The market crash has turned up some fantastic FTSE 100 dividend bargains for investors with a five- to 10-year investment horizon. With that being the case, here are three FTSE 100 dividend stocks that look cheap after current declines.
FTSE 100 dividend champion
Iron ore miner Rio Tinto (LSE: RIO) has become a FTSE 100 dividend champion over the past five years. The company has transformed itself from an inefficient, overleveraged outfit, into one of the index’s most cash-generative businesses.
Investors have been able to reap the rewards. The group announced a succession of record dividends, including the latest $3.7bn distribution for the second half of 2019. In total, last year, the company returned $7.2bn in cash to investors.
While the current virus outbreak might have an impact on the demand for iron ore around the world, Rio’s size, strong balance sheet and scale should mean it can quickly recover when the economy starts to grow again.
Therefore, now could be a great time to snap up a share in this business at a discount price. The stock is currently dealing at a price-to-earnings (P/E) ratio of 8.8, which suggests a wide margin of safety at current levels. A dividend yield of 7.2% is also an offer, above the FTSE 100 dividend yield of 4.7%.
B&Q-owner Kingfisher (LSE: KGF) is also likely to suffer from a drop in demand following the Covid-19 outbreak in the near term. However, as one of the largest home improvement companies in the UK, the retailer is well-positioned to make a strong comeback.
The DIY and home improvement market in the UK is worth £14bn a year and it’s growing again after years of stagnation. Online sales of DIY and gardening equipment could increase by 53% between 2018 and 2023 to £598m.
Kingfisher should be able to capitalise on this growth. The company has recently embarked on a restructuring plan to reduce costs and improve customer service. This should help turbocharge growth as the market expands.
Right now, the stock supports a dividend yield of 6.4% and trades at a P/E of 8.4. Once again, these figures suggest the stock offers a wide margin of safety, implying now could be the time to snap up a share of this un-loved enterprise.
Emerging markets-focused banking group Standard Chartered (LSE: STAN) has lost more than a third of its market value this year. Investors are concerned about the bank’s exposure to Asian economies, which are being ravaged by the Covid-19 outbreak.
While this disruption will undoubtedly hit Standard’s earnings in the near term, over the long run, customers will still need a banking partner. Standard is one of the best banking brands in Asia.
After several years of restructuring and improving its capital position, the bank is now in a stronger position than it has been for more than a decade. That means it now has the financial flexibility to weather the current storm.
Recent declines have pushed the bank’s valuation down to just 0.5% of tangible book value. This suggests the stock could be worth 100% more than its current multiple when investor confidence returns.
It also offers a yield of 4.7%, so investors will be paid to wait for a recovery.
The post 3 FTSE 100 dividend stocks I’d buy in the market crash appeared first on The Motley Fool UK.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Standard Chartered. 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.
Motley Fool UK 2020