3 top FTSE 100 dividend stocks that aren’t banks or housebuilders
The FTSE 100 index is home to a lot of dividend stocks. Many of these stocks are in riskier areas of the market however. I’m talking about areas such as banking and housebuilding – both of which are under a fair bit of pressure right now.
Here are three Footsie dividend stocks positioned in more stable industries. I think these shares could be good additions to investor portfolios in the current economic climate.
A defensive dividend stock
First up is National Grid (LSE: NG.), one of the UK’s largest utilities companies. From a dividend investing perspective, there’s a lot to like about National Grid shares, in my view.
For starters, the company operates in a ‘defensive’ industry. Throughout the business cycle, demand for its services tends to be pretty stable.
As a result, it’s a reliable dividend payer. During Covid-19, when bank and housebuilder dividends dried up, National Grid kept the cash flowing to shareholders.
Secondly, the yield is quite attractive. Currently, analysts expect the company to pay out 55.3p per share for 2023. That equates to a yield of about 4.8% at today’s share price.
A risk here is that now that interest rates are higher, investors may be tempted to shift their cash out of utilities stocks and into bonds. This could limit share price upside.
Overall however, I see the risk/reward setup as attractive today.
Next we have Unilever (LSE: ULVR). It’s one of the world’s premier consumer goods companies with brands including Dove, Domestos, and Hellman’s.
In the current environment, Unilever has several things going for it. Firstly, it’s relatively recession proof. In an economic downturn, people will still buy deodorant, cleaning products, and mayonnaise (although they may trade down to cheaper products if things get really bad).
And secondly, it has pricing power due to its strong brands. This is helping to drive revenue growth and offset inflation.
Unilever is another reliable dividend payer. Over the long term, it has steadily increased its payout. Currently, the shares yield about 3.5%.
It’s worth noting that Unilever’s price-to-earnings (P/E) ratio is above the market average. This adds some risk to the investment case.
However, I think the stock is worth a premium to the market, due to its defensive attributes.
Potential for share price gains
Finally, we have Smith & Nephew (LSE: SN.), a leading healthcare company that specialises in joint replacement technology.
Now the dividend yield here isn’t that high. Currently, it’s only about 2.2% But this isn’t a deal breaker for me. Smith & Nephew is a very reliable dividend payer, having delivered a dividend every year since 1937.
Meanwhile, I believe the stock has the potential to provide share price gains plus dividends in the years ahead.
This company faced a lot of challenges during Covid (when procedures were postponed). And only now are business conditions starting to normalise.
If the company’s performance continues to improve, I think we could see both earnings growth and a valuation re-rating here in the next 12-24 months, which could potentially push the share price up 25%, or more.
Of course, there’s no guarantee that this will happen. There are things that could go wrong (maybe slower growth than expected).
But given that the stock was trading at much higher levels before Covid, I’m optimistic about the potential here.
The post 3 top FTSE 100 dividend stocks that aren’t banks or housebuilders appeared first on The Motley Fool UK.
Edward Sheldon has positions in Smith & Nephew Plc and Unilever Plc. The Motley Fool UK has recommended Smith & Nephew Plc and Unilever Plc. 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.
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