Dividend stocks can play a valuable role in investment portfolios. Not only can they potentially provide multiple sources of return, but they can also potentially provide an element of protection during periods of volatility. This is due to the fact that dividend-paying companies are often well-established businesses.
Here, I’m going to highlight two FTSE 100 dividend stocks I’d buy for my own portfolio today. Both stocks have been reliable dividend payers in the past, and I believe they’ve the potential to boost my portfolio in the long run.
A defensive FTSE 100 dividend stock
One FTSE 100 dividend stock I see a lot of appeal in right now is Reckitt Benckiser (LSE: RB). It’s a leading consumer goods company that owns many well-known health and hygiene brands. The prospective dividend yield here is about 2.7%.
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I like RB for two reasons. Firstly, I think it’s well-placed for growth in a post-Covid-19 world due to its focus on hygiene (it owns the Dettol and Lysol brands). I could be wrong, but I think some of the hygiene habits we’ve developed over the last year will stick around long after we’ve all been vaccinated.
Secondly, Reckitt Benckiser has traditionally been quite a defensive stock. If we were to see stock market volatility in the near future, RB may provide my portfolio with some protection (although there’s no guarantee it will do this).
Of course, there are risks associated with Reckitt Benckiser shares. One is the fact the valuation is relatively high – the P/E ratio is about 20. If RB’s future performance is disappointing, the stock could fall. The company’s struggling nutrition division also adds risk to the investment case.
Overall, however, I think the risk/reward proposition here is attractive. I’d be happy to buy this dividend stock for my portfolio today.
Poised to benefit from the ageing population
A second FTSE 100 dividend stock I see appeal in as we begin February is Smith & Nephew (LSE: SN). It’s a leading medical technology company that manufactures joint replacements. It’s paid a dividend every year since 1937. Last year, it paid out 37.5 cents per share, which equates to a yield of about 1.7% at present.
Smith & Nephew has been impacted negatively by the coronavirus. That’s because a lot of medical procedures have had to be postponed due to lockdowns. In the near term, conditions could remain challenging for the company while Covid-19 lingers.
However, my view is that post-Covid-19, the company’s sales are likely to increase as elective medical procedures are resumed. And, looking further out, demand for the company’s products should be boosted by the world’s ageing population. By 2030, it’s expected that there will be 1.4bn people globally aged over 60 (up from 900m in 2015).
This is another FTSE 100 stock that isn’t cheap. A forward-looking P/E ratio of 22 means there’s some valuation risk here. Further setbacks related to Covid-19 could see the stock fall. They could also potentially result in a dividend cut.
However, overall, I think the long-term story here is alluring. As a long-term investor who loves dividends, I see this stock as a good fit for my portfolio today.
