2 FTSE 100 dividend stocks you can't afford to overlook

Updated: 
Several piles of pound coins

There are plenty of big name dividend stocks on the FTSE 100, but some lesser-known companies can do just as good a job for you. What the following two lack in action and adventure they make up by paying steady, regular dividends of more than 4% a year.

Provident performance

Provident Financial Group(LSE: PFG) sounds like a company with a long pedigree -- and it is. It was established in 1890, and is today a leading supplier of personal credit products to the non-standard lending market, through subsidiaries Vanquis Bank, Provident Home Credit, Satsuma Loans, glo and Moneybarn. It currently boasts 2.4 million customers across the UK.

Five-year performance has been healthy, with the share price up 150% in that time, although it has flattened over the past year. In February, Provident Financial reported a hefty 25.7% leap in full-year pre-tax profits to £343.9m, but Brexit cast a shadow over the results with management highlighting warnings that it is having "a significant impact on capital markets".

Vanquis vanquishes

Management says that tight credit standards and strict discipline have bolstered the group's specialist business models during previous economic downturns, despite the focus on serving non-standard customers. Vanquis Bank, for example, has shown itself less sensitive to changes in the employment market than mainstream card issuers, maintaining its risk-adjusted margins above 30%, despite modest increases in impairments.

Provident Financial currently trades at 16.5 times earnings, which suggests that investors are keeping the faith, and yields a healthy 4.6%. Forecast earnings per share growth of 4% this year and 9% in 2018 boosts my belief in the investment case, as do forecasts that the yield will hit 5.3% by then. However, with Prime Minister Theresa May triggering Article 50 today, you might want to see wait and see how Brexit pans out before committing yourself.

The REIT stuff

I first looked at real estate investment trust (REIT) Hammerson(LSE: HMSO) almost exactly four years ago, when it was yielding 3.4%, and declared that although it looked tempting, especially for income seekers, it wasn't a must-have stock.

It looks like I called it right, or rather, REIT (ho ho), because its share price has subsequently only crawled upwards from 517p to just 567p, an increase of less than 10%. But whilst there may have been little growth to boast about, the dividend looks even more appealing with its current yield 4.24%.

However, full-year results showed that "sector-leading earnings and dividend growth" were not enough to convince markets of the investment case for this owner-manager of European retail property. That's despite a 9.4% increase in adjusted profits to £230.7m, and £635m generated from disposals.

Retail therapy

Times have been hard for the retail sector and most investors expect their plight to worsen under Brexit, as a weak pound pushes up prices, and slow wage growth trails rising inflation. Forecast EPS growth of 5% this calendar year and 4% in 2018 do look encouraging for Hammerson, although hardly spectacular. With a forecast yield of 4.7% for 2018 the income case is even stronger than before, although the near-term growth story remains weak. 

In uncertain times like these, you cannot afford to make life harder for yourself by committing simple investment mistakes. Thankfully, you can learn from the errors made by others.

This BRAND NEW Motley Fool report Worst Mistakes Investors Make asks investors from all over the world for advice on how to avoid some of the biggest disasters investors bring on themselves.

It is absolutely free and explains why, say, you should not sell winners too early and should avoid going all in on one stock.

Click here to read this no-obligation report. It will be yours in seconds and won't cost you a penny.

 

Harvey Jones has no position in any 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.