I think owning income shares is a straightforward way to increase my income. So, with that in mind, I’ve been looking for FTSE 100 dividend stocks to add to my portfolio. Here are three blue-chip companies I’d buy for income today.
FTSE 100 dividend stocks
The first company on my list is precious metal miner Polymetal International (LSE: POLY). Precious metals have been rising in value recently, which could translate into higher profits for this business.
Indeed, net profit at the group more than doubled last year after a significant increase in gold and silver prices. Off the back of this growth, management hiked the company’s dividend by more than 100%. At current levels, the stock offers a dividend yield of 5.4%. I wouldn’t rule out a further dividend increase as precious metals prices increase.
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Unfortunately, commodity prices can fall as fast as they rise. This means the company may have to cut its dividend if prices fall significantly. That’s always going to be a risk of investing in mining businesses.
Still, it would be one of the FTSE 100 dividend stocks I’d buy based on its income potential.
Defensive industry
Utility companies can be the perfect income stocks. I reckon United Utilities (LSE: UU) fits the bill perfectly. At the time of writing, shares in the water company support a dividend yield of 4.4%. I think that looks attractive in the current interest rate environment.
The provision of water and wastewater services is an incredibly defensive industry. Consumers will always need access to this precious commodity. This suggests United will be able to earn steady profits for years to come. The company should also be able to increase profits and its dividends in line with inflation as prices rise.
However, the one major challenge the firm faces is regulation. Ofwat essentially controls how much profit water companies are allowed to earn on their assets. If the regulator decides to clamp down and reduce profitability, United may have to cut its payout.
Even after taking this significant risk into account, I’d still buy the company for my portfolio, based on its potential.
Housing market
The UK housing market is currently firing on all cylinders. This bodes well for homebuilders like Persimmon (LSE: PSN). This business is currently struggling to meet the demand for new properties, which is an excellent position to be in considering the overall economic environment.
City analysts believe the business will earn a net income of £778m in 2021, up from £638m in 2020. This could support a dividend of 236p per share, the highest level of income in five years. That would give a dividend yield of 7.6% on the current share price.
This level of income is far from guaranteed, but I think it showcases the company’s potential. Key risks and challenges to growth include a sudden increase in interest rates, which may hit demand for new-build properties. Rising labour costs could also hurt profit margins.
Considering the overall outlook for the UK housing market, I’d buy this company for my portfolio of FTSE 100 dividend stocks.
