Over the past few weeks, a string of FTSE 100 dividend stocks have cut their distributions. These actions have left income investors In the lurch.
However, there are a handful of FTSE 100 dividend stocks that continue to stand by their payouts. Two companies, in particular, look especially attractive.
FTSE 100 dividend stocks on offer
Imperial broke its silence last week. According to the company, up until the end of March, the coronavirus outbreak had not impacted the group’s performance and trading. This puts the business firmly on track to meet its forecasts for the year.
British American has not commented on current trading yet. Nevertheless, the update from its peer suggests that the business is coping well in the current turmoil.
With earnings holding up, it seems unlikely that either of these companies will cut their dividends this year. That indicates that both of these dividend stocks could be great additions to your portfolio.
After recent declines, shares in British American now support a dividend yield of nearly 8%. Meanwhile, Imperial supports a dividend yield of 13.3%. The dividend stocks trade at a price-to-earnings (P/E) ratios of 8.3 and 5.8, respectively, which suggests the shares offer a wide margin of safety at current levels.
Still, considering how widespread the coronavirus outbreak is, it is unlikely that these businesses will be able to escape the situation unscathed. What’s more, there’s been talk that Imperial will be forced to cut its dividend to focus on debt repayment for some time.
The company is in the process of replacing its CEO, and as yet we don’t know what actions the newcomer will take on arrival. The same can be said for British American.
The business has been cutting costs to improve efficiency and profit margins over the past 12 months. It also has quite a bit of debt. Management might cut the company’s dividend to accelerate these efforts, although so far, there’s been no mention of this.
For the time being, it looks as if both dividends are here to stay.
Still, considering all of the risks facing the businesses, it might not be sensible to have too much exposure to either company.
A 50/50 weighing in a portfolio would give investors access to their income stream while balancing risk. Such a combination would provide an average dividend yield of just over 10%.
So, if you’re looking for dividend stocks in the current market, it might be worth taking a closer look at Imperial and British American. Both seem to be insulated from the coronavirus uncertainty and have a track record of returning vast amounts of cash to investors.
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Rupert Hargreaves owns shares in British American Tobacco and Imperial Brands. The Motley Fool UK has recommended Imperial Brands. 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.