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3 FTSE 100 stocks with dividends over 5% I’d buy today

Rupert Hargreaves
Various denominations of notes in a pile

If you are looking for FTSE 100 dividend stocks, I highly recommend taking a closer look at mining giant Glencore (LSE: GLEN). This is one of the most important companies in the world, although most consumers don’t know it exists.

As well as being one of the largest mining businesses, the company is also one of the largest commodity traders. This means the group is responsible for getting commodities, such as iron ore, copper, coal and oil, from where they’re produced to the end consumer, a hugely complicated process that requires lots of planning and infrastructure.

There are only a handful of companies that are geared up to take on these challenges on such a large scale. Glencore is the biggest. 

As the global economy continues to expand, demand for Glencore’s services should only increase, and that’s why I’m recommending the stock as an income investment. Shares in the company currently support a dividend yield of 6.3% and trade at a forward P/E of 9.5 for 2020, based on current City estimates. 

Current projections suggest the dividend yield will be covered 1.8 x earnings per share next year. 

Special dividend

Another blue-chip stock yielding more than 5% that currently looks interesting as an investment is retailer Morrisons (LSE: MRW). A few years ago, the supermarket group was struggling. Morrisons, alongside the rest of the sector, was finding it tough to compete with the rise of the low-cost German discounters. While this threat hasn’t vanished, Morrisons has been able to win back customers by offering a better service at a similar price.

These efforts are now starting to pay off handsomely. The group reported stronger-than-expected profits for the six months to 4 August of £198m off the back of a 0.4% increase in total revenue.

Management was so pleased with these numbers, it decided to declare a special dividend of 2p per share. If this trend continues, City analysts believe shares in Morrisons will yield a total of 4.8% in its current financial year, rising to 5.1% for fiscal 2021.

With the payout covered 1.5 times by earnings per share as well, it looks to me as if management has plenty of room to increase the payout further from current levels as well. 

Undervalued income

The final FTSE 100 dividend stock I’m going to highlight is water supply United Utilities (LSE: UU). Threats from Labour leader Jeremy Corbyn to nationalise utility suppliers if he comes to power have weighed on the share prices of all utility companies over the past few years. However, I think there’s actually quite a small chance this will ever happen. Corbyn wants to nationalise utilities, but doing so would require the support of the courts as well as parliament, which he’s unlikely to have.

On this basis, I reckon it’s worth taking advantage of the negative market sentiment to snap up shares of undervalued utility companies.

Today, shares in United offer a dividend yield of 5.3%. The distribution is covered 1.4 times by earnings per share, so it looks as if it’s safe for the time being. Historically, the company’s dividend yield has averaged around 4.5%, which implies the stock is undervalued by nearly 18% at current levels. 

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Rupert Hargreaves owns no share 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.

Motley Fool UK 2019