The recent FTSE 100 market crash may mean the popularity of Cash ISAs increases. These products offer a stable return in a time of extreme uncertainty.
However, Cash ISA providers have recently slashed rates to all-time lows. This could mean FTSE 100 dividend stocks may provide a better level of income over the long term. As such, now could be the time to buy FTSE 100 dividend stocks as part of a diversified portfolio to improve your income prospects.
Here are two income plays I’d buy today.
FTSE 100 utility stock
Unlike many of its FTSE 100 index peers, utility company United Utilities (LSE: UU) recently reported only a small change in its operating performance since its last update.
Higher financing and operating costs are expected to weigh on income this year. But the company is unlikely to see a significant drop in revenue for 2020.
As such, now could be a great time to buy a share in this income champion and take advantage of depressed investor sentiment. The share price is down by around 5.2% in 2020. That suggests the stock offers a wide margin of safety at current levels.
The stock also offers a dividend yield of 4.7%. It has a solid track record of producing above-inflation dividend increases. That suggests United could be an attractive proposition for income investors.
Therefore, while United might not offer the recovery potential of many of its FTSE 100 peers, in an uncertain economic environment, this predictable income play could be an attractive addition to your portfolio today.
United’s peer, Severn Trent (LSE: SVT), also seems attractive after recent declines. Shares in the water company have fallen by around 2% this year.
However, the FTSE 100 company has informed investors it doesn’t expect to see a significant impact on its operations as a result of the coronavirus crisis. As such, long-term investors could be well rewarded by taking advantage of the recent market declines.
The stock currently offers a dividend yield of 4.2%. That’s above its long-term average of around 4%. This may suggest the company is undervalued at current levels. Further, Severn has a solid track record of increasing its dividend over the long run.
Takeover potential also adds to the appeal of this business. In the past, Severn has been highlighted as one of the most attractive takeover candidates in the UK.
With interest rates at record lows around the world, now might be the perfect time for an international competitor to snap up the business. This could generate handsome capital gains for the FTSE 100 income champion’s investors.
With this in mind, now could be an excellent time for investors with a long-term outlook to buy a share of this defensive income champion. Doing so could improve your financial prospects, especially when owned as part of a basket of income stocks.
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Rupert Hargreaves has no position in any of the shares mentioned. 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.