July’s UK consumer price index (CPI) came in hotter than expected at 10.1%. This is a 40-year high and has the potential to drive share prices further down as consumers struggle with a cost of living crisis. So, here are five shares I’m considering buying.

Lloyds

As the UK’s biggest lender, I believe Lloyds (LSE: LLOY) shares are a sound choice for my portfolio. It earns its money from the difference in providing and earning interest from loans. This is otherwise known as net interest income.

Interest rates are expected to go as high as 3% by 2024 as the Bank of England tries to combat inflation. As a result, the high street bank should get a top-line boost from higher lending costs, while benefiting from lower interest paid to customers. With enough cash to set aside for bad loan provisions, Lloyds doesn’t need to increase its savings rate to bring in more cash, thus allowing it to increase its profits. This was evident in the company’s latest half-year results, which saw it recording excellent numbers.

It’s worth noting, however, that the majority of its income stems from mortgages. With house prices and mortgage approvals starting to decline, it remains a possibility that Lloyds’ revenue could be impacted. Nonetheless, analysts think that the increase in rates should offset any declines for the time being. In fact, Lloyds stock is rated a buy as its dividend is also expected to increase. It has an average price target of 64.33p, or a 40% upside.

SSE

Energy prices have been the main culprit behind sky-high inflation. That’s because energy prices are at their highest levels since 2009. As such, I think SSE (LSE: SSE) is a share to buy for my portfolio given the circumstances.

When wholesale energy prices go up, energy suppliers increases their rates to cover the extra costs. This has allowed companies like SSE to benefit, with its top and bottom lines seeing modest increases. As a matter of fact, its profit and loss account saw its best numbers in FY22, which is why its shares are up 9% this year.

The latest inflation report shows that energy prices rose 3% on a month-on-month basis. And with a higher price cap expected in October, SSE should benefit from this. After all, its latest trading update indicates that it expects adjusted earnings per share (EPS) of at least £1.20 for FY23. This would bring its EPS to its highest level in five years.

Additionally, its dividend yield of 4.7% is rather modest and is expected to rise given its most recent increase in payout, from 25.5p to 60.2p. SSE shares are rated a moderate buy with an average price target of £20.78.

Unilever

Next on my list is Unilever (LSE: ULVR). Its share price has been rather volatile this year. Nevertheless, it has recovered by 5% since its reported its H1 numbers. Its shares are now only down by 1% on a year-to-date basis.

The fast-moving consumer goods conglomerate produces beauty products and personal care, foods and cleaning agents. Its brands include Lynx, Ben & Jerry’s, Dove, and many more. These are household names and have tremendous pricing power, given the inelastic demand surrounding most of its products. This is strongly reflected in the revised outlook given by CEO Alan Jope, when he improved the firm’s guidance.

Our guidance for underlying sales growth in 2022 was previously at the top end of a range of 4.5% to 6.5%. We now expect underlying sales growth to be above that range, driven by price with some further pressure on volume.

Unilever CEO Alan Jope

Nevertheless, it should be noted that Unilever shares are more of a defensive play to protect from potential downside at the moment. Analysts are forecasting an average price target of £40.81, which only means a potential 3% gain if I were to buy shares now.

Burberry

Burberry (LSE: BRBY) shares are a good inflation hedge, in my opinion. The brand’s status as a luxury retailer allows it to pass on many of its costs to consumers given the nature of its target market. This was confirmed by CFO Julie Brown in its Q1 trading update, with a positive outlook for the company.

The FTSE 100 retailer has benefited from the return of global travel, with a substantial amount of its sales coming from tourists. It saw its like-for-like sales numbers grow by 1% on an annual basis, despite lockdowns in key revenue driver, China. Excluding China, sales figures were actually rather impressive. They were 16% higher in Q1 overall, with EMEIA boasting impressive 47% growth. Moreover, the company’s most profitable products (leather goods and outerwear) also saw double-digit growth.

That being said, I should point out that China remains the firm’s achilles heel for the moment. With its government sticking to its zero-Covid policy, I don’t expect sales figures from that region to see an uptick any time soon. This is why its average price target currently sits at £19.34. Therefore, this is more of a long-term investment with a higher upside once China’s retail sales fully recovers.

