3 FTSE 100 dividend stocks to buy

Rupert Hargreaves highlights three FTSE 100 dividend stocks he’d buy for his portfolio today with the aim of producing an income.

| 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.

I think owning income shares is a straightforward way to increase my income. So, with that in mind, I’ve been looking for FTSE 100 dividend stocks to add to my portfolio. Here are three blue-chip companies I’d buy for income today. 

FTSE 100 dividend stocks

The first company on my list is precious metal miner Polymetal International (LSE: POLY). Precious metals have been rising in value recently, which could translate into higher profits for this business.

Indeed, net profit at the group more than doubled last year after a significant increase in gold and silver prices. Off the back of this growth, management hiked the company’s dividend by more than 100%. At current levels, the stock offers a dividend yield of 5.4%. I wouldn’t rule out a further dividend increase as precious metals prices increase.

Unfortunately, commodity prices can fall as fast as they rise. This means the company may have to cut its dividend if prices fall significantly. That’s always going to be a risk of investing in mining businesses. 

Still, it would be one of the FTSE 100 dividend stocks I’d buy based on its income potential.

Defensive industry

Utility companies can be the perfect income stocks. I reckon United Utilities (LSE: UU) fits the bill perfectly. At the time of writing, shares in the water company support a dividend yield of 4.4%. I think that looks attractive in the current interest rate environment. 

The provision of water and wastewater services is an incredibly defensive industry. Consumers will always need access to this precious commodity. This suggests United will be able to earn steady profits for years to come. The company should also be able to increase profits and its dividends in line with inflation as prices rise.

However, the one major challenge the firm faces is regulation. Ofwat essentially controls how much profit water companies are allowed to earn on their assets. If the regulator decides to clamp down and reduce profitability, United may have to cut its payout. 

Even after taking this significant risk into account, I’d still buy the company for my portfolio, based on its potential.

Housing market

The UK housing market is currently firing on all cylinders. This bodes well for homebuilders like Persimmon (LSE: PSN). This business is currently struggling to meet the demand for new properties, which is an excellent position to be in considering the overall economic environment. 

City analysts believe the business will earn a net income of £778m in 2021, up from £638m in 2020. This could support a dividend of 236p per share, the highest level of income in five years. That would give a dividend yield of 7.6% on the current share price.

This level of income is far from guaranteed, but I think it showcases the company’s potential. Key risks and challenges to growth include a sudden increase in interest rates, which may hit demand for new-build properties. Rising labour costs could also hurt profit margins. 

Considering the overall outlook for the UK housing market, I’d buy this company for my portfolio of FTSE 100 dividend stocks. 

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.

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.

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 »