The following FTSE 100 dividend stocks offer yields comfortably above the 3.7% index average. Here’s why I’d buy them to target exceptional long-term passive income.
A beaten-down bargain
The UK housing market has remained resilient despite rising interest rates. But there’s still a danger that housebuyer demand could sink, as data today from Rightmove suggests.
The property listings giant says that the average home price has slipped 1.3% month over month. Importantly this is the first monthly drop so far in 2022.
But is this an anomaly rather than a new trend? I can’t be sure though I believe the answer could be yes. So I think that businesses like homebuilder Taylor Wimpey (LSE: TW) will remain solid dividend stocks to buy.
In fact most reports show that home prices are still rising sharply. A survey from the Royal Institution of Chartered Surveyors last week in fact showed that almost two-thirds of estate agents continue to see prices increasing.
Then there’s the steady flow of positive trading updates from the London Stock Exchange’s collection of homebuilders.
Safe as houses
| Taylor Wimpey’s share price | 124.9p |
| Price movement in 2022 | -29% |
| Market cap | £4.4bn |
| Forward price-to-earnings (P/E) ratio | 6.4 times |
| Forward dividend yield | 7.3% |
| Dividend cover | 2.1 times |
Taylor Wimpey itself said in early August that it expects full-year results to be around the top end of expectations. It commented that “housing market fundamentals remain positive” thanks to “an enduring supply and demand imbalance and good availability of attractively priced mortgages”.
Encouragingly for Taylor Wimpey, I’m expecting this imbalance to endure for years to come, too. There’s no sign that ineffective housing policy over the past two decades will be overhauled. And factors like population growth and intensifying mortgage market competition should continue driving demand.
In the process, I’m expecting profits at Taylor Wimpey to rise strongly, preserving its role as a top stock for passive income.
Betting on Asia
Meanwhile, I believe HSBC Holdings (LSE: HSBA) could see earnings soar thanks to explosive GDP growth in emerging markets.
The FTSE 100 bank is a major player in Asia. In fact, following the height of the pandemic it announced plans to launch a $6bn multi-year investment programme on the continent to boost its position still further.
It’s lessening spending in its developed territories and pivoting towards Asian customers, a move it predicts will deliver “double-digit growth”.
| HSBC’s share price | 544.5p |
| Price movement in 2022 | +19% |
| Market cap | £109.9bn |
| Forward price-to-earnings (P/E) ratio | 8.5 times |
| Forward dividend yield | 4.4% |
| Dividend cover | 2.7 times |
This is unsurprising given the rate at which banking demand is growing. Forecasts from GMD Research tip the Asian mobile banking sector, for example, to grow more than 18% a year between now and 2030.
HSBC will have to navigate rising competition to fully capitalise on its opportunity. But on balance I think the bank has the clout and the brand recognition to thrive, and to deliver excellent shareholder returns in the process.