Tesco

Last on my shopping list are Tesco shares (LSE: TSCO). Given that its core products are consumer staples, I’m expecting Tesco shares to be robust in a recessionary environment. It’s also been steadily increasing its dividend payouts, which should serve as an added benefit.

As the market leader in the UK supermarket sector with more than a quarter of the market share, I think Tesco will be able to outperform its peers. Its Aldi price match across hundreds of items has been a success so far. According to the last several Kantar grocery reports, the supermarket leader has seen its market share remain relatively robust. It has also managed to outperform most if its competitors with higher sales figures. And its Q1 trading update showed its strength in the industry.

Having said that, sales figures are expected to come in slightly lower for the year. The grocer no longer enjoys the tailwinds of the pandemic and faces slower sales as a result of high inflation. Even so, I still think Tesco can utilise its strong supply chain and relationship with customers to match last year’s stellar performance. Analysts seem to share the same sentiment, rating Tesco shares a strong buy with an average price rating of £3.19.

The post Inflation hits 10.1%! 5 shares to buy now! appeared first on The Motley Fool UK.

More reading

• Selling for £1, are Lloyds shares still a bargain?
• Here’s what fresh legal news could mean for Lloyds shares
• Is now the time to consider buying Tesco shares?
• How to target a million-pound SIPP by investing in UK shares
• The Tesco share price is struggling to regain 500p even after strong results – where to from here?

John Choong has positions in Burberry. The Motley Fool UK has recommended Burberry, Lloyds Banking Group, Tesco, and Unilever. 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.

Lloyds

As Lloyds (LSE: LLOY) continues its share buyback programme, the British bank has seen its stock price increase by 3% this week. A hawkish Bank of England has been stoking uncertainty surrounding Lloyds’ future. This arguably led to a number of director dealings happening this week.

Most notably, Lloyds’ CFO William Chalmers and Chief of Staff Janet Pope purchased a large number of shares. However, Group Corporate Affairs Director Andrew Walton and Scottish Widows Chief Executive Antonio Lorenzo also sold a substantial number of shares.

• Name: William Chalmers (Chief Financial Officer)
• Nature of transaction: DRIP shares
• Date of transaction: 20 May 2022
• Amount purchased: 168,865 @ £0.44
• Total value: £74,409.46

• Name: Antonio Lorenzo (Chief Executive, Scottish Widows and Group Director, Insurance and Wealth)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 884 @ £0.43
• Total value: £383.86

• Name: Antonio Lorenzo (Chief Executive, Scottish Widows and Group Director, Insurance and Wealth)
• Nature of transaction: Disposal of shares
• Date of transaction: 20 May 2022
• Amount sold: 250,000 @ £0.44
• Total value: £110,062.50

• Name: Vim Maru (Group Director, Retail)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 31 @ £0.43
• Total value: £13.46

• Name: Janet Pope (Chief of Staff and Group Director, Sustainable Business)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022 and 20 May 2022
• Amount purchased: 85,633 @ £0.44
• Total value: £37,735.00

• Name: Stephen Shelley (Chief Risk Officer)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 1,563 @ £0.43
• Total value: £678.70

• Name: Andrew Walton (Group Corporate Affairs Director)
• Nature of transaction: Disposal of shares
• Date of transaction: 19 May 2022
• Amount sold: 184,216 @ £0.43
• Total value: £79,986.68

IAG

The IAG (LSE: IAG) share price is up about 4% this week as the group announced a share buyback programme on Tuesday. Apart from that, a number of big director dealings occurred at IAG. Chairman and Iberia CEO Javier Sanchez-Prieto and CFO Nicholas Cadbury made the headlines. The latter had already received 1,473,207 shares as a part of IAG’s executive share plan, which will be vested in three tranches annually. Despite that, Cadbury still purchased more shares.

• Name: Javier Sanchez-Prieto (Chairman and CEO Iberia)
• Nature of transaction: Transfer of shares from one nominee account to another nominee account with no change of beneficial ownership
• Date of transaction: 23 May 2022
• Amount transferred: 181,014 @ Nil
• Total value: N/A

• Name: Nicholas Cadbury (Chief Financial Officer)
• Nature of transaction: Acquisition of shares
• Date of transaction: 24 May 2022
• Amount transferred: 254,979 @ £1.23
• Total value: £312,604.25

SSE

SSE (LSE: SSE) reported a decent set of numbers in its FY22 earnings this week. The firm generated profits of £1.5bn last year, and expects to make even more this year from high energy prices. But a windfall tax from the British government soured investor sentiment, sending the SSE share price down by almost 10%. Still, outgoing non-executive director Dame Angela Strank acquired a respectable number of shares.

