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3 dirt-cheap 5%+ FTSE 100 dividend stocks I’d buy for 2021

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FTSE 100 dividends have been slashed in 2020, right? Well, even with this year’s cuts, the index still looks set to yield around 3.2%. That’s really not bad, especially during a stock market crash. And most of the fallen dividends look set to bounce back in 2021. Here are three dividend stocks I’m seriously thinking of buying for my 2021 Stocks and Shares ISA.

Top-up time?

I already own Aviva (LSE: AV) shares, but I’m considering adding to my holding. Aviva slashed its dividend in 2020 along with most of the financial sector, which came under pressure from the Prudential Regulation Authority to focus on liquidity. The result was a two-thirds reduction to just 9.5p per share.

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Some investors had been fearing longer-term dividend pressure for Aviva, thinking its corporate structure makes it less nimble than much of the opposition. So would Aviva reinstate its dividend at a lower level? Doing so could satisfy the bears, with the company able to point the blame at the wider economic situation.

But City analysts don’t think that’ll happen. In fact, they forecast a yield of about 7.5% for 2021. Earnings per share (EPS) has been a bit erratic, and in 2021 should fall short of 2019’s excellent year. But dividend cover would still exceed 2 times. With the Aviva share price down 20% in 2020, I might well top up.

Steely nerves

My next pick is a bit of an outlier for me. I’m usually happier to take a more modest dividend yield if it comes with low risk. But that’s not true for Evraz (LSE: EVR). The steel producer is on a forecast 2021 yield of 8.5%. So what’s the risk?

Profits at Evraz have been erratic. Pre-tax profit peaked in 2018 at more than $3bn, but then crashed to $900m in 2019. Forecasts see it hovering around that reduced level for at least a couple of years. It’s largely because the company’s fortunes are tied to single commodity, steel. So it faces even more risk than a diversified commodities company during economic downturns.

Then there’s the fact Evraz operates mainly in Russia. And Russia isn’t exactly one of the world’s most transparent economic or political environments. But the long-term future for steel must be good, mustn’t it? Evraz would be the closest I’d get to a reckless gamble these days. But with that dividend, I might just be a bit less, um, ‘reckful’?!

Dependable dividend

I’ve criticised Vodafone (LSE: VOD) plenty in the past for paying dividends it can’t afford. For years, they weren’t covered by earnings and didn’t look like they were going to be. As Vodafone was apparently sleepwalking towards a cash crunch, investors deserted it.

The Vodafone share price went into tailspin at the end of 2017, and the company finally saw sense and pruned its 2019 dividend by 40%. We’ve had a couple of years of falling earnings. But forecasts indicate solid growth in the next two years, and I’m sniffing the start of a potential long-term bull run.

Even the reduced dividend now wouldn’t be covered until the 2021-22 year. But with the potential that I think is there, I’d rate the chance of further dividend cuts as remote. The forecast yield stands at around 6.5%. I’m tempted now.

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Alan Oscroft owns shares of Aviva. 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.

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