My best shares to buy now list: 1 FTSE 100 dividend stock I like right now

Jabran Khan details this well-known energy supplier from the FTSE 100 as a dividend stock option from his best shares to buy now list.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

My best shares to buy now list is split into different categories. One of these categories is for dividend stocks I believe can make me a passive income. With that in mind, I’ll tell you why I like FTSE 100 energy supplier SSE (LSE:SSE) right now.

Defensive capabilities

SSE is the third-largest supplier of electricity and gas in the UK. It supplies electricity and gas under the Southern Electric, Scottish Hydro Electric, SWALEC, and Atlantic brands. It currently services over 7m customers.

There are a few utility companies on my best shares to buy now list. Utility companies possess excellent defensive capabilities, as they are essential bills. The recent economic downturn may have forced consumers to cut back on luxuries. Bills such as mortgages, council tax, and utilities are essential, however.

In general, utilities businesses tend to be favourable income investments as utilities are in a generally stable industry. SSE can rely on long-term contracts with customers, usually a minimum of a year in most cases. This provides a healthy regular income stream.

Why is it on my best shares to buy now list?

SSE is classed as a blue-chip stock and I believe it carries less risk than a smaller business. Every investment has some level of risk, however, organisations as big as SSE have more mechanisms in place to prevent issues from arising. If problems do crop up, big companies are often better equipped to handle them more effectively.

SSE has long been considered one of the UK’s best blue-chip stocks. The FTSE 100 offers an average dividend yield of close to 3%. At the time of writing, SSE currently supports a dividend yield of just over 5%, which is very tempting. At current levels, SSE’s share price is nearly 15% lower than at this time last year, trading at 1428p per share as I write. It currently trades at 16.1 times earnings. I wouldn’t class that as cheap, but it’s not expensive either.

Apart from its size and operational reach, I really like SSE as it is diversifying its operations towards renewable energy. Renewable energy presents a big challenge for traditional energy firms as they commit to net carbon zero. SSE is developing the world’s largest offshore wind farm. In addition to this, it is involved in many other projects as part of joint ventures across Europe.

Risk and reward

Many firms across the FTSE 100 had to cut dividends when the market crashed due to the global pandemic.The risk with SSE is that it could cut its dividend, which it did recently to meet capital spending requirements. Furthermore, a high dividend yield might indicate a business in distress. The yield could be high because the company’s shares have fallen in response to financial troubles, and the struggling company hasn’t cut its dividend yet. 

Management has reaffirmed its commitment to the dividend for at least the next year. In the near term, it looks sustainable. As with all of my best shares to buy now list, I look at the long term rather than short-term buy and sell strategies. SSE is firmly in the long term section of my list. Here is another FTSE 100 dividend stock I really like right now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jabran Khan 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.

More on Investing Articles

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »