ISA investing: FTSE 100 dividend stocks offer amazing yields right now
The Motley Fool
Published Apr 03, 2019 11:29
It’s a great time to be a dividend investor. That’s because if you analyse the FTSE 100, or the FTSE All-Share indexes, you’ll find you’re spoilt for choice when it comes to dividend stocks that offer high yields. It’s literally never been easier to build ourselves a solid income from high-yielding dividend stocks.
Sky-high yields Indeed, according to recent research from analysts at premier investment platform Hargreaves Lansdown (LON:HRGV), the UK stock market as a whole, as represented by the FTSE All-Share index, is currently sporting one of its highest yields in the last 30 years.
Hargreaves’ analysts say that since 1993, there have only been 11 months when the index had a higher yield than in 2019. Unbelievably, that was at the height of the Global Financial Crisis a decade ago when stock prices were at rock bottom.
Digging deeper, according to Stockopedia, there are currently over 40 stocks in the FTSE 100 that have rolling yields over 4% and around 30 stocks that sport rolling yields of 5%, or more. As I said, investors are spoilt for choice when it comes to yields right now.
Value on offer Hargreaves Lansdown analysts also point out that the high yields on offer right now suggest the UK stock market offers value. That’s because high yields can be an indicator that stocks are undervalued.
Looking at UK stocks, what I think has happened over the last decade is that dividends have been increased significantly (they were up more than 5% last year alone), but share price gains have lagged. This is due to Brexit uncertainty and the fact investors have been chasing international growth stocks, such as Apple (NASDAQ:AAPL), Amazon (NASDAQ:AMZN) and Facebook (NASDAQ:FB).
As such, what we’re seeing right now is big yields plus plenty of value on offer among the UK indexes too. That’s great for investors. So, what are some of the best dividend stocks to buy?
Attractive income opportunities Looking at the FTSE 100, there a number of dividend stocks that I like right now. For example, insurance and investment management specialist Legal & General is one I believe offers a lot of potential. It has registered nine consecutive dividend hikes now yet still yields over 6%.
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Tobacco giant Imperial Brands (LON:IMB) is another stock I’m bullish on. It has increased its dividend significantly in recent years yet the yield there is still almost 8%. Just last week, analysts at Citi said UK tobacco stocks could “still rise a long way”.
Packaging group DS Smith (yield 4.7%), broadcaster and content producer ITV (LON:ITV) (yield 6.3%), and Asia-focused financial services group Prudential (LON:PRU) (yield 3.4%) are three other dividend stocks I like.
Overall, I think there are some fantastic opportunities for dividend investors at present. And the best part of all is that if dividend stocks are bought within an ISA, the income is tax-free.
Edward Sheldon owns shares in Hargreaves Lansdown, Legal & General Group (LON:LGEN), Imperial Brands, Prudential, Ds Smith, ITV and Apple. John Mackey, CEO of Whole Foods Market (NASDAQ:WFM), an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Apple, and Facebook. The Motley Fool UK has the following options: short January 2020 $155 calls on Apple and long January 2020 $150 calls on Apple. The Motley Fool UK has recommended DS Smith, Hargreaves Lansdown, Imperial Brands, ITV, and Prudential. 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 2019
Written By: The Motley Fool
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