When it comes to finding FTSE 100 dividend stocks to buy now, I think there are good choices in the London market.
And one of the advantages of dividend paying stocks is that they are good for earning passive income. I can also choose to reinvest the dividends to help build the capital value of my portfolio with the goal of reaping more passive income later – perhaps in retirement.
Using FTSE 100 dividend stocks to emulate the big investors
One investor has had great success investing in dividends. Her name was Geraldine Weiss, born in 1926. And she became known as the “Grand Lady of Dividends” and sometimes “Dividend Detective” or “Queen of Blue-Chip Dividends”.
Its investment success is due to a pioneering approach to using dividend yield as a valuation measure when most other investors of the time focused primarily on earnings. She saw that there is a strong connection between a company’s ability to pay dividends and the way a stock behaves in the market.
I think a strategy that only focuses on dividends is elegant in its simplicity. And Weiss considered everything else in the context of a company’s ability to keep paying dividends. During this time, Simple has proven to be extremely effective for her. For example, one of his biggest ROIs came from Coca-Cola.
Thanks to its newsletter Investment Quarterly Trends, it rocked the stock between 1982 and 1992, and the stock price rose about 1,285% during that period. With the added dividends, the annualized return on the investment came in at just under 35%. But Weiss stopped rocking the stock when the dividend yield fell too low.
Indeed, she did not believe in stock ownership forever. She typically bought stocks when the return was less than 10% of its highest value on record. And she often sold them when the yield fell to less than 10% of her lowest value. However, although trading stocks on the basis of this valuation measure, she often held for years rather than weeks or months. And Coca-Cola is a good example.
Dividend stocks that I like now
We can learn more about the criteria she used to invest in dividends from the books she wrote. And there is also quite a bit of information available online. But, in the meantime, I’m building my own “hit list” of FTSE 100 dividend stocks.
For example, I like the look of the energy company SSE and its forward yield of 6%. The company is getting into renewable energy with its investments in wind farms and I think the dividends could prove to be sustainable for many years to come. And, in the pharmaceutical sector, I think GlaxoSmithKline looks attractive with its dividend yield just below 6%.
I would reinvest dividends from investments like these to help increase my earnings over time. And using Weiss’ wisdom, I would aim to build an investment pot large enough to produce passive income for financial freedom in retirement.
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Kevin Godbold has no position in any of the stocks mentioned. The Motley Fool UK recommended GlaxoSmithKline. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations that we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that taking into account a diverse range of information makes us better investors.