2 FTSE 100 dividend stocks I’d buy in case of a no-deal Brexit

Dots over the earth connecting the world
Dots over the earth connecting the world

UK stocks received a hammering at the end of last week, as UK politicians lined up to criticise Prime Minister May’s draft Brexit deal.

This isn’t the place to discuss politics, but it’s worth noting that a number of business leaders have made positive statements about the PM’s deal. This suggests to me that they believe it would allow international business to continue as usual.

I share this view, but I could be wrong. I certainly think it makes sense to own a handful of shares that aren’t dependent on UK-EU trade.

This 6% yield looks safe to me

October’s stock market correction was mirrored by an oil market slump that saw the price of a barrel of Brent Crude fall from $85 to $65 in just six weeks.

Oil majors such as BP (LSE: BP) saw their share prices fall sharply during this period. BP stock is worth 12% less than it was at the start of October, but I share my colleague Harvey Jones’ view that this could be a buying opportunity.

Here’s why. Management at companies such as BP were not budgeting for prices to stay above $80. If it happened, then profits would have received a boost. But profit forecasts for the current year are based on much lower average prices.

October’s oil market sell off hasn’t changed the firm’s expectations for 2018, or indeed for 2019. In fact, broker consensus forecasts for BP have actually risenby 5% over the last month.

Analysts now expect the FTSE 100 firm to generate adjusted earnings of $0.59 per share in 2018, and of $0.65 per share in 2019. These forecasts put the stock on a forecast price/earnings ratio of 11.3 for 2018, falling to a P/E of 10.2 in 2019.

Meanwhile, BP’s recent share price slide means the stock now offers a dividend yield of 6%. I rate the shares as a safe buy for income at current levels.

Big improvements in Asia

One business whose fortunes are unlikely to be affected by Brexit is Asia-focused bank Standard Chartered (LSE: STAN). The FTSE 100 bank’s shares are down by about 20% this year, but have risen by more than 15% since 31 October.

The trigger for the gains seems to have been the bank’s third-quarter results, which showed that underlying pre-tax profit rose by 25% to $3.4bn during the first nine months of the year.

Bad debts were down by 56% to $408m, and the bank’s return on equity — a key measure of profitability — rose 1.5% to 6.6%. Although this remains well below the 10%+ level investors would like to see, it’s certainly welcome progress and suggests the bank’s turnaround is continuing.

It wasn’t all good news. The bank’s income from Africa and the Middle East was down 5% on the same period in 2017. Chief executive Bill Winters warned that international trade tensions were affecting sentiment in some emerging markets. However, I don’t see this as a serious concern, given that income is still rising in the group’s core Asian markets.

The right time to buy?

Standard Chartered stock currently trades at a 40% discount to its book value of 1,048p per share. If performance continues to improve, I expect this discount to close.

In the meantime, the stock looks affordable to me, with a 2018 forecast P/E of 10 and a 2.8% dividend yield. I remain a buyer at this level.

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Roland Head owns shares of Standard Chartered. The Motley Fool UK has recommended Standard Chartered. 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.