Forget a Cash ISA! I’d buy dirt-cheap FTSE 100 dividend growth stocks

These FTSE 100 dividend growth stocks could provide far higher returns than any Cash ISA in the years ahead based on current projections.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Cash ISA interest rates have plunged in recent months. As such, it’s now harder than ever for savers to get an attractive return on their hard-earned cash. And with this being the case, FTSE 100 dividend growth stocks are starting to look more attractive as alternatives. 

With that in mind, here are two cheap FTSE 100 dividend growth stocks that may be worth buying for income and capital growth today

FTSE 100 dividend growth stocks

As FTSE 100 dividend stocks go, Halma (LSE: HLMA) has a track record. The company has increased its dividend at or above the rate of inflation every year in recent history. 

It doesn’t look as if this trend is going to come to an end any time soon. The business, which specialises in supplying health and safety equipment, has seen a surge in demand for its products in the coronavirus crisis. 

The FTSE 100 company has also been complementing organic growth in recent years with acquisitions. These acquisitions have taken the group into areas such as fire safety, which is a defensive and critical market. The demand for these services is only likely to grow over the long run. 

Therefore, Halma seems to have the potential to continue growing its dividend every year. The payout is covered 3.3 times by earnings per share, which leaves plenty of headroom for growth. 

The FTSE 100 stock also appears cheap at current levels. City analysts believe the shares could be worth as much as 2,385p within the next few months. These figures exclude the company’s recent trading performance, which has been better than expected. As a result, analysts may soon revise their guidance higher. 

It might be worth snapping up a share of this dividend growth champion before the rest of the market catches on to the opportunity. 

Unilever

Alongside Halma, I believe FTSE 100 dividend stock Unilever (LSE: ULVR) also looks attractive at current levels.

As one of the world’s largest consumer goods companies, Unilever is a relatively defensive investment. The demand for its food and personal hygiene products should only increase in line with the global population over the long run. 

What’s more, management has recently been building out the group’s diversification by acquiring new companies. That should help ensure that Unilever stays relevant and has a product set that remains attractive to consumers. 

This FTSE 100 dividend stock also has an impressive track record of growing its dividend at or above the rate of inflation over the long run. Over the past six years, for example, the payout has grown at a compound annual rate of 8%. The stock’s dividend yield currently stands at 3.4%, and the payout is covered 1.5 times by earnings per share. 

Analysts are also highly optimistic on the outlook for the stock in the near term. They believe shares in the FTSE 100 consumer goods giant could be worth as much as 5,100p, an increase of 20% from current levels. 

These figures indicate that the stock may have the potential to deliver high total returns for investors in the years ahead. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns shares in Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Halma. 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.

More on Investing Articles

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »

Investing Articles

£12K in savings? Here’s how I could turn that into £13K annual passive income

This Fool explains how investing a lump sum can help her build a passive income stream to enjoy in her…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s why Rolls-Royce shares are now set to fly over the £4 mark

Once again, Rolls-Royce shares are crushing the FTSE 100. Should I add to my holding of this stock at the…

Read more »

Investing Articles

1 under the radar FTSE 100 AI stock investors should consider buying

Our writer explains why this FTSE 100 pick could be a shrewd investment with its established experience of using AI…

Read more »

Investing Articles

Does the beaten-down Diageo share price make it a no-brainer buy?

Harvey Jones spent years waiting for the Diageo share price to look like good value, before finally buying it in…

Read more »