Stock market volatility has given me the chance to snap up many cheap FTSE 100 shares in 2022. If markets crash again, I’ll be opening the chequebook again to buy more beaten-down bargains.
More specifically, I’ll be looking to buy more dividend stocks for my portfolio. History shows that dividend payouts tend to keep pace with inflation quite well, reducing the impact of rampant price rises on my wealth.
Inflation protection
It’s also likely that dividend stocks could outperform the wider stock market right now. Mark Peden, manager of the Aegon Global Equity Income fund, says: “[US] Companies that pay dividends tend to outperform those that don’t in times of high inflation and rising rates.”
This is a quality that US companies share with their counterparts here in the UK.
Peden notes that “dividends are an important element of long-term equity returns.” And he says that the role of dividends “becomes even more important when capital returns are more muted” like today.
Indeed, the fund manager predicts that dividends will form a larger proportion of total returns for investors in 2022 than at any point in the past 10 years.
2 FTSE 100 stocks I’d buy
Those comments reinforce my belief that buying dividend stocks is a smart strategy right now. With this in mind, here two FTSE 100 dividend shares I’m thinking of buying using my Stocks and Shares ISA.
1. Glencore
Glencore’s 10.1% dividend yield is one of the biggest on the FTSE 100 today. It faces huge problems as macroeconomic conditions worsen and commodities demand slips. But robust dividend cover of 2.7 times means it looks in great shape to meet 2022’s predicted target.
I like Glencore because of the broad range of commodities it markets and produces, and its wide geographic footprint. This gives it better diversification that many other mining stocks and therefore superior strength in depth.
I think the business could prove extremely beneficial to my wealth over the long term. The copper, iron ore, aluminium and other raw materials it deals in are likely to soar on factors like rising consumer electronics demand, rocketing electric vehicle sales and massive construction activity in developing markets.
Glencore also trades on a rock-bottom forward price-to-earnings (P/E) ratio of 3.6 times today.
2. SSE
Peden has described “healthcare, consumer staples and utilities” as good dividend stocks to buy owning to “their relative immunity to economic cycles.” One such stock on my radar is renewable energy stock SSE.
Generating electricity from wind is notoriously unreliable. It’s a phenomenon which this FTSE 100 income stock is no stranger to and has resulted in profit warnings in recent years.
However, this is a risk I think is baked into SSE’s dirt-cheap share price. Today, it trades on a price-to-earnings growth (PEG) ratio of just 0.5. Combined with a 5.5% dividend yield I think SSE offers excellent all-round value.
Besides, as a long-term investor, I like the huge amounts SSE is spending to expand its green energy operations. It could prove highly profitable as the UK moves to cut carbon emissions.