FTSE 100 dividend stocks have been making headlines in recent weeks. For the wrong reason. We’ve seen a swathe of blue-chip companies cancel or suspend their dividends. And it seems highly likely more will follow suit. Indeed, it’s hard to say where it will end.
With this in mind, here are three stocks I think are at the right end of the cut-risk spectrum. Their dividends aren’t guaranteed, of course, but I reckon they have more than a fighting chance of maintaining their payouts. Furthermore, I see them as brilliant buys for the long term.
The spirit of FTSE 100 dividend stocks
Drinks giant Diageo (LSE: DGE) owns an unrivalled stable of spirits brands. These include Johnnie Walker whisky, Smirnoff vodka and Tanqueray gin. The group also owns the world’s best-selling cream liqueur, Baileys, and world-leading stout Guinness.
There’ll inevitably be a dip in Diageo’s revenue in the near term. However, thanks to the strength of such brands, City analysts expect the group to remain highly profitable and cash generative. The company has also recently increased liquidity by issuing bonds with long maturity dates. Specifically, €750m (due 2027), £300m (due 2029) and €1bn (due 2032).
Diageo has a financial year-end of 30 June, and analysts are forecasting it will increase its dividend by 3.5% to 71p. With the shares at 2,500p — 31% below their high last year — the forward yield is 2.8%.
Due to its powerful brands and long-term growth prospects, I think this is one of the most attractive FTSE 100 dividend stocks.
A golden time for dividends!
The spread of Covid-19 has already severely impacted the world economy. And on a global basis, it isn’t at its peak yet. However, even after the pandemic recedes, the economic reverberations could possibly last for many years. This is because governments, companies and individuals will be deeper in debt than ever before.
As a safe-haven asset that’s historically preserved its value over time, gold could perform strongly in the 2020s. If so, it would support generous dividends from gold miners like Footsie giant Polymetal International (LSE: POLY).
I’ve long seen the company as a good dividend diversifier. This is because it is a low-cost producer, meaning it can be profitable even when the price of gold is relatively soft. City analysts are forecasting a 74.8p dividend for 2020. The shares are trading at a new high, but the forward yield is still chunky at 5.3%.
Another of my favoured FTSE 100 dividend stocks
Accountancy software firm Sage (LSE: SGE) has a diversified customer base of small and medium businesses. High-quality recurring revenues account for 90% of its sales. As such, it scores well on dividend reliability.
Nevertheless, it isn’t immune to the impact of Covid-19. In a trading update today, it said it anticipates a slowdown in new customer acquisition as businesses defer purchasing decisions. It also said it anticipates a higher business failure rate leading to an increase in churn.
However, Sage remains another of my favoured FTSE 100 dividend stocks. The company has a strong balance sheet, with £1.3bn of cash and available liquidity. Analysts are forecasting it will increase its dividend by 2% to 17.25p for its financial year ending 30 September. At a share price of 555p — 33% below last year’s high — the forward yield is a robust 3.1%.
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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo 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.