FTSE 100 dividend shares play a valuable role in my portfolio. Not only do they give me with regular passive income (which I reinvest) but they also provide a degree of portfolio stability.
Here, I’m going to highlight three top FTSE 100 dividend shares I’d buy today. All of these companies have good dividend track records and I think they’ve the potential to deliver healthy total returns (capital gains and dividends) in the long run.
A top FTSE 100 dividend stock
One FTSE 100 dividend stock I see as a buy right now is Reckitt (LSE: RKT). It’s a leading consumer goods company that owns a wide range of hygiene, health, and nutrition brands. The prospective dividend yield here is about 2.7% as analysts expect a dividend payout of 175p per share for 2021 (note: dividend forecasts aren’t always accurate).
I think Reckitt is well-placed for growth in the current environment. Right now, demand for its hygiene products (Dettol, Lysol, etc ) is high due to Covid-19, and I expect demand to remain strong for a while. Meanwhile, as the world reopens, demand for other products in the company’s portfolio such as painkillers (Nurofen), cold and flu products (Strepsils, Mucinex), sexual health products (Durex), and digestive health products (Gaviscon) should pick up.
It’s worth pointing out that Reckitt is facing some challenges. Its nutrition segment continues to underperform. This is something it needs to sort out. Overall, however, I think the stock has a lot of appeal at present.
A 4.9% yield
Another FTSE 100 dividend share I like right now is BAE Systems (LSE: BA). It’s a leading defence, aerospace, and security company. It’s expected to pay out 24.8p per share in dividends this year which, at the current share, equates to a prospective yield of about 4.9%.
One thing I like about BAE Systems is that it’s a fairly reliable dividend payer. It did postpone its dividend payout during Covid-19. However, before that, it had registered 15 consecutive dividend increases.
Another thing I like is that the group is moving into higher-growth areas. Recently, it formed a partnership with Australian RegTech firm Kyckr. Under the partnership, the two companies will offer enhanced KYC (know your customer) solutions and help regulated firms solve anti-money laundering and compliance challenges.
One risk here is that defence budgets could be cut. This could impact future growth. However, looking at the valuation (the stock’s P/E ratio is just 10), I think this risk is priced in.
A high-dividend FTSE 100 stock
Finally, I like financial services major Legal & General Group (LSE: LGEN) as a high-yield play. The prospective dividend yield here is about 6.7% at present.
I don’t normally go for high-yield stocks. A lot of the time, companies with high yields are facing big challenges and their shares turn out to be very poor long-term investments. Legal & General doesn’t strike me as this kind of company however. This is a business with a solid balance sheet and decent long-term growth prospects. In March, the company said it expects to deliver long-term, diversified growth across the group.
Like other financial services stocks, LGEN can be volatile at times. So, it’s not a ‘defensive’ dividend stock. This means it may not be suitable for all investors. I’m comfortable with the volatility though. With a yield of nearly 7% on offer, I think the risk/reward proposition here is attractive.