• Name: Dame Angela Strank (Non-Executive Director)
• Nature of transaction: Acquisition of shares
• Date of transaction: 25 May 2022
• Amount transferred: 483 @ £18.49
• Total value: £8,929.14

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this article’s instance, Lloyds’ director dealings used the dividends they received on SIP shares to reinvest into further Lloyds shares. It should be noted, though, that dividend shares must normally be held in the trust for at least three years to get full tax relief. On the other hand, IAG’s CFO received free shares as part of his compensation package.

The post Director dealings: Lloyds, IAG, SSE appeared first on The Motley Fool UK.

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• Here’s what fresh legal news could mean for Lloyds shares
• How to target a million-pound SIPP by investing in UK shares
• How Lloyds shares could rise to 131p… or sink to 91p
• Are IAG shares the ultimate FTSE 100 volatility play? 

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended 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.

Savings and investment firm M&G (LSE: MNG) yields a stunning 7.5%, covered 2.4 times by earnings. It looks like one of the best stocks to buy for both dividend income and growth. Its share price has climbed 72% in a year (although don’t expect that breakneck pace to continue).

The FTSE 250 stock was spun off from Prudential in 2019. M&G looks undervalued to me, trading at just 5.5 times earnings. Perhaps that’s because it lacks a long-term track record. As well as one of the best stocks to buy for income, it’s one of the cheapest.

The FTSE offers rich pickings for dividend stocks

M&G’s first full-year results in March were mixed. Adjusted operating profit before tax fell from £1.15bn to £788m, although this was largely down to initial infrastructure costs. Assets under management rose following an acquisition, but investor outflows totalled £6.6 billion, amid weak investment performance.

The stock market rally will hopefully reverse that. Despite these concerns I’d buy M&G for high income, and steady growth.

Cardboard box and packaging specialist Mondi (LSE: MNDI) has a less dramatic yield of 4% a year, but that’s still solid. The FTSE 100 company looks to be among the best stocks to buy today because it gives investors exposure to the fast-growing e-commerce sector. Earlier this month it reported “strong” demand as online shopping surged. Q1 earnings were down 8% to €353m year-on-year, but jumped 14% on the previous quarter.

The best stocks to buy for long-term income and growth

Like a growing number of companies, Mondi has seen input costs rise as paper, resin, energy and transport prices increased. However, it has some pricing power, and has been able to pass on higher costs to customers We may buy less stuff online now that we can hit the high street again, but I believe the long-term trend for e-commerce is upwards. Trading at 17.2 times earnings, the Mondi share price isn’t dirt cheap, but it isn’t expensive either.

FTSE 100 power giant SSE (LSE: SSE) nearly always features on my list of the best stocks to buy for income. It has a terrific record of increasing its dividend in line with prices, and now yields 5.3%.

SSE faces a tricky balancing act as it looks to establish itself as a renewables specialist while also relying on income from legacy fossil fuels. So far, it’s risen to this challenge better than, say, BP and Royal Dutch Shell, so I remain optimistic.

On Wednesday, it reported a 1% increase in full-year underlying operating profit to £1.5bn, after taking a £170m knock from the pandemic. Underlying earnings per share rose 5% to 87.5p. Management reaffirmed its commitment to grow the dividend in line with RPI for the next two years. Thereafter, it depends on how success of its green transformation.

Today, SSE remains one of the best FTSE 100 stocks to buy for solid, high income. I’m optimistic that’ll continue.

The post Best stocks to buy for income! I’d target these 3 FTSE dividend shares appeared first on The Motley Fool UK.

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Harvey Jones 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.

If I had £2,000 to invest right now, or any sum, I’d make a beeline for the FTSE 100 and fill my boots with top UK stocks. While many companies have taken a hammering over the last troubled year, there are still some great opportunities out there. I’d buy today, ahead of the next stock market rally, rather than afterwards.

