While investing in FTSE 100 dividend stocks may appear to be a strategy most suitable for investors who are seeking a passive income rather than growth, a number of large-cap income shares could deliver high total returns in the long run.
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 (LON:TW) 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 (LON:ULVR) 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.
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.
Motley Fool UK 2019