It is no secret that dividends are one of the best parts of investing. Not only do they give you a regular stream of income, which should grow steadily over time, but numerous studies have shown that they provide the bulk of returns for investors over the long term.
With this being the case, my portfolio is stuffed full of blue-chip dividend stocks, to make the most of dividends' wealth-creating qualities. Here are my top three FTSE 100 dividend plays.
Be greedy when others are fearful
My first is tobacco group Imperial Brands(LSE: IMB). Over the past 12 months, shares in this business have fallen out of favour with investors, and it is easy to see why. Tobacco sales are falling around the world and governments are only stepping up their efforts to stamp out smoking. Meanwhile, attempts to diversify into the so-called reduced risk market have not proved to be as profitable as initially expected.
Shares in the company also took a knock when Japan Tobacco, which has long been touted as a possible buyer for Imperial, confirmed that it was not interested in bidding for the UK-based company anytime soon.
Still, despite all the issues surrounding the company, Imperial's outlook is not as bad as its depressed valuation seems to suggest. After recent declines, shares in the tobacco company are trading at a forward P/E of 9.8.
At the beginning of May, the company reported first-half results that beat expectations, thanks to higher cigarette prices in the US, and confirmed City guidance for the full year. Excluding the impact of one-off items, earnings per share are expected to rise 44% to 263p for 2018.
To help reinforce the group's financial position, management is also planning to raise £2bn through the sale of non-core businesses during the next 12 to 24 months, which should help alleviate concerns about the state of Imperial's balance sheet.
With profits growing and asset sales planned, I see no reason why Imperial's dividend payout will come under pressure in the near future. The distribution of 188p per share is covered 1.4 times by earnings and is equivalent to a dividend yield of 7.6% current prices.
A return to growth
Another blue-chip dividend stock that has recently fallen out of favour with investors is GlaxoSmithKline(LSE: GSK).
The City dumped shares in the pharmaceutical group last year following comments from the new CEO Emma Walmsley that it "would be irresponsible" to maintain the dividend yield at the current level at the expense of investing in growth.
However, at the beginning of 2018, it became apparent that the group was more than comfortable with its current dividend distribution following an increase in revenues of 8% for 2017.
And since these figures were published, Glaxo's outlook has only improved, which leads me to conclude that the dividend remains safe for the time being. Excluding the impact of exchange rate fluctuations, first-quarter sales grew 4% meanwhile, adjusted earnings per share jumped 11% in constant currency.
To help boost growth, Glaxo is currently in the process of a $13bn deal to buy the Novartis share of the two companies' consumer joint venture, and Glaxo is refining its R&D operations. Walmsley wants to streamline the group and focus on core strengths, which has meant cutting some pipeline projects, but the additional funding should benefit other parts of the business.
One division of the group where Glaxo is seeing tremendous success is its ViiV HIV arm. Last week, ViiV published the results of a large clinical trial showing the effectiveness of its pioneering two-drug HIV treatment.
This trial, code-named Gemini, could help Glaxo grab a much larger share of the $20bn per annum market for HIV treatments around the world. Analysts are already predicting that sales of the combination treatment could hit £1.1bn by 2025. One of the drugs, dolutegravir, is also expected to be a blockbuster treatment on its own with sales of £5.2bn expected by 2022.
These new treatments, coupled with management's efforts to streamline the business and improve returns on investment, should help fund Glaxo's dividend for many years to come.
Shares in the company currently support a dividend yield of 5.4% and, they are not that expensive either, trading at a forward P/E of 14.3. The City has pencilled in earnings growth of 12% for 2018 as a whole.
My final blue-chip dividend pick is ITV(LSE: ITV). Over the past two years, shares in ITV have plunged 35% from an all-time high of just over 260p, primarily due to concerns about the company's business model as advertising increasingly moves online, away from traditional markets such as television and print.
Advertising revenues have come under pressure, but the decline has been nowhere near as severe as some analysts were expecting. For 2017 as a whole, net advertising revenue declined 5% but rebounded 3% during the first quarter of 2018.
What's more, ITV is no longer just a broadcaster. The company now generates revenue from multiple streams. Its online and production businesses are booming with revenues rising by 11% and 41% respectively from these divisions during the first quarter. Meanwhile, it has been reported that the group is looking to expand into the theme park market by building an attraction in central London based around its TV shows with the capacity for 300,000 visitors per year.
All of the above leads me to conclude that ITV is not the basket case some analysts believe it to be, and the shares look like a steal at current levels.
The stock is currently trading at a forward P/E of 11 and supports a dividend yield of 4.8%. The payout is covered twice by earnings per share, so there's plenty of room for dividend growth in the years ahead.
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Rupert Hargreaves owns shares in GlaxoSmithKline, Imperial Brands and ITV. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended Imperial Brands and ITV. 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.