I’m searching for the best FTSE 100 dividend stocks to buy this month. Which of these popular income stocks should I load up on today?
British American Tobacco
What it does: A global tobacco manufacturer with a large focus on The Americas.
Price: £34.50 per share
Dividend yield: 6.3%
Tobacco stocks like British American Tobacco have historically been popular investments in tough times like these. The addictive nature of their products provided stable revenues at all points of the economic cycle.
These qualities explain why BATS’ share price has soared more recently. However, they’re not enough to encourage me to buy the FTSE 100 tobacco titan for my portfolio.
Despite its recent resurgence, British American Tobacco’s share price has slumped almost 40% over the past five years. This reflects the increasing threat regulators pose to the company’s traditional combustible products and, more recently, its next-generation heated tobacco and vaping products.
Restrictions governing the sale, usage and marketing of tobacco products continue to come down the pipe (no pun intended) at alarming speed. The problem for BATS is a global one too. And the latest worry for Big Tobacco comes from the UK following a review by health secretary Sajid Javid.
According to The Telegraph, the review has championed plans to raise the legal smoking age to 21 from 18. It has also suggested slapping extra taxes on tobacco companies’ earnings.
I don’t care about British American Tobacco’s big dividend yield or its low valuation (today, the business trades on a forward P/E ratio of just 10 times). I think the long-term dangers facing the business far outweigh the possible benefits. It’s why I decided to sell my shares in Imperial Brands several years back.
SSE
What it does: A UK electricity generator with a growing renewable energy operations.
Price: £17.65 per share
Dividend yield: 5.3%
I’d rather buy renewable energy stock SSE (LSE: SSE) for my shares portfolio today. That’s even though its dividend yield sits some way below British America Tobacco’s.
I would also buy SSE despite the fact it also faces a growing threat from the UK government. Last week, chancellor Rishi Sunak said that electricity generators like this could also be pulled into paying larger taxes in response to the cost-of-living crisis. This could take a big bite out of company profits.
Demand for low-carbon energy is rising sharply as legislators get tough to address the climate crisis. It’s a sector in which SSE is rapidly increasing investment in plans that could deliver excellent profits growth over the long haul.
SSE plans to bolster renewable energy output fivefold up to the end of the decade, to a whopping 50TWh of renewable electricity from its portfolio each year by 2030.
I’ve bulked up my own exposure to the renewables energy sector by buying shares in The Renewables Infrastructure Group in recent weeks. And FTSE 100 dividend stock SSE is another great way for me to latch onto the green energy boom.