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£3k to invest? I’d buy these FTSE 100 dividend stocks

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A large number of FTSE 100 dividend stocks have had to cut their payouts this year. However, others have stood firm. And it’s these businesses that I think could be worth buying for 2021. 

I reckon if a company has managed to navigate the pandemic and keep its dividend intact, it’s a great sign. With that in mind, here are two FTSE 100 dividend stocks I’m eyeing up right now. 

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FTSE 100 dividend stocks

United Utilities (LSE: UU) is the first company on my list. This water business has been a dividend stalwart for some time. I think this is going to continue. 

The supply and disposal of water is one of the most defensive industries you can get. In the UK, this industry is highly regulated. That’s both a benefit and a drawback for companies like United.

It’s a benefit because it’s challenging for new companies to break into the sector. On the other hand, regulators control the billing system. This means United can’t make excessive profits. 

As such, the company may not be the most prosperous FTSE 100 dividend stock. Nevertheless, I think its dividend is exceptionally sustainable. In my opinion, that’s what matters. Investors can buy the stock safe in the knowledge it will still be distributing profits 10 years from now. 

At the time of writing, shares in the utility provider support a dividend yield of 4.5%. That looks extremely attractive to me in the current interest rate environment.

Takeover potential

Severn Trent (LSE: SVT) exhibits similar qualities to United. This is one of the reasons why I believe this company is one of the best FTSE 100 dividend stocks to buy now. 

Severn’s business model is a bit more profitable and efficient than its peer. That’s why the business has historically traded at a premium. It’s also been subject to several takeover rumours in the past. 

None of these rumours has materialised into concrete action, but there’s still time. Severn is a profitable, predictable business, which could fit nicely into another conglomerate or Sovereign Wealth fund. 

In the meantime, the stock supports the dividend yield of just over 4%. 

Recently, investor sentiment towards the business has deteriorated as analysts have become concerned about regulator plans for the sector. As mentioned above, I’m not too worried about these threats. The regulator may decide to reduce the amount of profit water companies are allowed to earn, but that won’t remove their defensive qualities. Severn will remain one of the UK’s most crucial water groups. 

Therefore, I’m interested in buying this company as a part of a diversified basket of FTSE 100 dividend stocks. Combined with other defensive income investments, I reckon Severn and Untied can provide investors with a steady income stream for many years to come, just as they’ve done in 2020. 

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Rupert Hargreaves has no position in any of the shares mentioned. 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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