One FTSE 100 income stock I'd consider buying in May and one I'd sell

Next month might have a poor reputation for returns (thanks to the 'sell in May' adage) but dividend investors would do well to ignore any temporary fall in the value of their portfolios.

Once again, the annual Equity Gilt Study from Barclays -- which focuses on long-term returns in the UK and US -- has shown just how important it is to stay in the market and re-invest all that you receive if circumstances allow. £100 invested in 1945 might only be worth £288 now but if the income received over that time had been used to buy more shares, it would now be worth an astounding £6,294.

Solid payer

Anglo-South African life assurance and banking giant OldMutual(LSE: OML) is a good example of a stock I'd consider investing in for its bi-annual payouts.

Today's update, released to coincide with the company's AGM, confirmed that the £12.6bn cap's businesses continue to trade "inline" with those expectations announced back in March alongside its full-year results.

First quarter net client cash flow at Quilter -- the wealth manager that will separate from Old Mutual and list on the London and Johannesburg stock exchanges in June -- has continued to be strong. At £1.6bn, this was 14% higher than over the same period in 2017.

Although assets under management fell by 2.4% to £111.6bn over the reporting period thanks to "negative market movements", the company stated that this compared favourably to the 8.2% decrease in the FTSE 100. That said, CEO Paul Feeney did remark on likely "uncertainties in equity, bond, and currency markets" as the full impact of Brexit becomes clearer.

Q1 performance at South African banking group Nedbank was also as expected.

Despite rising 31% over the last year -- impressive for such a large company -- Old Mutual's stock still trades on a fairly undemanding valuation of 11 times forecast earnings. The 3% yield is somewhat average but it is expected to be covered three times by profits -- the kind of security that holders of higher yielding stocks in the FTSE 100 can only dream of. Speaking of which...

Shaky foundations

In contrast to some of my Foolish colleagues, I remain wary of communications behemoth and top table peer Vodafone(LSE: VOD).

The 6% yield on offer is certainly attractive, but this massive payout is still not covered and unlikely to be for another couple of years. That's fine if you're invested in some kind of diversified income fund or a simple FTSE 100 tracker but, for those who choose to own a more concentrated portfolio, I can't help thinking that's a sufficiently long time period for new problems to arise.

Bulls will point towards the completion of Project Spring as a catalyst for Vodafone's fundamentals to improve. They may also reflect on the recent jump in mobile data traffic (as reported in February) and the fact that Vodafone now claims to be the fastest growing fixed broadband provider.

While this may be true, I remain concerned by the Newbury-based firm's huge debt pile and the inevitability of further capital expenditure. In September last year, net debt stood at £32bn, well over half its market capitalisation.

Vodafone announces full year results on May 15. Shares might rally if predictions of organic adjusted EBITDA growth of "around 10%" and EUR5bn+ free cash flow are met but, on 22 times expected earnings for next year, I'll be steering clear.

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Paul Summers has no position in any of the 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.

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