When it comes to finding FTSE 100 dividend shares to buy now, I reckon there are some good choices on the London market.
And one of the great things about dividend shares is they’re good for harvesting a passive income. I can also choose to reinvest the dividends to help build up the capital value of my portfolio with the aim of harvesting a larger passive income later – perhaps in retirement.
Using FTSE 100 dividend shares to mimic great investors
One investor made a big success of dividend investing. Her name was Geraldine Weiss, born in 1926. And she became known as the ‘Grande Dame of Dividends’ and sometimes the ‘Dividend Detective’ or the ‘Queen of Blue-Chip Dividends’.
Her investment success arose because of a pioneering approach to using dividend yield as a valuation metric when most other investors of the time were focusing mainly on earnings. She saw there’s a strong relationship between the ability of a company to pay dividends and the way a stock performs in the market.
I think a strategy that focuses just on dividends is elegant in its simplicity. And Weiss considered everything else within the frame of a company’s ability to keep paying dividends. Meanwhile, simple proved to be extremely effective for her. For example, one of her biggest investment returns came from Coca-Cola.
Through her Investment Quarterly Trends newsletter, she tipped the stock between 1982 and 1992 and the share price rose by around 1,285% during that period. With dividends added, the annualised return from the investment worked out at just under 35%. But Weiss stopped tipping the stock when the dividend yield fell too low.
Indeed, she didn’t believe in holding stocks forever. She typically bought stocks when the yield was within 10% of its highest-ever value. And she often sold them when the yield dropped to within 10% of its lowest value. However, although trading shares based on that valuation measure, she often held for years rather than weeks or months. And Coca-Cola is a good example of that.
Dividend stocks I’m keen on now
We can find out more about the criteria she used to make dividend investments from the books she wrote. And there’s also a fair bit of information available online. But, in the meantime, I’m building up my own ‘hit list’ of FTSE 100 dividend shares.
For example, I like the look of energy company SSE and its 6% forward yield. The company is moving into renewable energy with its wind farm investments and I reckon the dividends could prove to be sustainable for many years ahead. And, in the pharmaceutical sector, I think GlaxoSmithKline looks attractive with its dividend yield just below 6%.
I’d reinvest the dividends from investments like those to help compound my gains over time. And using the wisdom of Weiss, I’d aim to build an investment pot large enough to produce a passive income for financial freedom in retirement.