Income investors will be pleased to know that there are still FTSE 100 dividend stocks out there. Around 50 FTSE 100 companies cut or suspended their dividends this year, leading to worries that income investing was a thing of the past. This is not the case – some companies carried on paying dividends, and others have started to again.
I have picked one of the former and one of the later that I think income investors should think about buying right now.
Insured against losses
Aviva (LSE: AV), a general insurer, has a new CEO who is pushing through strategic change. Markets and products where Aviva has the scale, capability, brand, or a compelling proposition for customers are in, everything else is out. This will lead to Aviva focusing geographically on the UK, Ireland, and Canada, but should see the range of products and services maintained.
Maintaining a diverse suite of products seems sensible. On most profitability measures Aviva suffered in the first six months of this year. However, compared to other, more focused insurers, it did well in declaring operating and before-tax profits of £1,225m of £1,076m respectively for the first half of 2020. Liquidity and solvency measures look robust despite dipping slightly.
The results were encouraging enough for management to finally declare an interim dividend of 6p per share. The Aviva share price has still not fully recovered from its slump in March, so the yield looks attractive. At the current share price of around 280p, this FTSE 100 dividend stock could yield around 10% if it pays out close to its 27p three-year average again.
Safety dividend stock
Unlike Aviva, Halma (LSE: HLMA) has never had its FTSE 100 dividend stock status called into question. Halma has increased its dividend for 41 years straight, including this year. Despite warning that 2021 profits could drop by up to 10% because of the coronavirus pandemic, final 2020 (fiscal year ending 31 March) dividends were increased by 3.8%.
I own shares in Halma and I tipped it as a company that would at least maintain its dividend as the market melted down in March. Halma supplies safety, security, and health solutions to businesses. Regulations mean that its customers can’t scrimp on spending in this area if they want to operate. As such, Halma’s revenues tend to suffer less than most when the economy sours. A reported 4% drop in revenue over the lockdown months of April-June 2020 is not bad all things considered.
Halma does rely on acquisitions to grow its revenue. However, they have helped drive net income from £109m in 2016 to £184m in 2020. Net income margins have remained stable at an average of 14% with little volatility. This indicates sensible, strategic, and beneficial acquisitions.
Investment might suffer as the debt accrued during the coronavirus pandemic is worked off. This could put the brakes on future dividend increases. But, analysts think Halma will emerge strongly in 2021 and up its total dividend again to 17.28p in 2021 and expect the stock to pay 18.6p in 2022.
The forward consensus dividend yield on Halma’s 2,260p shares is around 0.75%. Income investors might scoff at that, but remember what I said about 41 years of consecutive dividend increases. If history is anything to go by, Halma’s yield will creep ever higher. Halma looks to be a safe FTSE 100 dividend-paying stock. It compliments Aviva nicely.
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James J. McCombie owns shares in Halma. 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.