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This is one of my top FTSE 100 dividend shares to buy now

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I reckon the stock market crash has thrown up plenty of great long-term dividend shares to buy now. I doesn’t matter much to me if a dividend has been cut in 2020, it’s long-term dividends that matter. And buying while prices are low in 2020 should boost my effective yields.

The Imperial Brands (LSE: IMB) dividend was rebased this year, but it’s still providing cracking yields. Imperial has just announced a full-year dividend of 137.7p per share. That’s a stunning yield of 9%. And it’s after the 2020 dividend cut.

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A yield that big often suggests there’s something set to go wrong. Or at least, that the big investing firms lack confidence in its future viability. Still, my experience tells me that often the best shares to buy now are the ones being shunned by the City. And among dividend shares, solid cover by earnings and a long-term view of future profits can make all the difference to me.

My favourite dividend shares

There can be ethical issues surrounding tobacco shares. But in compiling my list of potential FTSE 100 shares to buy now, I start purely with the investing case. Once I’ve done that, I can refine my selections based on personal choices. And purely considering investing factors, I have to put Imperial Brands right among my very top dividend shares.

Imperial has seen adjusted earnings per share drop by 5.6%, which is better than many had feared in a difficult year. That came from an increase in adjusted revenue too, albeit a modest 0.8% rise. And it would appear to support new chief executive Stefan Bomhard’s description of the business as resilient.

Among the best shares to buy now?

Among dividend shares, Imperial Brands has better cover than many. The 2020 dividend was covered 1.85x by earnings. And based on forecasts, that would rise to 1.94x in the 2020-21 year. Still, to pick it as one of my best shares to buy now, I’d need to be convinced that we have many more years of well-covered dividends ahead. On that score, Imperial is going through something of a transition.

There’s a reducing dependence on combustible tobacco products like cigarettes, and a move to what the company refers to as next generation products (NGP). Speaking of NGP, Mr Bomhard did say: “I firmly believe we can make a meaningful contribution to harm reduction within a more disciplined, returns-focused framework and we have already taken steps to stem the NGP losses.”

And yes, the NGP business isn’t doing too well so far. Full-year NGP revenue declined 27%. But the bulk of that was in the first half, with losses reduced in H2.

Transition troubles

This makes me think of BP a little. BP has been, for years, among my top dividend shares. But it’s moving away from its fossil fuel base and aiming for a net-neutral mix. That, too, has damaged investors’ confidence, and the BP share price is in a slump. But I think BP faces greater pressure than Imperial Brands.

In Imperial’s case, its traditional products are holding up surprisingly well. And as people slowly turn away from smoking, I’m confident we’ll see progress on the NGP front. Imperial Brands shares are on a forward P/E of only five. I think that’s irrationally low.

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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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