2 beaten-up FTSE 100 stocks: are they dividend bargains?

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Sainsbury's

The FTSE 100 index is in an interesting place right now. While the UK's blue-chip index continues to trade at a high level of around 7,400 points, a closer inspection reveals that many popular FTSE 100 stocks are way off their highs.

With that in mind, today I'm looking at two FTSE 100 dividend stocks that have been well and truly beaten up. Are these stocks dividend bargains or should investors steer clear?

J Sainsbury

Shares in J Sainsbury(LSE: SBRY) have had a poor three months. Trading above 280p in early June, the shares have fallen to 235p today, a decline of 16%.

At that price, the supermarket giant trades on a forward P/E ratio of 12.2, and sports a trailing dividend yield of 4.3%. These metrics obviously sound enticing, but from a dividend investing perspective, I'm not convinced by the investment case.

Sainsbury's cut its dividend by 16% last year, from 12.1p to 10.2p per share, and City analysts forecast another cut this year, with a payout of 9.85p expected. That's a big negative for me, because as a dividend investor, I like to see consistent increases from the companies I invest in.

Furthermore, adding doubt to the investment thesis is the considerable uncertainty in relation to the company's future growth prospects. Not only are the German discounters still aggressively targeting market share, but with Amazon buying upmarket grocery chain Whole Foods, and looking to slash prices, the trading environment is likely to remain challenging, in my view. As a result, J Sainsbury isn't a dividend stock I'd buy right now.

Imperial Brands

However, one stock I'm more bullish about from a dividend perspective is Imperial Brands(LSE: IMB). Like J Sainsbury, Imperial Brands has seen its share price decline significantly in recent months. In April, the shares changed hands for over 3,900p, yet now, they can be purchased for just 3,300p. An announcement from the US Food and Drug Administration (FDA) recently that it plans to lower nicotine levels in cigarettes has resulted in sentiment across the whole tobacco sector taking a hit.

Yet Imperial increased its dividend by 10% last year, and the tobacco giant stated in its half-year results in May that "we expect to deliver another year of 10% dividend growth, in line with our commitment to growing shareholder returns."

Last year's payout of 155.2p per share equates to a yield of 4.7% at present, and City analysts forecast a dividend payout of 171p this year, which takes the yield to an impressive 5.2%. Dividend coverage is anticipated to be around 1.6 times, indicating that the company can afford to pay that level of payout.

Imperial Brands shares currently trade on a forward P/E ratio of 12.3, significantly below that of rival British American Tobacco, which trades on a multiple of 17.4 times this year's forecast earnings. As such, I see appeal from a dividend perspective here.

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Edward Sheldon owns shares in Imperial Brands. The Motley Fool UK has recommended Imperial Brands. 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.