Personally, I’m avoiding stricken sectors that may face an existential threat if Covid lockdowns drag on or mutant variants create havoc. So no airlines, hotel groups or cinema chains for me. Recent figures suggest I do not need to take big risks to make big money and these two top UK stocks look like a safer way to build my wealth.

My first pick is power giant SSE (LSE: SSE). The FTSE 100 dividend hero is making a big move into renewables, and I think it is an attractive way to play this fast-growing sector. Investors are piling into clean energy start-ups, but I think SSE’s scale gives it a head start and an added layer of security.

Clean power to the people

Let’s be honest here, I don’t really anticipate much growth. The SSE share price trades at similar levels to five years ago but it still isn’t particularly cheap, trading at 16.88 times earnings. However, it remains a top UK stock for income, with a forecast yield of 6% and a great track record of making payouts, stretching over a decade.

My trade could backfire if the dividend is cut and cover is thin at 1.1x. Revenues could come under pressure if customers struggle to pay their bills during the pandemic. However, investors have been fretting over the SSE dividend for some time, but management has remained committed to increasing it rather than cutting.

SSE continues to target annual RPI increases to 2023 as set out in its five-year dividend plan. Given today’s rotten rates on cash, this juicy dividend makes it a top UK income stock for my portfolio.

I’d buy these two top UK stocks

I’d like to invite inject some growth into my portfolio too, and have been intrigued by talk of a new commodity supercycle. Many analysts believe demand for metals and minerals will accelerate, as the world busts out of lockdown and China and Asia lead the charge back to normality.

My top UK stock in the commodity sector is Rio Tinto (LSE: RIO), which recently reported an impressive 22% rise full-year profit after tax to $9.8bn. Its total dividend is at a record high, up 26% ahead on last year, and it looks like there is more to come. The Rio Tinto share price comes with a whopping 7.8% forecast yield, covered 1.9 times by earnings.

The valuation looks tempting too, trading at just 9.1 times forecast earnings.

As ever, there are risks and it’s important to register them when singling out top UK stocks. If mutant Covid strains slow the recovery, sales and profits could suffer. Also, the commodity sector is notoriously cyclical, and Rio Tinto’s management has to strike a balance between investing for the future and protecting against the next downturn. I would still buy it for long-term income and growth though.

The post Stock market rally: I’d invest £2,000 today in these top UK shares appeared first on The Motley Fool UK.

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Harvey Jones 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.

At the moment, I reinvest all my dividends for growth. When I retire, I will draw those dividends as income. That income will be tax-free inside a Stocks and Shares ISA. Last year was tough for many FTSE 100 dividend stocks, but these two stood by their shareholder payouts and number among the best shares on the index, in my view.

Power giant SSE (LSE: SSE) is transforming itself into a renewable energy giant, developing the world’s largest offshore wind farm, Dogger Bank Wind Farm, in a joint venture with Equinor. It is also part of a consortium for the huge Danish Thor offshore wind tender, and is developing a range of other projects.

This energy stock pays top dividends

SSE has the wind behind it right now, as the UK and other countries commit to net carbon zero. It should find the energy transition a lot easier than many FTSE 100 energy companies, such as BP. The group is looking to generate more than £2bn from disposals, largely from selling off coal and oil-fired plants.

The big attraction for me is the yield. SSE has been one of the best shares to buy for income on the FTSE 100 for years now. It currently yields 5.3%, almost double the FTSE 100 average of around 2.7%. Be warned, cover is thin at just 1.1 times earning. The payout was rebased lower in 2018 but looks safe for now.

I don’t expect that much capital growth from this stock. The SSE share price is up just 7% measured over five years. On the other hand, it does offer me protection from stormy waters. While the FTSE 100 is down 12% over the last turbulent year, SSE is holding steady. It currently trades at 16.1 times earnings. Not cheap, but not expensive either. I’d buy it with the aim of holding for the very long term. As I do with most stocks.

I would consider matching it with international mining giant Rio Tinto (LSE: RIO). I reckon this is also one of the best shares for dividends right now, as it yields an attractive 5%. It boasts more impressive dividend cover than SSE, as its payout is covered 1.7 times by earnings.

