Throughout the Covid-19 pandemic, investor focus has been mainly on share prices. But though FTSE 100 dividends suffered too, many still looked good to me. Now that markets might be stabilising going into August, which dividend shares am I thinking of chasing?
I took a look at BT Group a few days ago, and I see it as a tempting long-term dividend investment. The 4%-or-so on offer for the current year is nowhere near the Footsie’s best. But it’s been rebased from BT’s excessive pre-pandemic payouts. And I think this could be the start of long-term progressive payouts.
The downside is BT’s debt, together with its still-hefty pension fund deficit. And that could have an adverse effect on dividends. But, on balance, BT makes it on to my August dividend candidates list.
I couldn’t examine FTSE 100 dividend stocks without taking a look at housebuilders. Persimmon is my personal choice. Along with 2021 results announced in March, the homebuilder revealed a “commitment to a total return of £2.35 per share in 2021 subject to continual board review.”
On the current share price, that’s an equivalent dividend yield of around 8%. It does include a return of surplus capital, so we’re not going to get this much every year. And there’s still the risk that a shaky UK economy could weaken the sector in the coming year. But if I didn’t already own one, I would definitely add a housebuilder to my portfolio.
FTSE 100 faller
Some stocks offer modest dividend yields, but they’re consistently progressive over the years. And a progressive dividend with a lower current yield can be a better investment than one that’s paying more today but with weaker sustainability. And sometimes we get the opportunity to secure a higher yield if the share price dips.
That happened to Reckitt this week. The price dipped on disappointing Q2 results, helping push the yield up a little. The company expects a weaker Q3 too, which is a bit doubled-edged. It could presage a down spell for the stock. But, on the other hand, it could also provide better dividend yields in the coming months.
With tobacco giant Imperial Brands, we’re looking at a potential dividend yield in excess of 10%, one of the best on the FTSE 100. A yield that high has only come about thanks to a falling share price, down 60% over the past five years. That, in turn, is due to the decreasing popularity of smoking, so there’s a chance the shares could continue to slide.
But for those who see a lengthy future for tobacco products, the risk might be worth taking to secure a healthy income stream.
Finally, no examination of FTSE 100 dividends could be complete without a look at my favourite financial stock, Lloyds. Like the rest of the sector, the UK banking giant had to suspend its dividend when Covid-19 struck. But it’s been accumulating the cash and intends to resume payments as soon as it can.
The potential downside is that the UK’s economic recovery could be a bit fragile over the next few years, and that could harm the banks. But once dividends are lifted, I can see the share price picking up too.
I’m seriously considering all of these as possible August buys.
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Alan Oscroft owns shares of Lloyds Banking Group and Persimmon. The Motley Fool UK has recommended Imperial Brands and Lloyds Banking Group. 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.