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I think there’s never been a better time to buy these 3 FTSE 100 income stocks

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I exaggerate slightly when I say there’s never been a better time to buy these three FTSE 100 income stocks. That’s because we could actually have bought them cheaper in March when the Covid-19 crash was at its worst. But I’m not trying to time it precisely, because that would be a mug’s game.

My first choice is oil giant Royal Dutch Shell (LSE: RDSB), which announced a dividend cut at the end of April. That was the first time Shell had reduced its dividend payment since the Second World War. So what am I doing choosing it among my FTSE 100 income stocks?

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The cut has helped push the Shell share price considerably lower than that of fellow FTSE 100 oil firm BP. It’s down 40% so far this year, while BP shareholders have seen only a 28% drop – and their dividends are unaffected so far.

The oil price is back nudging $40 per barrel, and I’d be very surprised if it doesn’t end the year significantly above that. That makes me confident that Shell’s dividends will return to their former strength. And that buying now will set up even better yields in the long term.

Ironically, perhaps, I think Shell’s short-term dividend cut will make it a better long-term income stock.

FTSE 100 income stocks

The second of my FTSE 100 income stocks is housebuilder Taylor Wimpey (LSE: TW). Now, you might think this choice is even crazier, as the firm has suspended its dividend altogether. The final payment for 2019, plus a planned special dividend payment, have both been canned.

Taylor Wimpey explained it as part of its emergency strategy to preserve cash, which has also included directors’ pay cuts. The company, however, did say that its ordinary dividendhas been stress tested and is payable though a ‘normal’ downturn“. As FTSE 100 income stocks go, that’s positive.

May did bring the biggest fall in UK house prices since the financial crash. But I don’t think that’s anywhere near as bad as it seems, as so many transactions have simply not been able to take place.

I reckon in a couple of years, with Taylor Wimpey’s dividends back to strength, investors who didn’t buy will be ruing a missed opportunity.

A 10.6% yield

The third of my FTSE 100 income stocks for today is still paying dividends, so maybe I’m not quite mad. It’s Imperial Brands (LSE: IMB).

The Imperial Brands share price is down 20% since the start of 2020, a bit worse than the FTSE 100’s 16% fall. But its shareholders are still enjoying a handsome dividend to compensate. Imperial Brand shares are on a forward price-to-earnings multiple of under 6. That’s well below half of the FTSE 100’s long-term average. And well below what I’d expect from top FTSE 100 income stocks.

With the share price so low, the forecast dividend for the year to September would yield a huge 10.6%. It would be down quite a bit on the 2019 payment. And first-half results released on 19 May did show a fall of around 11% in adjusted earnings per share (at actual exchange rates). The company is also focusing on strengthening performance.

But I think the share price has fallen way beyond what this pessimism deserves.

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Alan Oscroft has no position in any of the shares mentioned. 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.

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