Forget a Cash ISA! I’d buy dirt-cheap FTSE 100 dividend growth stocks

Forget a Cash ISA! I’d buy dirt-cheap FTSE 100 dividend growth stocks

The Motley Fool  | Jul 12, 2020 12:10

Forget a Cash ISA! I’d buy dirt-cheap FTSE 100 dividend growth stocks

Cash ISA interest rates have plunged in recent months. As such, it’s now harder than ever for savers to get an attractive return on their hard-earned cash. And with this being the case, FTSE 100 dividend growth stocks are starting to look more attractive as alternatives.

With that in mind, here are two cheap FTSE 100 dividend growth stocks that may be worth buying for income and capital growth today.

FTSE 100 dividend growth stocks As FTSE 100 dividend stocks go, Halma (LSE: LON:HLMA) has a track record. The company has increased its dividend at or above the rate of inflation every year in recent history.

It doesn’t look as if this trend is going to come to an end any time soon. The business, which specialises in supplying health and safety equipment, has seen a surge in demand for its products in the coronavirus crisis.

The FTSE 100 company has also been complementing organic growth in recent years with acquisitions. These acquisitions have taken the group into areas such as fire safety, which is a defensive and critical market. The demand for these services is only likely to grow over the long run.

Therefore, Halma seems to have the potential to continue growing its dividend every year. The payout is covered 3.3 times by earnings per share, which leaves plenty of headroom for growth.

The FTSE 100 stock also appears cheap at current levels. City analysts believe the shares could be worth as much as 2,385p within the next few months. These figures exclude the company’s recent trading performance, which has been better than expected. As a result, analysts may soon revise their guidance higher.

It might be worth snapping up a share of this dividend growth champion before the rest of the market catches on to the opportunity.

Unilever (LON:ULVR) Alongside Halma, I believe FTSE 100 dividend stock Unilever (LSE: ULVR) also looks attractive at current levels.

As one of the world’s largest consumer goods companies, Unilever is a relatively defensive investment. The demand for its food and personal hygiene products should only increase in line with the global population over the long run.

What’s more, management has recently been building out the group’s diversification by acquiring new companies. That should help ensure that Unilever stays relevant and has a product set that remains attractive to consumers.

This FTSE 100 dividend stock also has an impressive track record of growing its dividend at or above the rate of inflation over the long run. Over the past six years, for example, the payout has grown at a compound annual rate of 8%. The stock’s dividend yield currently stands at 3.4%, and the payout is covered 1.5 times by earnings per share.

Analysts are also highly optimistic on the outlook for the stock in the near term. They believe shares in the FTSE 100 consumer goods giant could be worth as much as 5,100p, an increase of 20% from current levels.

These figures indicate that the stock may have the potential to deliver high total returns for investors in the years ahead.

The post Forget a Cash ISA! I’d buy dirt-cheap FTSE 100 dividend growth stocks appeared first on The Motley Fool UK.

Rupert Hargreaves owns shares in Unilever. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Halma. 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.

Motley Fool UK 2020

First published on The Motley Fool

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