As an income investor, I want to buy stocks that are reliable dividend payers. There’s little benefit to me of investing in a company with a high dividend yield if the business is performing badly. In this case, the dividend is likely to be cut. Rather, I want to find stocks with years of dividend growth. With that in mind, here are a couple of FTSE 100 dividend stocks with a long history of growing their income payments. Of course, I have to remember that a good track record is no guarantee for the future.
A FTSE 100 old-timer
The first company is Unilever (LSE:ULVR). It’s a group that owns a host of brands from different sectors. These include Dove, Lynx, Hellmann’s, Magnum and plenty of others. This is one reason why I like the prospect of buying its shares. It’s a great consumer staples stock that should help me weather future uncertainty in the market.
Regardless of tensions with Russia, another Covid-19 variant, goings-on at 10 Downing Street or other headline-grabbing issues, Unilever should be able to go about its business. Demand for the brands should remain firm and isn’t directly liked to the state of the UK economy.
Its robust, long-term demand is shown by the 20+ years of consecutive dividend per share growth. The current dividend yield is 3.77%, above the FTSE 100 average. Even though it’s not as high as some other flagship FTSE 100 dividend stocks, it doesn’t bother me. The reliability of the income payments makes up for this.
One risk is the performance and mindset of the management team. The CEO and CFO have been criticised in recent weeks following what was seen by many as a poor and overpriced attempt to buy GlaxoSmithKline’s Consumer Health unit. I also need to note that the share price has fallen by 12% over the last year.
An above-average-yield company
The second FTSE 100 dividend stock I’m thinking about buying is British American Tobacco (LSE:BATS). The large multinational tobacco manufacturer has been a feature in many dividend portfolios over the years. It offers an attractive dividend yield, currently at 6.76%. More than this, it has over 20 years of consecutive dividend per share growth.
A risk straight off the bat is that some just won’t consider owning a tobacco company. The negative screening criteria associated with a tobacco company means that it does get a lot of bad press. With a strong focus on ESG investing in the market at present, the company could struggle to see share price gains as many will decide to invest elsewhere.
On the flipside, there’s still a lot to like about the brand. The share price is up 18% over the past year, as the company invests more in New Category products (such as vapes). In a recent trading update, it commented that it had “strong acquisition of consumers of non-combustible products, up 3.6m Sept, year-to-date to 17.1m”.
If it can continue on this pivot and grow a solid market share in this alternative sector, then I think the future could be positive for the FTSE 100 dividend stock.
Jon Smith owns no share mentioned. The Motley Fool UK has recommended British American Tobacco, GlaxoSmithKline, and Unilever. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
