FTSE 100 dividend stocks are the best shares to buy right now. It’s not me saying that. Investors have been voting with their feet.
Seven of today’s top 10 most popular stock purchases are blue-chip dividend stocks, and no wonder given the income they pay. Out of the magnificent seven stocks, the lowest yield is 4.8% while the highest offers a staggering 10.75%.
The FTSE 100 has disappointed this year falling 1.26% but this means dividend shares are really cheap and the yields are super-high. New research from fund platform Interactive Investor shows private investors are jumping at the opportunity.
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Time to buy cheap shares
The UK’s most popular stock, we’re told, is telecoms giant Vodafone, which is hardly surprising given its 10.75% income stream. It’s also cheap, trading at just 7.4 times earnings (a figure of 15 is seen as fair value).
I’m wary of Vodafone, as its share price has been sliding for years, and I think the dividend is vulnerable. I won’t buy it today but last week I did purchase the UK’s second most popular stock and it yields only slightly less.
Legal & General Group currently pays income of 8.91% a year and I think that could prove sustainable. The stock is even cheaper than Vodafone, trading at just 5.64 times earnings. As an asset manager, its share price could recover when stock markets finally get up a head of steam.
One year ago I bought the third most popular FTSE 100 dividend stock, mining giant Rio Tinto, and I’m tempted to buy more today. All the commodity stocks are suffering as China’s growth slows, yet this is also an opportunity for contrarians with the stock trading at 7.7% and yielding 8.12%.
Last month I bought the UK’s fourth most popular income stock, miner Glencore, when its shares dipped 10%. Today it looks dirt cheap trading at 3.93 times earnings while yielding 8.07%.
As ever, it’s important to understand the risks when buying shares. If China continues to slide and the West dips into recession, commodity prices could fall further and drag Rio Tinto and Glencore’s shares down with them. It’s also worth noting that Rio Tinto cut its interim dividend by a third in July, as first-half profits fell more than expected. I hope Interactive Investor customers know the risks as well as the potential rewards.
More favourites of mine
I’m not surprised to see investors piling into insurer Aviva, which yields 8.30%. I’d buy it too, if I hadn’t decided rival L&G was a better bet.
Lloyds Banking Group is perennially popular, even though the share price hasn’t climbed in yonks. I’ve bought it twice in the last year, charmed by its 5.7% yield, which is forecast to hit 6.2% next year. With cover of 3.2, its dividends should continue rising over time.
Barclays is the last of the magnificent seven FTSE 100 income stocks. The only reason I haven’t bought it is that I keep buying rival bank Lloyds. Barclays trades at 4.9 times earnings and yields 4.8%.
The remaining three top 10 purchases are growth stars Rolls-Royce, Nvidia and Tesla. But today, investors are hungry for income and understandably so, given the juicy yields out there.
