Abrdn (LSE:ABDN) shares have had a difficult year. The asset manager began 2022 buoyed by improving financials only to be hit by sky-high inflation and the worsening economic outlook of the UK. 

In the first half (H1) of 2022, the firm recorded a total pre-tax loss of £320m. Fee-based revenue dropped 8% to £696m and adjusted operating profits fell 28% to £115m. 

As a result, Abrdn shares are down 47% in 12 months and 42% so far in 2022.

This prompted a demotion from the FTSE 100 in September and the investment firm is now a part of the mid-cap FTSE 250 index. 

But things could be changing. Abrdn shares are up 8% in the last week. Could this beaten-down stock present a mixture of growth and value, factoring in this historic decline and the 10.7% dividend yield? Let’s find out. 

Cheap or a value trap?

Most shares that fall nearly 50% in a year will appear cheap on paper. Looking at the performance of Abrdn shares performance over time, it is clear that the firm has declined steadily since hitting an all-time high of 571p in 2015.

The company has undergone many changes over the last decade, including a merger and subsequent sale of the Standard Life business, several high-profile boardroom changes, and a rebranding effort.

Most investment firms are struggling at the moment. The larger economic collapse in the UK has caused trading volumes to drop. 

This marketwide pullback caused Abrdn’s assets under management (AUM) to fall £34bn in H1 2022. Despite this, the company has managed to hold on to its position as one of the largest asset managers in the UK. 

And I think the latest collapse in Abrdn shares is primarily due to current market conditions rather than a failing business model. This is why I still hold on to my opinion that it is a bargain right now.  

Positives and verdict

Abrdn has been a consistent dividend payer for over 15 years now. In July 2022, the company managed to roll out a share buyback worth £300m. The board also announced its plans to return £500m to shareholders after the firm was removed from the FTSE 100 last month. 

The firm has also changed how it uses excess cash. While many analysts questioned the acquisition of Interactive Investor for £1.5bn, the firm has also been shedding excesses to generate more cash. 

Heading into H2 2022, the investment firm sold two of its stakes in HDFC for about £500m. The company also sold £300m worth of Phoenix Group shares to fund the aforementioned share buyback program.  

This makes me optimistic that the company plans on maintaining a decent dividend going forward. While the current yield of 10% might be unsustainable given falling profits, I think the annual yield will remain higher than the FTSE 100 average of 3.5%. 

When the economy recovers, I expect large asset managers to recover quickly. Given its current sky-high yield and history of shareholder returns, I think Abrdn shares currently offer a nice mix of growth potential and value. I am wary of further economic turmoil in the UK, which is why I am looking at a £1,000 lump sum investment when conditions stabilise. 

The post Up 8% in a week! Can beaten-down Abrdn shares make a comeback?  appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares 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.

The finance firm’s stock looks cheap right now with a yield of over 9%. But should I invest or be wary of a value trap? Let’s find out. 

Passive income is the way 

My main goal for my investing journey is to maximise savings from my day job and retire early. And this quest for financial freedom isn’t unique. Millions of investors have slowly woken up to the power of dividends. Looking at the Google search data for ‘passive income’ since 2004 (see chart below), the jump in popularity over the last two years is clear.

A stable passive income portfolio could be incredibly rewarding in the long run. Many investors have used dividends to retire in their 40s. And it doesn’t require complicated analysis either. Looking for stable businesses with strong cash flow and a history of dividend hikes is a good starting point. How do Abrdn shares fare in these areas? 

Share price analysis 

Abrdn shares are currently trading at 160p at a price-earnings ratio of a measly 3.5 times. Factoring in the 9.1% dividend yield, this asset manager’s stock looks very attractive on paper. 

But shareholders have been selling this stock in record numbers. Down 44% over the last 12 months, Abrdn shares rank 98th in the FTSE 100 for returns. 

Looking at the 2021 results, I think the asset manager had a strong year. Its fee-based revenue model generated over £1.5bn from its total assets under management (AUM) worth £542bn.

As of 2022, Abrdn’s 9.1% yield is covered 1.18 times on an adjusted capital generation basis. While this is higher than 2020’s cover of 0.84 times, the board has made it clear that the current 14.6p per share payout will remain unchanged until a capital cover of  1.5 times is met. 

This makes a dividend rise in 2022 unlikely. But the board is confident of a progressive dividend hike in the next few years so the firm may be able to maintain its high yield longer term.

A major concern here is the revenue from fees. The current economic slowdown is already affecting the average trading volume in the US and UK. People are likely to protect savings during inflation, which could cause private investment figures to drop. And historically, finance firms perform poorly during inflation because of lower activity. 

I also understand that passive income can’t make me rich overnight or completely offset the effects of inflation. Depending on my capital, it could take decades of diligent investing before payouts are large enough to support my retirement.

However, as a passive income option for the long term, the Abrdn share price looks very attractive right now. The company seems to be in a decent financial position and the board is expecting a tidy jump in earnings this year as well. But I think I will wait for the half-yearly results scheduled for 9 August. I’d consider an investment in Abrdn if the results look favourable.

The post Should I buy Abrdn shares just for the 9.1% dividend?  appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares 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.

As a long-term dividend shares investor, I’m a firm believer that it’s far easier to save your hard-earned cash when you have a purpose for that money.

For some people, that might be as simple as wanting a better standard of retirement. For others, it’s perhaps a safety net for quitting an unloved job.

As for me, I’m an avid explorer, and suspect I will be for a long time yet. So, the idea of investing in dividend shares to pay for my travels had me hooked from the start.

How do dividend shares pay for my holidays?

The theory of using dividend shares was pretty simple. I planned on investing in enough shares so that the total dividend payments would pay for my travels. And since I wouldn’t touch the underlying investments, they would continue to do so each following year.

So, I started saving money each month, and buying good quality dividend-paying companies. It wasn’t always easy to find the money to save or to know which shares to pick.

And undeniably, it was hardest at the start, when I was saving hard but not seeing much happen. But as any Fool knows, investing is very much a long-term game. It all became far more interesting when the numbers started to add up after a few years.

These days, my dividend portfolio produces enough cash to pay for my trips away every year — now that was worth saving for!

What makes a good dividend portfolio?

When assessing what investments to include in my dividend portfolio, I have a few simple guidelines I look to follow.

• Consistency — are there any gaps in the payment history?
• Growth — are dividends increasing steadily over time?
• Diversification — will this investment help diversify my portfolio?

Following these principles, I now own a wide range of income-paying investments. Usually, I like to have between 10 and 15 different assets. And in that group I have both individual shares, like BP, alongside dividend-focused ETFs such as S&P Euro Dividend Aristocrats.

Why is it so important to have a range? Well, dividends are not guaranteed. But, if a company does cut its dividend, the average dividend yield on my portfolio will fall less when diversified than if I only own one or two shares.

But how did I know how much I needed to save?

How much do I need to have invested?

When working out how much I needed to have invested, it’s the average dividend yield of my portfolio that matters.

For example, my original investment portfolio has grown over time to have an average dividend return of around 10%. That means that if I have £40k invested, the equivalent of two Stocks & Shares ISAs, I will likely generate around £4k each year.

Even with inflation and the cost-of-living challenges, that still gets me a good break away to somewhere warm and sunny.

It’s not completely work-free and I still need to re-evaluate each position regularly. I like to read a diverse range of share analyses, like at The Motley Fool. That means I can swap out any under-performers for better quality investments.

That effort all seems entirely worthwhile when I’m walking down the beach towards a chilled beer. Now that’s happy travels!

The post Dividend shares are paying for my summer holiday! appeared first on The Twelfth Magpie.

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Michelle Freeman has positions in BP and SPDR S&P EURO DIVIDEND ARISTOCRATS ETF. 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.

Here, I’m going to highlight three top FTSE 100 dividend shares I’d buy today. All of these companies have good dividend track records and I think they’ve the potential to deliver healthy total returns (capital gains and dividends) in the long run.

A top FTSE 100 dividend stock

One FTSE 100 dividend stock I see as a buy right now is Reckitt (LSE: RKT). It’s a leading consumer goods company that owns a wide range of hygiene, health, and nutrition brands. The prospective dividend yield here is about 2.7% as analysts expect a dividend payout of 175p per share for 2021 (note: dividend forecasts aren’t always accurate).

I think Reckitt is well-placed for growth in the current environment. Right now, demand for its hygiene products (Dettol, Lysol, etc ) is high due to Covid-19, and I expect demand to remain strong for a while. Meanwhile, as the world reopens, demand for other products in the company’s portfolio such as painkillers (Nurofen), cold and flu products (Strepsils, Mucinex), sexual health products (Durex), and digestive health products (Gaviscon) should pick up.

It’s worth pointing out that Reckitt is facing some challenges. Its nutrition segment continues to underperform. This is something it needs to sort out. Overall, however, I think the stock has a lot of appeal at present. 

A 4.9% yield

Another FTSE 100 dividend share I like right now is BAE Systems (LSE: BA). It’s a leading defence, aerospace, and security company. It’s expected to pay out 24.8p per share in dividends this year which, at the current share, equates to a prospective yield of about 4.9%.

One thing I like about BAE Systems is that it’s a fairly reliable dividend payer. It did postpone its dividend payout during Covid-19. However, before that, it had registered 15 consecutive dividend increases.

Another thing I like is that the group is moving into higher-growth areas. Recently, it formed a partnership with Australian RegTech firm Kyckr. Under the partnership, the two companies will offer enhanced KYC (know your customer) solutions and help regulated firms solve anti-money laundering and compliance challenges.

One risk here is that defence budgets could be cut. This could impact future growth. However, looking at the valuation (the stock’s P/E ratio is just 10), I think this risk is priced in.

A high-dividend FTSE 100 stock

Finally, I like financial services major Legal & General Group (LSE: LGEN) as a high-yield play. The prospective dividend yield here is about 6.7% at present.

I don’t normally go for high-yield stocks. A lot of the time, companies with high yields are facing big challenges and their shares turn out to be very poor long-term investments. Legal & General doesn’t strike me as this kind of company however. This is a business with a solid balance sheet and decent long-term growth prospects. In March, the company said it expects to deliver long-term, diversified growth across the group.

Like other financial services stocks, LGEN can be volatile at times. So, it’s not a ‘defensive’ dividend stock. This means it may not be suitable for all investors. I’m comfortable with the volatility though. With a yield of nearly 7% on offer, I think the risk/reward proposition here is attractive.

The post 3 FTSE 100 dividend shares I’d buy in May 2021 appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Reckitt, BAE Systems, and Legal & General Group. 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.

Here, I highlight three UK dividend stocks I’d buy today. In my view, all have the potential to provide healthy total returns to investors over the long term.

The best UK dividend stock?

The first UK dividend stock is consumer goods company Unilever (LSE: ULVR). It paid out total dividends of €1.64 last year which equates to a trailing dividend yield of 3.3% at present. That’s about three times the best savings account rates.

There are a few reasons I like Unilever as a dividend stock. Firstly, it’s a resilient company. Because it manufactures products that people use every day, earnings tend to be relatively steady throughout the economic cycle. This translates to consistent dividends.

Secondly, dividend coverage – a key measure of dividend sustainability – is solid. Last year, Unilever’s dividend coverage ratio (earnings divided by dividends) was about 1.6.

Finally, Unilever has an outstanding long-term dividend growth track record. Over the long run, the payout has increased significantly.

All in all, I think Unilever is a top dividend stock. It’s one of the first UK dividend shares I’d buy today.

Strong dividend growth 

Another I like is accounting specialist Sage (LSE: SGE). It paid out dividends of 16.9p last year. At the current share price, that’s a yield of 2.3%. 

Like Unilever, Sage has a number of attributes that make it a top dividend stock. Firstly, it tends to generate a high proportion of recurring revenues. This is what you want as a dividend investor, as recurring revenues translate to consistent earnings which, in turn, translate to consistent dividends.

Secondly, dividend coverage is respectable. Last year, Sage’s dividend coverage ratio was about 1.5. Third, the company tends to increase its dividend by quite a bit every year. Over the last 10 years, Sage has raised its payout from 7.4p per share to 16.9p per share. That represents annualised growth of 8.6%.

I see Sage as a very attractive stock. And I’m not the only one who likes it. A number of top UK fund managers, such as Terry Smith and Nick Train, hold SGE in their funds.

High yield 

Finally, I also like defence giant BAE Systems (LSE: BA). Earlier in the year, it deferred the decision on whether to pay out its final dividend for 2019. However, in its recent half-year results, the company said it would be paying this to shareholders, as well as a 9.4p per share payment for the first half of 2020. Last year’s total dividend of 23.2p per share equates to a trailing yield of about 4.4% at the current share price, which is a fantastic yield in the current environment.

I think BAE is a good dividend stock for a few reasons. Firstly, its revenues are largely government-backed. This adds stability. Secondly, dividend coverage is high. Last year, it was just below two. Third, the company has a good long-term dividend growth track record. It doesn’t tend to lift its payout by much every year, but the payout does get increased consistently.

All in all, I think BAE Systems is a good choice for those looking for reliable dividends.

The post 3 UK dividend stocks I’d buy today appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Unilever, Sage, and BAE Systems. The Motley Fool UK has recommended Sage Group and Unilever. 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.

BT purchased EE, the wireless carrier, in 2016. This acquisition gave the company a monopoly on network access in the UK market. It is the only UK telecoms operator able to offer wireless and fixed-line services without leasing its network access. On the face of it, what’s not to like?

The BT share price has underperformed  

Looking at BT’s share price over the last five years, you’ll see a steady drop in value from its 2016 peak. The firm’s shares are currently worth around 116p. This is back where it was in 2009. 

BT has significantly underperformed the FTSE 100 over the last five-year period. In my view, any gains from it’s EE purchase have been frittered away.

BT has not capitalised on its monopoly position either. The firm hasn’t managed to overcome the challenges of new competitors. And it also appears to struggle with regulatory and operational burdens.

Some analysts believe the firm to be moving slowly in the right direction. If that is the case, I think progress is much too leisurely and is reflected in the declining share price.

Adding to BT’s woes, is the UK’s Huawei dilemma. Much of BT’s current infrastructure depends on Huawei equipment. The UK government’s cap on the use of Huawei in the newer 5G network is estimated to cost the firm £500 million over the next five years. This is adding to the downward pressure on BT’s share price.

Downhill financial performance (H2)

Some analysts describe BT as a ‘top FTSE dividend share’. This is mainly due to its attractive dividend yield and monopoly position. However, the yield is attractive because the share price is falling. Unlike many FTSE 100 firms, this is not solely due to the recent crash.

A closer look at BT’s financial statements shows its peak performance to correlate with its purchase of EE. And it’s been downhill since then.

A write-down in asset values occurred in 2017. This was due to an accounting scandal in the firm’s Italian division. At the same time, turnover, operating profits, and earnings per share dropped, and continue to do so.

BT has consistent ‘exceptional item’ expenses which make me wonder how exceptional they really are. Since exceptional items are not included when calculating operational profit, the declining profits may be higher than they should be.

And while I’m talking about accounting, changes in standards brought BT’s off-balance-sheet financing onto the balance sheet in 2017. The results were inflated EBITDA but also higher gearing.    

As for that 13% yield, profits are dropping and debt is increasing. It’s easy to see why the dividend growth rate has been declining year on year since 2016. Unless BT can make faster changes to its model, this will likely continue.

Incredibly, the average broker recommendation on BT shares is a buy. With this in mind, if I had the shares in a portfolio, I’d continue to hold them. But I won’t be buying them anytime soon.  

The post The BT share price is rising after the crash. Here’s what I’d do now appeared first on The Twelfth Magpie.

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Rachael FitzGerald-Finch has no position in any of the shares 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.

In the current low-interest-rate environment, many people are ditching their savings accounts and turning to other investments in an effort to generate higher returns on their money. ‘Dividend stocks’, which offer high levels of income compared to savings accounts, are one such investment. 

Don’t know what dividend stocks are? Don’t worry. Here, I’ll explain how they work.

What is a dividend stock?

A dividend stock is a share in which the underlying company pays out a proportion of its profits to shareholders, in cash, on a regular basis. These cash payments are called ‘dividends.’ It really is quite a simple concept to grasp – if you own a dividend stock, you’ll receive cash payments from the company (usually twice or four times per year) simply for being a shareholder.

Here in the UK, there are many dividend stocks listed on the London Stock Exchange. Examples include Royal Dutch Shell, Lloyds Bank, and Legal & General.

How much income do dividend stocks pay?

Every dividend stock has its own dividend ‘yield.’ This is a similar concept to an interest rate on a bank account. For example, if a stock has a dividend yield of 5% and you have £1,000 invested, your dividend will be £50 per year.

Dividend yield is calculated by taking the company’s dividend per share and dividing it by its share price. Looking at Lloyds, it declared a dividend of 3.21p per share last year and its share price is currently 61p. That means the dividend yield is 5.26% (3.21/61 = 5.26).

