I’m looking for the best FTSE 100 dividend-paying shares to buy. Should I go ahead and buy those with the highest yields I can find?
I could, but I’m often sceptical of the highest-yielding shares. They might not be sustainable. That can either lead to a fall in share price, or a cut in dividend. Neither of which is ideal.
Sometimes, it’s the winning shares that keep on winning. Their momentum can often continue for some time. So today I’m looking for reliable dividends and strong share prices.
Should you invest £1,000 in SSE 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 SSE made the list?
FTSE 100 top pick
It leads me to one of my favourite renewable energy stocks, SSE (LSE:SSE). Not only does it offer a 5% dividend yield, but it has an enviable track record. It has been paying dividends for over three decades. That’s exactly the kind of consistency I’m looking for.
What’s more, its share price is up by 26% over the past year. And I reckon this momentum can continue further.
In demand
The outlook for global energy requirements has changed this year. Events in Ukraine have pushed governments to diversify their gas and electricity sources.
In addition, extreme weather has also highlighted the need for more renewable energy. That bodes well for SSE. As a leading generator of renewable electricity, it’s well-placed to support zero-carbon goals.
A word of warning though. Energy companies right now could be targeted by government policies in the form of windfall taxes. With an upcoming change in the government’s leadership, there could be some uncertainty around this issue.
But all things considered, I reckon this FTSE 100 stock could make a good addition to my diversified Stocks and Shares ISA.
Reliable dividends
Next, I’d consider buying Vodafone (LSE:VOD). It’s a popular dividend share, and it’s easy to see why. With over 30 years of dividend payments, it offers similar reliability to SSE.
The average FTSE 100 stock offers a 4% dividend yield, but Vodafone distributes 6% a year.
Its strong dividend yield is backed by a solid subscription-based business model, and robust cash flow. This global telecoms business is also growing in new technology fields that include 5G and Mobile-Edge Computing.
Despite the stock market tumble that we’ve seen so far in 2022, Vodafone has bucked the trend. In fact, its share price is up by over 20% over the past year.
Defensive characteristics
Much can be attributed to its relatively defensive characteristics, in my opinion. It’s not as reliant on customer spending as airlines and retailers for instance. In an economic slowdown, shares like Vodafone could thrive.
That said, one area that lets down this FTSE 100 technology giant is its relatively large debt. Its debt pile grew in 2022 and rising interest rates could make paying it more costly. This could reduce profits and potentially affect its generous dividend yield.
Yet I still think Vodafone operates a strong brand and a resilient business. I’d happily buy these shares today.