Unlike SSE, the Rio Tinto share price offers the potential for growth as well. It is up 234% measured over five years, and 36% over one year.

One of the best shares to buy for income

That is impressive, but I cannot rely on past performance figures. Commodity stocks like Rio Tinto are highly cyclical. When the world is growing and hungry for metals and minerals, Rio Tinto will profit by supplying them. In a downturn, it will do less well.

I am banking on the world coming out of its Covid lockdowns this year, boosted by vaccine success. I am tempted to buy Rio Tinto before the recovery kicks in. Today’s valuation of 12.19 times earnings suggests an opportunity here.

SSE and Rio Tinto look like two of today’s best shares for investors like me who are seeking solid, long-term returns.

The post I reckon these 2 FTSE 100 dividend stocks may be among the best shares to buy now appeared first on The Motley Fool UK.

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• How much do I need in a Stocks and Shares ISA to reach a £2,027 monthly passive income?

Harvey Jones 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.

Too many people are leaving large sums of money in cash right now, despite getting a near zero return. With inflation at 0.7%, this is a losing strategy. I would much rather put my money into dividend-paying FTSE 100 stocks like SSE.

The power group’s half-year report, published today, only confirms my view that this is a solid alternative to cash. Shares will always be more risky than leaving money in the bank, but this FTSE 100 stock is at the safer end of the spectrum. I say that even though SSE has just reported a 15% drop in first-half adjusted operating profit to £418.3m.

Forget cash, choose dividends

The drop was mostly down to a hefty £115m coronavirus hit, due to lower demand, rising bad debts and ineffective hedging. There is more to come but it looks manageable to me, with full-year Covid-19 costs expected to be towards the middle of the £150–£250m range set out in June.

SSE plans to position itself as the pre-eminent green energy company in the UK and Ireland, as a key part of its £7.5bn investment plan. It is now pushing ahead with the first two phases of the world’s largest offshore wind farm at Dogger Bank, and plans to treble its renewable output by 2030.

This FTSE 100 stock could ultimately become a green powerhouse. It plans to invest £7.5bn over the five years to March 2025, and has already raised more than £2bn towards that through its disposals programme. Management reckons the remainder is “fully financeable” within its debt targets.

SSE may not deliver share price growth but when it comes to income, this is still one of the best FTSE 100 dividend stocks. Last year, management cut its dividend from 97.5p to 80p, but it still yields around 6%. Cover is thin at 0.9 but management is looking to increase the payment steadily in the years ahead. That should give investors a rising income as well. I would buy it inside a Stocks and Shares ISA, for tax-free returns.

I’d buy this FTSE 100 stock for income

With savings rates plunging to record lows, this level of income is hard to ignore. Especially given that it comes from a company whose share price has been steady for years, and has largely recovered from this year’s crash.

SSE looks fairly priced to me, trading at 16.1 times earnings. With interest rates set to stay low for years, it looks a great long-term buy and hold. Buying FTSE 100 stocks like this one looks far more tempting to me than leaving money in cash.

The post Forget cash! I’d buy this FTSE 100 stock in an ISA for its 6% yield appeared first on The Motley Fool UK.

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Harvey Jones 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.

The SSE (LSE: SSE) share price is up almost 9% this morning after it reported a 37% jump in adjusted operating profit to £1.49bn. Crucially, it stood by this year’s final dividend. SSE now yields 7.06%, making it one of the most attractive dividend income stocks on today’s market.

FTSE 100 listed SSE is primarily known as an energy company, but it also supplies phones, broadband and boiler cover to UK homes. It’s a relatively defensive business, and a good choice to underpin a balanced portfolio.

Top FTSE 100 defensive stock

But don’t expect much in the way of share price growth as there’s been precious little of that. SSE compensates by dishing up dividend income in large amounts. While dividends are never guaranteed, this is far more solid than most. Today’s payout is in line with management’s five-year dividend plan running to 2022/23.

The final dividend of 56p per share, paid on 18 September, lifts the full-year dividend to 80p per share. In 2018, SSE announced it was rebasing its dividend payout. So this year’s payout is lower than last year’s 97.50p. However, investors can now look forward to receiving a rising income.

