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Forget gold, buy-to-let, and Cash ISAs: I’d buy bargain FTSE 100 dividend shares

There are plenty of bargain FTSE 100 dividend shares after the stock market crash, but many companies have delayed or cancelled their shareholder payouts. The uncertainty surrounding the global economy is making it harder to generate a passive income from the FTSE 100 at the moment, but I don’t believe that will last.

Many investors may be tempted by alternative homes for their money, such as gold, buy-to-let property, and Cash ISAs. However, their long-term returns may be disappointing. Buying FTSE 100 bargain shares should still make your money work much harder over the longer run, helping you to get rich and retire early.

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While some FTSE 100 companies have cut back on dividends, others are holding firm. These include oil giants BP and Royal Dutch Shell, as well as AstraZeneca, British American Tobacco, Diageo, GlaxoSmithKline, Tesco, Unilever, and Vodafone.

I’d buy bargain FTSE 100 shares

This means it is still possible to generate a worthwhile passive income from bargain FTSE 100 dividend blue-chips in 2020. Plus you should also benefit from rising shareholder payouts in the years ahead, and capital growth when share prices rise.

Many investors have piled into gold, but the precious metal doesn’t generate any income at all. You only make money when the price rises. With the gold price hitting a high of $1,731 an ounce, you could get caught out if the price retreats.

Cash ISAs will be hit hard by the Bank of England’s double base rate cut in March. Savings rates may now struggle to keep up with inflation. You can get higher yields from buy-to-let, but this is no longer a tax-efficient investment. It also requires a lot of expense and effort.

Right now, landlords may be negotiating payment holidays with tenants. It’s a faff. Especially if your tenants lose their jobs, when you may have uncomfortable decisions to make.

The income and growth potential of FTSE 100 dividend shares makes them a top long-term investment. Especially at today’s bargain prices. While the outlook is uncertain, share prices have always recovered from previous bear markets, as economic growth returned.

Dividend stocks should recover

The very best time to buy dividend shares is after a stock market crash, when you can find bargain stocks trading at far lower prices than before.

Choose your targets carefully, sticking to those with strong balance sheets, healthy cash generation, and minimal debt. Stock markets are likely to recover when today’s monetary and fiscal stimulus really starts working. This may allow companies to build profits and raise their dividends at a faster rate in future.

The key to reducing risk is to diversify across a range of bargain shares, and build a balanced income stream for the longer run.

Buying FTSE 100 dividend stocks may look like a risky move at the moment, but in the longer run, today’s bargains should still be your best way of generating passive income.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended Diageo and Tesco. 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.