I plan to buy the best dividend shares on the FTSE 100
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I’m looking out for high-quality dividend shares. The place higher to look than the UK’s main index?
The FTSE 100, for my part, is residence to among the greatest revenue shares obtainable. I already personal a good few. I wish to purchase extra.
My plan is fairly easy. I wish to snap up undervalued shares and maintain them for many years. With the dividend funds I obtain, I’ll purchase extra shares.
It’s powerful to whittle it down given the variety of prime shares on the index. However listed below are two I believe are the very best. With any spare change I’ve in April, I’ll look to select up some extra shares.
British American Tobacco
Let’s get the ball rolling with the inventory that has the second-highest yield on the index. In fact, that’s British American Tobacco (LSE: BATS).
Its whopping 9.8% yield is a serious draw. Nonetheless, what’s extra engaging to me is its spectacular observe document relating to rising its payout.
Dividends are by no means assured. Due to this fact, when a enterprise has elevated its dividend yearly since 2000, that’s one thing that fills me with confidence.
Throughout that point, its cost has elevated from round 25p per share to 253.52p for 2023. With administration “dedicated to persevering with to reward shareholders with robust money returns”, that’s one other optimistic signal.
That mentioned, there’s no level in receiving dividends once they’re worn out by a declining share worth. British American Tobacco inventory is down 22.6% within the final 5 years, in order that’s an actual menace. The enterprise may also face additional strain within the years forward as governments clamp down with extra smoking bans.
Nonetheless, the enterprise is conscious of this. To fight the difficulty, it has put extra deal with its ‘New Classes’ division. Final 12 months, this division achieved profitability two years forward of schedule.
This feeds extra broadly into British American Tobacco’s goal to construct ‘A Higher Tomorrow’ by turning into “a predominantly smokeless enterprise by 2035”. Buying and selling on simply 6.5 occasions ahead earnings, its shares additionally appears to be like grime low-cost to me.
Authorized & Common
Switching over to the monetary business, subsequent up is Authorized & Common (LSE: LGEN). Its yield registers barely decrease than its counterparts at 8%. Nonetheless, that’s nonetheless one of many highest on the Footsie and double the index common.
Like British American Tobacco, it has additionally positioned emphasis on rewarding shareholders. Between 2020 and this 12 months, the agency is on observe to return as much as £5.9bn in dividends.
The inventory has wobbled just lately. Rates of interest have detrimentally impacted asset valuations. Deposits ranges have additionally been risky lately as customers have tightened their belts.
Nonetheless, in Authorized & Common, I see a enterprise in wholesome form to excel in the long term. It has robust model recognition and a stable buyer base.
For my part, at 254.1p, the inventory appears to be like too low-cost to cross on. It’s buying and selling on simply 9 occasions ahead earnings. I’m eager to purchase extra shares now at a slashed worth. I believe they might be a long-term winner for my portfolio.