3 FTSE 100 dividend stocks I’d snap up right now

These FTSE 100 dividend stocks should provide reliable payouts, even in a recession, says Roland Head.

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Here are three FTSE 100 dividend stocks I’d buy after the recent market bounce. These aren’t just the highest yielders in the index (although one yields 8%). Instead, they’re companies I think should be able to maintain, or increase, their dividends, even during a recession.

A safe haven?

Luxury goods can be a safe haven in a recession as wealthy shoppers continue to spend. High-end fashion group Burberry (LSE: BRBY) isn’t the cheapest FTSE 100 stock to buy today, but I think it could be one of the best.

Demand is bouncing back as loyal customers return to the group’s stores after the pandemic. New lines such as the Lola handbag range are said to be performing well.

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I admire Burberry’s high profit margins, strong brand and long history. The dividend has not been cut since its 2001 flotation and I think further growth is likely.

I think the main risk with Burberry is that it might fall out of favour with Chinese shoppers, who account for a sizeable chunk of sales. Lockdowns in China have kept stores shut and limit travel, but over the next six months we should find out more.

Burberry shares currently trade on 15 times forecast earnings, with a 3% dividend yield. I see the stock as a long-term buy.

A safe 8% yield?

My next pick has one of the highest dividend yields in the FTSE 100. Housebuilder Barratt Developments (LSE: BDEV) has earned a five-star HBF rating for the last 13 years. Sales have doubled over this period and profits have soared.

Despite this strong record, Barratt’s share price has fallen this year as the market has priced in a recession. As a result, the shares now offer a forecast dividend yield of 8.2%.

How safe is this payout? Barratt’s recent market update for the year to 30 June reported “strong nationwide demand” and a solid order book.

This year’s dividend should be covered twice by earnings and Barratt has plenty of cash.

The problem is that if the housing market is going to slow, it’s only just starting to happen. It’s too soon to know how housebuilders will perform over the next couple of years.

Personally, I don’t expect a major housing crash. I think Barratt’s 8% yield could be safe.

This FTSE 100 stock is recovering

Packaging group Mondi (LSE: MNDI) was hit harder than some rivals by the invasion of Ukraine. The group previously generated about 20% of its earnings in Russia.

Fortunately, the rest of the business is performing well. Mondi has been able to pass higher costs onto customers, protecting its profit margins. The group’s net profit for the first half of 2022 was €536m, just 3% lower than during the final six months of 2021.

Mondi has several characteristics I look for in a dividend stock. It’s highly profitable, generates plenty of cash and has relatively low debt levels. In my view, these factors combine to make the dividend safer than some peers.

The short-term outlook could be uncertain, as a widespread recession could see demand for packaging slump. However, I think these risks are probably priced into the stock. Mondi shares trade on less than 10 times forecast earnings and offer a 4% yield.

Mondi is on my list as a dividend buy.

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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.

Roland Head has positions in Burberry. The Motley Fool UK has recommended Burberry. 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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