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Have £2,000 to invest in the FTSE 100? I’d buy these 2 dividend stocks in an ISA right now

Peter Stephens
Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.

While the FTSE 100 may continue to experience a high degree of volatility in the coming months, now could prove to be a buying opportunity for long-term investors.

A number of the index’s members appear to offer wide margins of safety, with investors seemingly pricing in the prospect of a difficult period. This could allow new investors to not only obtain relatively high income returns, but improve their chances of generating capital growth over the coming years.

With that in mind, here are two FTSE 100 dividend shares that could be worth buying today, with them both offering low valuations and growth potential.

HSBC

The resignation of the HSBC (LSE: HSBA) CEO last week took the stock market by surprise. After all, John Flint had been in the role for only 18 months and was seemingly enjoying success in implementing the company’s strategy.

Of course, a new CEO may seek to make changes to the company’s strategy. This could cause a degree of uncertainty in the near term, although HSBC’s focus on the Asian economy has the potential to provide it with strong growth as demand for financial services in the region increases alongside rising incomes.

With the stock having a dividend yield of 6.6%, it appears to offer significant income investing potential. Its dividend payout is covered 1.5 times by net profit, which suggests that it may be robust even if there are short-term challenges ahead from global economic uncertainty.

As such, now could be the right time to buy a slice of the business. Its global diversity, high income returns and growth potential suggest that it could outperform the FTSE 100 in the long run.

Kingfisher

Another FTSE 100 stock that will have a new CEO in the near future is DIY retailer Kingfisher (LSE: KGF). It has been struggling in recent years with weak demand across a number of its markets. This trend could continue in the near term, with consumer confidence being downbeat in key markets such as the UK.

The company has been able to improve its efficiency over the last few years, while its balance sheet is relatively strong. This could provide it with a competitive advantage over sector peers, and may reduce risk to some extent should trading conditions prove to be tough.

Kingfisher’s dividend yield of 6.4% has been inflated by its share price decline of 30% over the last year. While its dividend payout may be less robust than some of its FTSE 100 index peers due to the uncertain nature of its industry, dividend cover of 2.3 times suggests that its income prospects may be brighter than the stock market is currently pricing in.

Trading on a price-to-earnings growth (PEG) ratio of just 0.5, Kingfisher appears to offer a wide margin of safety. It may be a relatively risky stock due to its challenging operating conditions, but it may deliver impressive total returns in the long run.

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Peter Stephens owns shares of HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings. 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