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I think these two FTSE 100 shares are must-own dividend stocks

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There could be an opportunity in FTSE 100 dividend stocks Unilever (LSE: ULVR) and Reckitt Benckiser (LSE: RB).

Unilever and Reckitt Benckiser are two leading consumer staples that have numerous competitive advantages given their economies of scale, financial strength, and well-known brands.

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Both have yields considerably higher than the UK 10-year Gilt Bond.

At the time of writing, Unilever and Reckitt Benckiser have dividend yields of 3.01% and 2.35%, respectively. The UK 10-year Gilt Bond, meanwhile, has a yield of around zero.

Given that both stocks are down from their all-time highs, here’s why I think Unilever and Reckitt Benckiser are ‘must-own’ stocks for any dividend investor.

Stock and dividend history

FTSE 100 dividend stocks Unilever and Reckitt Benckiser have done well in terms of their stock performance and dividend history in the last five years.

Unilever’s stock price has surged over 50% and Reckitt Benckiser’s shares have risen around 27%.

Both Unilever and Reckitt Benckiser’s annual dividend has increased every year in that span as well.

Unilever’s annual dividend per share has increased from €0.97 for fiscal year 2015 to €1.56 for fiscal year 2019.

Meanwhile, Reckitt Benckiser’s annual dividend per share has risen from 139p to 174.6p in the same time frame.

Stability

Given that they are leading consumer staples, FTSE 100 dividend stocks Unilever and Reckitt Benckiser have a good measure of stability.

Since their products don’t cost that much and many consumers have the habit of buying the same essential consumer staple products, demand for the two companies remains relatively stable during challenging times.

As a result, they both can do well in terms of earnings even in tough times. That degree of stability makes their dividends safer than that of many other companies, in my opinion.

Despite the coronavirus outbreak, for example, Unilever’s underlying earnings per share (EPS) still grew 6.4% year-on-year to €1.35 in the first half of 2020. One tailwind in the period for Unilever was strong demand for products that could be consumed at home given the lockdowns.

For the same time frame, Reckitt Benckiser did even better in terms of growth, with adjusted diluted EPS rising 14.5% year-on-year to 166.5p.

Rise of the developing & emerging markets

In addition to good past performance and stability, FTSE 100 dividend stocks Unilever and Reckitt Benckiser are a potential play on the rise of developing and emerging markets.

While there are hundreds of millions of people in Western Europe and the US, there are billions of people in developing and emerging markets.

With rising incomes, many people in developing and emerging markets can afford to buy premium-end consumer staples products for the first time.

The rising incomes mean potential revenue growth ahead.

Unilever is especially well positioned given that around 60% of the company’s business was in developing and emerging markets in 2019.

Reckitt Benckiser is also well positioned given that its brands have substantial penetration potential in urbanising regions in China and India.

As emerging markets get bigger, demand from those regions could increase and help boost the dividend.

Foolish conclusion

FTSE 100 dividend stocks Unilever and Reckitt Benckiser have several features that make them ‘must own’. The two have a strong history of execution, a good measure of operational stability, and attractive potential growth in developing & emerging markets.

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Jay Yao has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. 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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