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3 reasons why I’d buy bargain FTSE 100 dividend stocks today to make a passive income

Buying FTSE 100 dividend stocks today to make a passive income is a more challenging prospect than it has been over recent years. It was previously possible to find a wide range of companies yielding in excess of 4%. Now, after the unprecedented events of the past few months, fewer opportunities exist for investors to generate an attractive income return from large-cap shares.

However, now could be the right time to buy a diverse range of those FTSE 100 stocks that continue to pay dividends. Their low valuations, dividend growth potential and relative appeal may make them a sound means of producing a passive income over the coming years.

FTSE 100 yield opportunities

The FTSE 100 may have bounced from its March lows, but investor sentiment towards the index continues to be relatively weak, as the past few days have shown. As such, there are a number of shares that trade at low prices relative to their levels over the past few years.

Lower share prices mean that the yields on offer across the index may be relatively high. In fact, it is possible to obtain a portfolio yield that is in excess of 5% at the present time, while also diversifying across a range of sectors.

Furthermore, low share prices can lead to capital growth over the long run. The FTSE 100 has an excellent track record of recovering from its bear markets to produce new record highs. This may mean that your portfolio size increases over the coming years, thereby making the task of generating a passive income somewhat easier.

An economic recovery

The fiscal stimulus and supportive monetary policy introduced after the lockdown could mean that the operating environments of many FTSE 100 companies improve over the medium term.

Certainly, there are risks facing most sectors across the index. This could lead them to report disappointing results in the short run. But, with low interest rates and quantitative easing likely to boost the prospects for the economy, many companies may be able to afford to pay a rising dividend over the long run.

Dividend growth could not only boost your passive income, but also increase the appeal of FTSE 100 income shares. Rising demand for them among investors may push their prices higher.

A lack of choice

Any investor who is seeking to generate a passive income may struggle to achieve their goal from many income-producing assets. For example, Cash ISAs and bonds now offer low income returns due to the recent fall in interest rates. Likewise, buy-to-let property could face an uncertain period due to economic weakness.

Therefore, on a relative basis, FTSE 100 dividend shares may be the most appealing income opportunity at the present time. Buying a range of large-cap income shares may boost your passive income and improve your long-term financial outlook.

A top income share that boasts a reliably defensive business model… plus a current forecast dividend yield of 4.2% to boot!

With global markets in turmoil as the coronavirus pandemic tightens its grip, turning to shares to generate income isn’t as simple as it used to be…

As the realities of ‘life under lockdown’ begin to bite, many of the stock market’s ‘go-to’ high-yielding companies have either taken an axe to their dividend pay-outs… or worse, opted to suspended them altogether – for the near-term at least.

With so many blue-chip and mid-cap companies scrambling to hoard cash right now, where are we income investors to turn for decent yields?

Fortunately, The Motley Fool is here to help…

Our analyst has unearthed what he believes could be a very attractive option for income- seeking investors – a company that, in his view, boasts a ‘reliably defensive’ business model, combined with a current forecast dividend yield of 4.2% to boot!*

But here’s the really exciting part…

This business even has form in riding out this kind of situation, too… having previously increased sales and profits back in 2008 and 2009 when the world was gripped in the deepest economic crisis since the Great Depression.

*Please be aware that dividends are variable and not guaranteed.

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Peter Stephens 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.