Although adjusted profits jumped in the year to 31 March, reported operating profit fell 40% to £963.4m. That was largely due to a net exceptional pre-tax charge of £529m on discontinued operations. This was followed by January’s sale of its retail operations to OVO Energy, and closing its last coal-fired power station in March.

SSE also took a £209.7m hit on continuing operations, including £33.7m from bad debts, due to the pandemic. In 2020/21, the coronavirus is estimated to hit operating profit by between £150m and £250m, before mitigation.

Management has drawn up a comprehensive plan to sustain that all-important dividend income and create value in the business. This includes reducing planned outflows by at least £250m in 2020/21, mainly by cutting capital expenditure, and a proposed £2bn of disposals.

I’d buy this dividend income hero

SSE still has to invest around £7.5bn over the next five years, as it makes the transition to low carbon electricity production. It’s also investing in the new 103-turbine, 443MW Viking onshore wind farm near Shetland, approved today.

I’m glad to see chairman Richard Gillingwater emphasising the importance of sustaining shareholder payouts, stating that its dividend income funds “people’s pensions and savings, income which is now more important than ever.”

That’s exactly what investors want to hear. The SSE share price has recovered only slowly since the March crash, and still trades almost 18% lower than its peak in February. This reduced entry price makes SSE a buy for me. Judging by today’s share price action, I’m not the only one.

The post Looking for dividend income? I’d buy this 7%-yielding FTSE 100 stock right now appeared first on The Motley Fool UK.

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Harvey Jones 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.

Now is a good time to do it, as the market is still trading 20% lower than at the start of the year. This means you are picking up top FTSE 100 companies at reduced prices. If current volatility makes you wary, you could target defensive stocks like these two utility giants.

Both companies offer an attractive entry price, and you still get dividends as well. If you buy inside your Stocks and Shares ISA allowance, you can take all your growth and income free of tax.

I’d go for the SSE share price today

Power giant SSE (LSE: SSE) is a top FTSE 100 dividend stock, now more than ever. Although dozens of companies have dropped their payouts, it currently yields a thumping 7.86%.

That is a terrific rate of income, given that the Bank of England base rate is just 0.1%. Utilities are generally seen as attractive stocks to hold in a recession, as they offer basic services that people need whatever the economic weather.

Despite that, the SSE share price is trading around 25% lower than in February, when Covid-19 started to hit the FTSE 100. This offers an attractive entry point for investors looking to access a long-term income stream at a discounted price.

Dividends are not guaranteed, so there is a danger SSE could cut its payout in future. The group’s income has been hit by the pandemic and customer arrears will inevitably increase as the recession drags on. However, SSE still expects operating profits at its core businesses to grow this year, if at a slower pace. No promises, but it looks tempting for now.

Another FTSE 100 income hero

As the UK’s largest listed water company, United Utilities Group (LSE: UU) is fulfilling the most basic of human needs. Its share price has recovered slightly better from the March crash. It is now just 12% below its February peak.

United Utilities is also standing by its dividend, which currently gives you a yield of 4.68%. Before the pandemic, it pledged to increase its dividend by at least the rate of inflation. However, the group is now reviewing its policy for the 2020–25 regulatory period, to assess the impact of Covid-19, which could lead to delayed bill payments as customers struggle.

That surprised investors, who had assumed that its payout was one of the most reliable on the FTSE 100. However, it does have to repay around two thirds of its £1.2bn liquidity this year, while looking to raise a further £500–£800m. If it manages that, the dividend should be safe. I remain hopeful, but there are no guarantees in these strange times.

One option is to divide your money between the two, to spread your risk.

The post No savings at 50? I’d buy these 2 FTSE 100 dividend stocks in an ISA today appeared first on The Motley Fool UK.

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• 3 FTSE shares with many years of consecutive dividend growth

Harvey Jones 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.

I’m impressed by any company that manages to continue paying dividends right now, as so many others scrap theirs. It tells me the underlying business remains healthy, still generates cash and is well placed to weather the stock market crash.

Mining giant Rio Tinto (LSE: RIO) offers investors a thumping yield of 6.6%. It is now the fifth biggest dividend stock on the FTSE 100, making up around 5% of total dividends paid, according to research from AJ Bell.

