With £2k to invest in the FTSE 100, I’d choose these 2 dividend stocks

After their strong performance through the pandemic, I’d invest in these 2 FTSE 100 dividend stocks now for their income and capital growth potential.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

On 29 July 2019, I wrote an article saying I’d invest £2k in Kingfisher (LSE: KGF) and DS Smith (LSE: SMDS). Of course, I didn’t know the coronavirus crisis was coming. But how have those two FTSE 100 dividend stocks fared? And would I invest £2k in them today?

Benefiting from enhanced customer demand

B&Q and Screwfix owner Kingfisher had a share price near 222p back in July 2019. Today, it’s at about 266p. Shareholder dividends became a casualty of the crisis but overall, Kingfisher has been a decent stock to hold through the challenges of 2020.

In November, the company released its third-quarter update covering the period to 31 October. Chief executive Thierry Garnier said there had been “strong” sales growth across the business. Indeed, after initial challenges, the company began to benefit from Covid-19 as consumers spent more time in their homes and focused on improving them.” 

Should you invest £1,000 in Kingfisher Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Kingfisher Plc made the list?

See the 6 stocks

Meanwhile, Kingfisher is engaged in an intense restructuring drive aimed at boosting growth and adapting to changing retail trends, such as the swing to internet sales. Looking ahead, Garnier reckons the firm is building a strong foundation for long-term growth.”

City analysts expect dividends to crank up again next year. And with the share price at 266p, the forward-looking yield is just above 3.4%. I’d still buy some of the shares today.

Expanding to serve a fast-growing sector

Corrugated and plastic packaging supplier DS Smith had a share price of near 383p in July 2019. Today, it’s at 368p as I write. And shareholder dividends were stopped when the pandemic arrived, as with Kingfisher. Overall, the stock has carried its shareholders through the crisis quite well with little loss to the value of their invested capital if they held until today.

However, the half-year results report released today contains some dire-looking figures reflecting the worst the crisis had to throw at the business so far. But looking ahead, chief executive Miles Roberts is optimistic about the long-term outlook for the business. And he explained that in the second quarter, the company saw real momentum” in corrugated box volumes and profitability. And that’s continued into the second half of the firm’s trading year.

DS Smith serves the growing fast-moving consumer goods (FMCG) and e-commerce sectors. The business has been expanding. And the company has a strategy of building new packaging-plant facilities in order to capture higher sales from increasing demand.

I think the future looks bright for DS Smith, so I would buy some of the company’s shares now. Meanwhile, City analysts have pencilled in the resumption of shareholder dividend payments. And with the share price at 368p, the forward-looking dividend yield for the trading year to April 2022 is around 3.9%.

I’d aim to hold the shares for at least five years and probably for much longer than that. And my expectation would be for dividend income that grows a bit each year. And capital appreciation from a share price rising to reflect ongoing underlying operational progress.

Passive income stocks: our picks

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Kevin Godbold has no position in any share 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.

More on Investing Articles

Dividend Shares

Of the 20 highest-yielding FTSE 100 stocks, this is my top pick

This FTSE 100 stock currently offers a yield of 6.4%. But Edward Sheldon believes it’s capable of providing share price…

Read more »

Investing Articles

Could Tesla’s share price jump over the next 12 months? These analysts think so!

Tesla's share price has fallen by almost a third since 1 January. But optimism is high that Elon Musk's company…

Read more »

Investing Articles

I asked ChatGPT where the FTSE 100 will be in 6 months: here’s what it said…

Let’s be realistic, ChatGPT can’t predict the future. But it did do a good job of compiling data from brokerages…

Read more »

Investing Articles

Could the Rolls-Royce share price hit £10?

The Rolls-Royce share price has taken most analysts by surprise with almost everything going right for the British engineering giant.

Read more »

Investing Articles

4 REITs Fools own for passive income

REITs often have higher-than-average dividend yields compared to other stocks, making them a solid choice to consider for passive income…

Read more »

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »