Dividend stocks could be a means of obtaining a passive income in 2021. However, they may offer more than just a generous income return.
Income shares could become more popular in an era where low interest rates may remain in place for a prolonged period of time. Furthermore, today’s high-yielding shares could offer good value for money, as well as dividend growth potential over the coming years.
With that in mind, here are two FTSE 100 dividend shares that could be worth buying at the present time.
An improving outlook relative to other dividend stocks
SSE could become increasingly attractive relative to other dividend stocks in the next few years. The renewables-focused utility company recently updated the market on its performance. It remains on track to meet its guidance to deliver dividend growth that’s at or above inflation over the next few years.
This could make the stock more appealing over the medium term because of the potential for inflation to move higher. A loose monetary policy may mean the price level increases at a faster pace in future than it has done in the past. Alongside the company’s 5.4% yield, this could make it an attractive FTSE 100 share to buy at the present time.
A high-yielding UK share at a relatively low price
While many UK shares have risen sharply in the recent stock market rally, GlaxoSmithKline (GSK) isn’t among them. Its shares have continued to fall over recent months so that it’s now among the highest-yielding dividend stocks in the FTSE 100.
Its 6% dividend yield could make it attractive from an income perspective, since many FTSE 100 shares have considerably lower yields at the present time. Certainly, its dividends have failed to rise in recent years on a per share basis.
They could even come under pressure over the coming years as the company embarks on major structural and organisational changes. However, those changes could catalyse its financial performance over the long run, and may be priced in to the company’s valuation via a relatively high yield.
Potential risks from buying income stocks
Of course, dividend stocks don’t guarantee investors will receive any passive income. They could, for example, experience challenging operating conditions that restrict their ability to pay out profit to investors. Similarly, they may decide to retain capital in what remains a tough economic outlook. This could have a detrimental impact on their income prospects.
However, with other assets potentially offering low returns in a low interest rate environment, dividend shares such as GSK and SSE could be attractive as part of a diverse portfolio of stocks. When combined with other companies, they may offer an attractive passive income that grows over the coming years. This could increase their appeal on a relative basis and allow them to command higher share prices that translate into impressive total returns for investors.