSE 100’s top dividend stocks.

However, despite these strengths, shares in the company have still dropped like a stone in recent weeks. After these declines, the stock now offers investors a dividend yield of 8.3%. Meanwhile, the shares are dealing at a P/E of 7.9.

Analysts are expecting the business to report earnings growth of around 11% in 2020. That’s even after factoring in the current economic uncertainty. Further growth is forecast for 2021.

Lower interest rates also suggest the company’s bottom line will benefit from lower interest costs, which could speed up with the group’s efforts to reduce its looming debt mountain.

Therefore, now looks to be an excellent time to take advantage of the recent market sell-off and snap up a share of this leading FTSE 100 dividend stock.

A top income share with a juicy 5% forecast dividend yield

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Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this out-of-favour business that’s throwing off gobs of cash!

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Our analyst is predicting there’s potential for this company’s market value to soar by at least 50% over the next few years...

He even anticipates that the dividend could grow nicely too — as this much-loved household brand continues to rapidly expand its online business — and reinvent itself for the digital age.

With shares still changing hands at what he believes is an undemanding valuation, now could be the ideal time for patient, income-seeking investors to start building a long-term holding.

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Rupert Hargreaves owns shares in Royal Dutch Shell and British American Tobacco. 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.