Other examples of dividend yields available right now include:

• Royal Dutch Shell: 6.5%

• Legal & General: 5.8%

• GlaxoSmithKline: 4.6%

• BT Group: 8.2%

Be careful with high yields

While dividend stocks can offer excellent yields, you do have to be careful with really high yields (7%+). That’s because companies with super-high yields are often experiencing problems. What’s happened is that a lot of investors have already sold the stock, which has pushed the share price down and the yield up. Quite often, these kinds of companies go on to cut their dividend, which isn’t what you want as a dividend stock investor.

What to look for in a dividend stock

There are a few things you should check before investing in a stock for its dividend. These include:

• Dividend growth – ideally you want a company that has a consistent dividend track record and has grown its dividend over time

• Revenue and earnings growth – this will help the company increase its dividend

• Dividend coverage – this is the ratio of earnings per share to dividends per share. It gives an indication of whether the company can afford its dividend. Look for a ratio above 1.5

• Debt – companies with high debt are more likely to cut their dividends in the future

Risks

Of course, as with any investment, there are risks associated with dividend stocks. It’s important to be aware that, due to the volatile nature of the stock market, you might not get back what you invested. Even if you pick up a 5% yield on a stock, you could still lose money if its share price falls heavily. Secondly, dividends are not guaranteed. A company can cut or reduce its dividend at any time.

Overall though, dividend stocks can be a great way to build up an income stream. Compared to savings accounts, they offer the potential for much higher returns.

The post Dividend stocks explained: how to generate income through shares appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Lloyds Bank, GlaxoSmithKline, Royal Dutch Shell, and Legal & General Group. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Lloyds Banking Group. 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.

One of the most prominent on my radar is FTSE 250 property group NewRiver REIT (LSE: NRR). Here, I’ll explain why I think the company’s business is more attractive than some of its peers, how it meets my criteria of compelling value, and two other significant factors that inform my positive view on the stock.

Mid-cap status maintained

Earlier this week, NewRiver escaped being demoted from the FTSE 250 index by the skin of its teeth. It actually featured on the FTSE’s indicative list of demotees published on Monday. However, its shares rose enough to get its head back above water by the all-important close of market on Tuesday, and it avoided plunging into the FTSE SmallCap index.

The reason its shares rose on Tuesday was a timely and positive update on acquisitions and disposals. It also announced it’s holding a Capital Markets Day for analysts and institutional investors on 26 September.

Positioned for growth and resilience

NewRiver specialises in buying, managing, developing and recycling convenience-led, community-focused retail and leisure assets throughout the UK. Its £1.3bn portfolio consists of 33 community shopping centres, 23 conveniently located retail parks and over 650 community pubs.

Management has deliberately focused on the fastest growing and most sustainable sub-sectors of the UK retail market, with grocery, convenience stores, value clothing, health & beauty and discounters forming the core of its retail portfolio. It’s deliberately limited exposure to structurally challenged sub-sectors such as department stores, mid-market fashion and casual dining.

I like how NewRiver’s positioned itself, not least because I think its retail centres should be more resilient than some of its peers in an economic downturn, as should its pubs, which traditionally offer an affordable treat when consumer incomes are squeezed.

Woodford and shorts

I reckon NewRiver’s share price has suffered from the general aversion to property in this time of Brexit fears, but also because of the two other significant factors I mentioned earlier.

Back in April, Neil Woodford had a 29% stake in NewRiver. However, with redemptions at his Equity Income fund spiralling dangerously out of control, he was forced to sell liquid stocks. By mid-July his NewRiver holding went below 5% and I suspect he’s exited completely by now.

At the same time, short positions in NewRiver (hedge funds betting on its share price falling) peaked at over 8% in June, but are currently down to less than 5%.

Acing it

The depression of NewRiver’s share price has left it sporting what I think of as the four aces of value investing. It’s trading at a deep discount to its book value (35%), on a cheap forecast earnings multiple (8.3x), with a high dividend yield (12.7%), and has a strong balance sheet, including fully unsecured borrowings with long maturity dates (August 2023 and March 2028).

I think NewRiver’s positioning in value retail and pubs, the clearing of the Woodford overhang, the reduced short positions, and my four aces of value, suggest now could be an opportune time to take an interest in the stock for the long term. I rate it a ‘buy’.

The post A FTSE 250 dividend stock yielding 13% I predict will pay you for the long term appeared first on The Twelfth Magpie.

