2 inflation-busting FTSE 100 dividend stocks I'd buy

Inflation in the UK has been falling at a fair lick since the start of 2018. Standing at 2.7% in February, the consumer price index (CPI) gauge was down 30 basis points a month beforehand and slumping further from the 3.1% five-and-a-half-year peak hit in November. While the City is expecting CPI to continue sliding as sterling recovers from its post-EU referendum hangover, the era of near-zero inflation of recent years is unlikely to rise any time soon. And thus finding shares with bulky dividend yields is as critical as ever. And so in this article I am looking at two great FTSE 100 stocks which also carry inflation-mashing yields: DS Smith (LSE: SMDS) and TUI Travel (LSE: TUI). High flyer Supported by a predicted 13% earnings improvement in the current fiscal year (ending September 2018) City analysts are expecting package holiday giant TUI to raise the dividend from 65 euro cents per share last year to 73 cents. This means the yield stands at a chubby 4.1% but the good news just keeps on coming as, with the number crunchers forecasting an additional 12% profits jump in fiscal 2019, payouts are expected to boom again to 81 cents. Such a prediction nudges the yield to a delicious 4.5%. And there is plenty of reason to expect TUI to keep reporting brilliant profits growth too, and thus to keep raising dividends at a sprightly pace. Since I last reported on the business it announced in its most recent quarterly update that, at constant currencies, it saw turnover boom 9.1% year-on-year during October-December, to EUR3.55bn. TUI continues to benefit from a robust economic backcloth in Europe, as well as improving sentiment towards terrorism-hit destinations in Turkey and Africa. It also witnessing strong demand for its long haul even in spite of the impact of hurricane activity in the Caribbean. Right now the firm can be picked up on a forward P/E ratio of 13.8 times. This is scandalously cheap given its impressive earnings prospects, in my opinion. Cardboard corker Investors that love dividend shares that can be bought on a shoestring should also love DS Smith today. Dividends at the boxbuilder have leapt almost 90% during the past five years and, with profits expected to continue their relentless drive northwards and the business remaining extremely cash generative, the City does not think growth is over just yet. DS Smith is expected to report earnings expansion of 5% and 12% in the years to April 2018 and 2019 respectively. And so last year's 15p per share dividend is predicted to rise to 16.3p this year and to 18.1p in the upcoming fiscal period. These projections yield 3.4% and 3.8%. As I said, DS Smith is also a splendid value selection thanks to its prospective P/E multiple of 13.8 times. This is far, far too low in light of the company's brilliant revenues outlook created by its rapid expansion across Europe and recent entry into the US, in my opinion.

Buy-And-Hold Investing

Our top analysts have highlighted five shares in the FTSE 100 in our special free report "5 Shares To Retire On". To find out the names of the shares and the reasons behind their inclusion, simply click here to view it immediately with no obligations whatsoever!

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended DS Smith. 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.

Read Full Story

FROM OUR PARTNERS