Stock market crash opportunity

The dividend has a decent amount of cover, currently 1.62 times earnings. Right now, the big question is how the global economy performs, as that will dictate demand for the metals and minerals that Rio Tinto produces, and how big a FTSE 100 bargain it is.

China is its biggest customer, and there are tentative signs that its virus-battered economy is starting to recover. Yesterday, Rio Tinto’s chief executive J-S Jaques said that “demand in China continues to recover”. That is encouraging, although he added that the outlook in the rest of the world remains uncertain.

He said Rio’s “world-class portfolio and strong balance sheet” should serve it well in all market conditions. It is particularly valuable amid current stock market volatility. I’m encouraged to see the iron ore price hold steady $84 per tonne, four times its production costs of less than $20, as this is Rio’s main resource. It looks a FTSE 100 bargain buy-and-hold to me.

FTSE 100 bargains to be had

The stock market crash has also driven energy giant SSE (LSE: SSE) into FTSE 100 bargain territory. Its share price has fallen around 25% this year.

Despite the slump, management has yet to cancel the dividend, which currently yields a handsome 6.7% a year. However, it is worth noting that cover is relatively thin at 1.22 times earnings. This stock has been a dividend favourite for years and I was pleased to SSE management stating it is still aiming to hit its target of paying 80p per share, although it will continue to monitor the situation.

SSE has other challenges, such as funding its transition to low carbon energy, but earlier this month successfully raised €1.1bn through five- and 10-year dual tranche eurobonds, which will cover its refinancing and funding requirements for the rest of the year.

It is great to see these two blue-chip companies still paying dividends, despite the stock market crash. There are no guarantees that will continue as Covid-19 takes us into unknown territory. However, these two FTSE 100 bargains still look tempting to me.

The post Stock market crash: I’d buy these 2 FTSE 100 bargains that still pay dividends appeared first on The Motley Fool UK.

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Harvey Jones 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.

In days like these, a high yield is a thing of beauty and, happily, the FTSE 100 is crammed full of stocks paying generous levels of dividend income. The opportunity to get 5% or 6% a year is too good to ignore, given that the average savings account gives you a 10th of that amount, and power giant SSE (LSE: SSE) looks a particularly tempting buy today.

SSE has been one of the most solid income stocks for the last 30 years, with many investors using its steady dividend to underpin their portfolio. Lately, they’ve enjoyed a further kicker from the rising SSE share price, up a hugely impressive 40% over 12 months.

High energy

You wouldn’t normally expect that kind of share price growth from what should be a solid defensive performer, but it’s been playing catch-up after a difficult period, when many investors lost faith with the stock. Now they’re starting to believe again.

The SSE share price was hit by falling earnings and rising debt, as its retail home energy operation struggled amid tough competition, lower customer demand, and the government-backed price cap. Its wholesale business has faced headwinds, as the move to net zero carbon emissions sunk its gas and coal operations, while forcing it to invest heavily in wind, hydro and pumped storage. The group’s energy trading operations also floundered.

Operating profits in both these divisions fell sharply, although it’s ever-reliable networks division, which covers electricity transmission and distribution in Scotland and England, offered some ballast. SSE was nonetheless forced to cut its full-year dividend from just over 97p to 80p for 2019/20, with the inevitable negative impact on investor sentiment and the share price.

Goodbye coal

Things picked up after management announced in September it was successfully offloading its retail business to Ovo for £500m. Then, in December, Boris Johnson’s election win dispelled the threat of being nationalised by wannabe PM Jeremy Corbyn.

The £17bn group is intensifying its push into renewables, exiting coal altogether in March. Frankly it has little choice, but one downside is that revenues may be more unreliable due to intermittent wind, and output is currently around 5% behind plan.

After the recent share price surge, the stock trades at 16.4 times forecast earnings, so is no longer a bargain. Don’t expected it to rise another 40% this year. However, the 5% dividend yield looks more solid now, as management remains committed to targeting annual increases that at least keep pace with RPI inflation, until March 2023.

The risk/reward trade-off compared to a Cash ISA looks positive to me, and with a fair wind behind it, I’d buy SSE for long-term dividend growth.

The post Forget the Cash ISA! I’d buy the SSE share price for its 5% yield appeared first on The Motley Fool UK.

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Harvey Jones 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.