Attention income seekers! 2 low-cost FTSE 100 dividend stocks I’d buy with yields over 5%

Gold medal

In an earlier article, I lauded the steps IAG is taking to ramp up its profits generation in the years ahead. The vast sums being investing in its aircraft fleet is helping deliver strong earnings expansion and, as a result, I continue to celebrate its likely resilience as a top dividend growth stock, too.

It’s not the only airline operator on the FTSE 100 that I consider to be a white-hot buy today, though. Indeed, it could be argued that the bigger yields over at easyJet (LSE: EZJ) make it a better pick for dividend chasers.

With recent currency-related profits pressures behind it, the budget flyer is expected to get the annual dividend on the front foot again. And for the year ended September, a 53.9p per share reward is being forecast, underpinned by an anticipated 42% bottom-line improvement, up from 40.9p in fiscal 2017.

The 2% earnings rise projected for this year means that easyJet’s dividend is expected to leap again, to 61.3p per share. And this creates a 5% yield, slipping past IAG’s corresponding reading, which sits closer to 4%.

Taking off

Just like the British Airways and Iberia owner, easyJet has been smashing the proverbial chequebook in recent times to boost its fleet sizes and the number of routes it operates. Passenger numbers flew more than 14% higher in October, to 8.58m, reflecting the fruits of these ambitious steps, including the decision to buy Air Berlin’s Tegel operations.

And the orange-liveried airline isn’t done on the acquisition front just yet. Just last week, it confirmed it had submitted a revised offer for Alitalia.

As IAG has also shown with its pursuit of Norwegian Airlines, the sector remains ripe for consolidation now and, even if easyJet fails in its bid for the Italian state carrier, there’s bound to be many more excellent M&A opportunities on the way. And particularly so if Ryanair boss Michael O’Leary’s prediction of some smaller carriers going to the wall in the coming months, as a consequence of rising fuel costs comes true.

Yields jump above 6%!

Despite its bright profits outlook eastJet carries a forward P/E ratio of just 10.2 times. But this isn’t the only brilliant blue chip dividend stock trading for next to nothing today. Step forward Legal & General Group (LSE: LGEN).

In fact, it’s even cheaper than its Footsie 100 colleague, with the financial services giant carrying a prospective P/E multiple of 8.6 times. Its forward yields sit above those of easyJet too, with predicted payouts of and 16.4p per share for 2018 and 17.5p for next year, yielding an epic 6.5% and 6.8%, respectively.

Legal & General’s strong growth performance over the past half a decade, a record that has allowed it to turbocharge dividends in that time, is expected to fall in 2018. A 2% decline is currently being anticipated by the number crunchers. But, as I’ve noted before, the business has the financial strength to keep raising payouts, even in times of profits turbulence.

Not that Legal & General is expected to remain in a rut. It’s expected to hit back with a 4% earnings rise next year, and I fully expect the bottom line to remain on an upward trajectory as the globe’s booming (and ageing) population drives demand for its financial services.

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Royston Wild has no position in any of the 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.

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