Have £1,000 to invest? Here are three FTSE 100 dividend stocks to consider
If you've found yourself with a spare £1,000 this month, it could be a sensible decision to invest it for the long term, instead of spending the money immediately. One idea is to buy a stock that pays a regular dividend. That way, you could build yourself a second income stream. With that in mind, here are three dividend stocks that could be worth a look.
Mining giant BHP Billiton(LSE: BLT) is well known for rewarding shareholders with chunky dividends. And with the outlook for commodities having improved in recent years and profits on the rise, investors look set for another big dividend this year. Indeed, according to City analysts' projections, the group will pay out $1.22 per share in dividends for FY2018, which at the current share price and exchange rate equates to a prospective yield of a bumper 5.7%. Tempting in today's low-interest rate environment, right?
The one thing to be aware of with BHP (and any other mining company) is that profits can be volatile due to swings in commodity prices. This means that dividends are not always consistent. When demand for commodities is high, the chances are you'll be rewarded with big dividend cheques. However, if commodity demand drops, dividends can be reduced. As always with investing, it's a trade-off between risk and reward. But a yield of nearly 6% is an attractive reward, in my view.
One company that does have quite a consistent dividend track record is defence specialist BAE Systems(LSE: BA). The stock's yield is not as high as BHP's, at 3.6% (forecast for 2018), but the group has now registered 14 consecutive dividend increases, which is an impressive achievement.
BAE has been winning some key contracts recently, including a landmark £20bn deal to build nine anti-submarine warfare frigates for the Australian navy. As such, the group's prospects look healthy going forward, in my view. Recent half-year results were perhaps a little softer than the market was hoping for - the group advised that underlying earnings for 2018 are expected to be on par with last year's earnings. But management stated: "With a large order book and a positive outlook for defence budgets in a number of key markets, we have a strong foundation to deliver growth and sustainable cash flow." With BAE Systems' share price having pulled back by 7% in the last few weeks, I think the shares now offer value.
Lastly, for a more under-the-radar dividend pick, check out DS Smith(LSE: SMDS). As a manufacturer of cardboard packaging, the company is not exciting by any stretch of the imagination, yet I believe the stock could be a fantastic way to play the e-commerce boom as the company is a key supplier of packaging solutions to Amazon UK. With analysts expecting a dividend of 15.8p per share this year, the prospective yield on the shares is around 3.1%.
DS Smith has made some key acquisitions in recent years, including a $1.1bn deal for US firm Interstate Resources last year, and more recently, a EUR1.9bn deal for Western European integrated packing business Europac in June. Investors have cheered both deals, as they appear to strengthen the group's position as a leading global supplier of sustainable packaging solutions. With the shares trading on a forward-looking P/E of 14 at present, I believe there's value on offer.
Edward Sheldon owns shares in BAE Systems and DS Smith. 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.