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G A Chester has no position in any of the shares 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.

Furthermore, other mainstream asset classes appear to have limited income return potential. Cash ISAs, bonds and buy-to-let investments lack the income returns of the FTSE 100 in many cases. This could mean that buying a range of FTSE 100 stocks could be the best move to make at the present time.

Return prospects

While the FTSE 100 may have a 4.5% dividend yield, a number of its members have significantly higher income returns. As such, an investor may be able to put together a portfolio of 20-30 stocks that has an average yield in excess of 6%. Over the long term, their total returns could be highly impressive – even if the portfolio fails to offer substantial capital growth.

In addition, the outlook for the FTSE 100’s dividend growth rate is positive. Certainly, there is an ongoing threat from geopolitical risks in the Middle East and a global trade war. But the world economy’s growth rate remains relatively robust, with emerging markets providing a clear catalyst for the long run.

Since the FTSE 100 provides an investor with exposure to the world’s fastest-growing economies, its members may produce rising dividends over the long run. They also have the potential to deliver capital growth as a result of their appealing valuations in many cases.

Relative appeal

While the FTSE 100 offers a high income return at the present time, other mainstream assets appear to lack return potential. For example, a Cash ISA offers an interest rate of 1.5% or less, while the returns on investment-grade bonds may prove to be modest when compared to inflation. Likewise, with tax changes in the buy-to-let sector, landlords’ returns may come under further pressure at a time when house prices are falling in a number of regions of the UK.

Therefore, on a relative basis, FTSE 100 dividend shares could offer high return potential. Although they will inevitably experience volatility over the medium term from the ongoing risks facing the world economy, the index has a solid track record of recovering from short-term disappointments. Indeed, it has always been able to post higher highs after bear markets.

ISA potential

As such, now could be the right time to buy FTSE 100 dividend stocks within an ISA. It offers tax efficiency and simplicity and is easier to access when compared to a buy-to-let investment, for example. And with the FTSE 100 having a significantly higher return outlook than a Cash ISA or bonds, it may produce a substantially larger nest egg in the long run than other mainstream assets.

The post Have £2,000 to invest in the FTSE 100? I’d buy and hold dividend shares within an ISA appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any of the shares 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.

In fact, many of the index’s stocks appear to offer fair value for money given their growth prospects. And, with the potential for an impressive yield that helps to boost their total returns, now could be a good time to invest in them.

With that in mind, here are two FTSE 100 income shares that could be worth buying today and holding for the long term.

Taylor Wimpey

FTSE 100 housebuilder Taylor Wimpey (LSE: TW) appears to offer excellent value for money at the present time. It trades on a price-to-earnings (P/E) ratio of just 7.1, with investor sentiment towards the wider housebuilding sector being weak. This may be because of Brexit, as well as the political uncertainty that faces the UK.

Despite this, the company’s recent performance has been sound. Demand for new homes has been robust, while house price growth is strong in a number of regions in which the business operates. With interest rates expected to remain low over the medium term and the government’s Help to Buy scheme due to stay in place until 2023, the outlook for the wider sector seems to be positive.

With a dividend yield of around 11%, Taylor Wimpey has an income return that is more than twice that offered by the FTSE 100. Since the company’s balance sheet has a net cash position and its financial prospects remain sound, it could be worth buying from a value and income investing perspective.

Unilever

The growth potential offered by economies such as China and India could catalyse the financial prospects of global consumer goods company Unilever (LSE: ULVR). The business has a diverse geographical spread that may allow it to capitalise on emerging market growth, while also offering a level of diversity that is difficult to match across a variety of sectors within the FTSE 100.

In terms of its income investing prospects, Unilever’s dividend yield of 3% may mean that some income investors are somewhat lukewarm about buying it. However, with its bottom line due to rise by 10% in the current year and the company likely to deliver an impressive rate of growth in the long run, a rising dividend may be ahead. This is especially likely since the company’s shareholder payouts are currently covered 1.6 times by profit.

Therefore, while Unilever may be viewed as a growth share, it could post a fast-rising dividend over the long run. Together with its diverse business model, this may mean that it is able to offer a superior risk/reward opportunity compared to many of its FTSE 100 index peers.

The post Have £2k to invest? I’d buy these 2 FTSE 100 dividend stocks right now appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Taylor Wimpey and Unilever. The Motley Fool UK owns shares of and has recommended Unilever. 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.