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FTSE 100 dividends: should I buy or avoid these UK shares in 2021?

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2021 is a brilliant time to buy UK shares. This is because many top-quality stocks continue to trade far too cheaply after last year’s stock market crash. I myself have continued investing in my Stocks and Shares ISA despite the uncertainties created by Covid-19. And I plan to keep buying UK shares in the weeks and months ahead.

These FTSE 100 stocks all offer eye-popping dividend yields right now. Would they be good buys for my ISA in 2021 and beyond?

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A golden selection

It’s probable that appetite for riskier assets like UK shares will pick up as the Covid-19 crisis subsides. But this doesn’t mean that safe-haven investments like precious metals will lose their shine. Indeed, the World Gold Council reckons that soaring budget deficits, inflationary pressures, and market corrections “amid already high equity valuations” will keep investment demand for gold well supported in 2021. It reckons too that industrial demand for the metal will improve as the economic recovery clicks through the gears.

These are good reasons to buy FTSE 100-quoted Polymetal International. Buying the mining giant is certainly a better bet than buying bars or coins, for example, or financial instruments backed by the physical metal. This is because getting exposure to gold with UK shares can allow investors to ride movements in the metal price while receiving dividends in the process. And today Polymetal boasts a gigantic 7.7% dividend yield for 2021.

Hand holding pound notes

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A UK share I’m avoiding

Not all commodities stocks are made equal, however. And I’m not tempted to splash the cash on BP despite its gigantic 5.5% forward dividend yield. Profits at the FTSE 100 oilie remain at the mercy of rising supply and subdued demand.

Fresh data from the International Energy Agency today have raised my fears that dividends at BP might not bounce back in 2021 as hoped. The organisation scaled back its global demand forecasts again today following new Covid-19 restrictions. It slashed its estimates for the first quarter by a whopping 600,000 barrels per day. And for the full year it expects global consumption to rise by 5.5m barrels per day, down around 300,000 barrels from its prior forecasts.

Another top FTSE 100 dividend stock

The profits outlook for BAE Systems is a lot more reassuring for 2021. And this will provide the ammunition for this UK share to pay more big dividends over the next 12 months at least. Current City payout projections are for a bulky 5% dividend yield.

The financial impact of Covid-19 is unlikely to derail weapons spending this year or beyond. The boffins at Deloitte certainly don’t reckon arms budgets will fall in the near future. They predict that “defence budgets and revenues for defence contractors are expected to remain largely stable” in 2021.

In fact, they reckon that worldwide defence spending will rise almost 3% this year to traverse the $2trn marker “as military programmes continue to be critical to national defence”. This is a situation that in my opinion should keep revenues at BAE Systems, a major supplier to militaries across the globe, ticking steadily higher.

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Royston Wild 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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