Are these the best FTSE 100 dividend stocks to watch in September 2024?

The FTSE 100 may be continuing to underperform international indices, but the index nevertheless has risen by an impressive 8% year to date — and this excludes dividends. Having smashed through the symbolic 8,000-point barrier, the index currently rests on 8,343.85 points.

FTSE 100 macroeconomics

After meeting the Bank of England’s (BOE) CPI inflation target rate of 2.0%, on 2 August interest rates were by 0.25 basis points from 5.25% down to 5%. Since then, CPI inflation has risen to 2.2% as last years lower energy prices fall out of the annual comparison.

Following this announcement, the overall price trend for the FTSE 100 remained stable, maintaining its record highs as investors had already priced in, anticipating these cuts.

The BOE are next scheduled to meet on 19 September and it’ll be interesting to see if further rate cuts are introduced.

Whilst the UK economy has now entered into a phase where interest rate cuts are likely, their frequency, and the amount by which they’re cut is dependant on inflation. If inflation rises too much after the decision to reduce interest rates, further cuts will be more gradual.

On the other hand, businesses may need a helping hand. The Insolvency Service recently noted that the number of companies declared insolvent in England and Wales in May this year was up 16% year-on-year. If more and more businesses struggle to service their debts interest rate cuts are likely to be more frequent.

Then there’s the AI-fuelled surge of the US tech stocks to consider. This may be a sustainable rise given the tech advances at hand or may be a bubble that eventually bursts. If the latter, this excess capital may find itself within FTSE 100 dividend stocks until the storm blows over.

This all makes investing in FTSE 100 dividend stocks complex. In particular, the highest dividend yields can be hostage to economic policy — where individual investment cases and changing financial landscapes can create value traps or payout irregularities.

Best FTSE 100 dividend shares to watch

These shares are the highest yielding on the index as of 1 May 2024. They may not be the best investments and the dividends and capital itself are not guaranteed.

1. British American Tobacco
2. HSBC
3. Imperial Brands
4. Aviva
5. Land Securities Group

British American Tobacco (Dividend yield: 8.54%)

British American Tobacco saw revenue drop 0.8% during H1 as cigarette volumes in the US, their main market, are down 9% and the company struggles to maintain their market share.

Despite this small single figure revenue drop, no changes have been made to its full year guidance as the company anticipates a stronger H2, where investments made in H1 will begin to pay off as they introduce new or improved new categories products to the market.

However, the FTSE 100 tobacco company will have to pivot fast, having written off £27.3 billion of its US brand portfolio after acknowledging they have ‘no long-term future.’ Compounding the weak combustibles growth, the UK recently announced a ban on disposable vapes which could hit BATS’ long-term ambitions in non-combustible categories — and is also imposing a specific vaping tax as well. This could hit margins if similar legislation is adopted more broadly.

Since announcing their H1 results, BATS share price has increased. We may see further gains from here as their generous dividend of 58.88p per share remains a key attraction.

Our analysts have given the stock a buy rating, with an average price target of 2865p, up 3.83% from its current price.

HSBC

(Dividend yield 7.06%)

HSBC Holdings reported strong Q2 results where its underlying revenue increased by 5% year-on-year reaching $16.5 billion. This strong performance was mostly due to the fees charged in the Wealth and Investment Banking parts of the company.

Profit before tax increased by 7% to a total of $8.9 billion, exceeding analyst expectations of $7.8 billion. Net interest remained flat.

On top of this, the company also announced a $3 billion share buyback and will pay an interim dividend of $0.10 per share.

Their current dividend cover ratio is 1.89 and analyst estimates anticipate the dividend yield will increase to 8.0% in the next 12-month period.

The company’s decision to appoint current CFO Georges Elhedery as the new CEO as of 2 September 2024, following the retirement of current CEO Noel Quinn, was widely expected and the share price has remained stable amongst this announcement.

With global interest rates seeming to have peaked and the possibility of fresh tensions between China and the US, Georges Elhedery will face a series of challenges within his first few months of being appointed, and it’ll be interesting to see the impact this will have upon the share price and future dividend payments.

HSBC currently has a buy rating with an analyst price target of 797p in the next 12—month period, up 21.71% from its current price.

Imperial Brands (Dividend yield 6.93%)

The tobacco company Imperial Brands has seen a 2.8% increase in net revenue for the first half of this year, excluding the impact of currency movements, bringing in £3.6 billion. This performance is anticipated to remain stable throughout the next 6—month period where they’re likely to report low single digit net revenue growth at the end of the year.

Recent updates have seen the company’s market share solidify, with a stronger share performance than competitors British American Tobacco (BATS).

The company has a dividend cover ratio of 1.90. Their total dividend for the year has increased annually since 2021, and with their first interim payment of 22.45p up from 21.59p the year before it’s likely this pattern will continue. It’s worth noting however that this is based upon the company’s overall performance in the coming months, so it can’t be guaranteed.

Despite reporting the highest organic growth in over 10 years, increased regulation due to public health concerns poses a potential risk to the tobacco industry as consumers opt for healthier alternatives. This could negatively impact profitability and long-term revenue as future sales are expected to drop.

Aviva (Dividend yield 6.90%)

Insurance provider Aviva has become a great performer for investors over the past four years as cost-cutting and rationalisation efforts have paid off.

Their strong performance has continued into 2024 as their H1 earnings reported an operating profit of £875 million, up 14% year-on-year. This growth was mostly driven by the Wealth & Retirement and UK & Ireland General Insurance part of the business.

With interest rates coming down, Aviva’s solid dividend is likely to be a key attraction. Following their strong performance, the company have increased its interim dividend by 7% to 11.9p per share, and its dividend cover ratio is 1.13.

Although high dividend payments throughout the next financial year can’t be guaranteed, Aviva’s projected dividend yield of 7.6% in the next 12 months suggests that if they continue to perform well, payments should remain stable.

The stock currently has a buy rating, with our analysts predicting a price target of 555p in the next 12—month period, up 11.86% from its current price.

Land Securities Group (Dividend yield 6.26%)

Real estate company Land Securities Group reported an operating profit of £473 million in FY24, up 4% from the year before. This increase has enabled the company to offset higher finance costs.

Broadly speaking, the company’s performance has remained stable throughout the past year, and this is expected to continue.

The company has recently declared a dividend payment of 9.2p per share to be paid out to shareholders in October this year. This is up from 9p for the same quarter a year earlier. Land Securities Group currently has a dividend cover ratio of 1.27, and their dividend is expected to grow by a low, single digit percentage within the next year.

Our analysts have placed the stock in a strong buy position with a potential upside of 8.72% reaching 691p in the next 12—month period.

How to invest or trade in FTSE 100 stocks with us

1. Learn more about FTSE 100 shares
2. Open an account with us or practise on a demo
3. Select your opportunity
4. Choose your position size and manage your risk
5. Place your deal and monitor your trade

You can either invest in shares directly or trade using spread betting or CFDs to benefit from leverage.

Keep in mind, leverage means you can gain or lose money faster than expected. Because your position size is far greater than your deposit, you could lose more money than you put in. Be aware also that past performance is not an indicator of future returns.

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