While the summer is often a somewhat quiet time for the stock market, this year could be a little different. Threats such as a global trade war and Brexit are likely to maintain investor interest over the coming months.
However, this doesn’t mean that now is the right time to avoid buying FTSE 100 dividend stocks. In fact, valuations may become increasingly attractive if global economic risks remain high. As such, now could be the right time to buy these two large-caps that each offer income returns in excess of 5%.
British Land
Real estate investment trust (REIT) British Land (LSE: BLND) is undergoing a period of change at the present time. The company is seeking to shift the focus of its portfolio towards office, leisure and residential uses as demand for retail space continues to be uncertain. This trend is likely to continue as online shopping grows in popularity, and physical stores become a less obvious means for retailers to sell their products to the public.
While this transition may involve a degree of pain in the short run, British Land appears to have a sound strategy that could add value to its asset base over the long run. Moreover, its valuation suggests that investors have fully factored in the risks that it faces. The company currently has a price-to-book (P/B) ratio of just 0.6. This indicates that the stock is grossly undervalued, and could deliver capital growth in the long run.
With a dividend yield of 5.8%, British Land also has income investing potential. Although there may be other FTSE 100 shares that have faster dividend growth in the near term, the company’s mix of value and income investing potential could make it a highly appealing stock for the long term.
TUI
The travel and leisure industry has not been a popular sector among investors in 2019, with shares in TUI (LSE: TUI) declining by 29%. The company reported a challenging operating environment in its recent update, while the difficulties in the wider industry have been highlighted by the share price collapse of Thomas Cook in recent months.
Looking ahead, trading conditions may remain uncertain for TUI and its sector peers. Consumer confidence in the UK and across parts of Europe remains downbeat, while changing consumer tastes may also lead to added volatility in the company’s performance.
However, with TUI continuing to invest in the customer experience and in its digital offering, it could post improving financial performance as the cyclicality of the economy moves in its favour over the long run. Since it has a price-to-earnings (P/E) ratio of 6.5, it seems to offer a wide margin of safety.
Although there are more consistent performers in the FTSE 100, the company’s dividend yield of 9% suggests that it could offer impressive income returns for less risk-averse long-term investors.