2 FTSE 100 income stocks with yields of 5.9% and 12.2%!
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These FTSE100 both income stocks offer dividend yields well above the index average. Should I buy them today?
Price: 212p per share
Dividend yield: 5.9%
The J.Sainsbury (LSE: SBRY) The stock price fell as fears over consumer spending intensified. This pushed its dividend yield well above normal levels. But I’m still hesitant to buy the FTSE 100 grocer today.
Food retail has traditionally been seen as an oasis of calm in difficult conditions. However, the UK’s cost of living crisis is so bad that people are skipping and cutting back on meals at a pace that should concern supermarkets like Sainsbury’s.
The Office for National Statistics reported on Friday that three in four British adults feel “very” Where “somewhat worriedon the rising cost of living. As a result, the number of households spending less on food and basic necessities rose to 41%. That’s a 5% increase from a poll just a fortnight ago.
In this environment, Sainsbury’s will have to keep cutting prices to encourage people to keep shopping in its stores. The problem is that it has very little wiggle room on this front given the impact of rising costs on its already thin profit margins.
I like the excellent progress that Sainsbury’s has made in the growing area of e-commerce. The grocer has posted the best online sales growth of any UK supermarket during the pandemic. It is now the second largest online grocer in the country and continues to invest in its online retail channel to maintain momentum.
However, that is not enough to encourage me to buy Sainsbury’s shares today. I think the cost of living crisis and growing competition in the UK food industry is making the business too big of a risk today.
Price: £57.20 per share
Dividend yield: 12.2%
I would be much happier investing my hard-earned money in Rio Tinto (LSE: RIO) right now. And that’s even as commodity companies like this face an increased threat to their earnings as the global economy slows.
The FTSE 100 company could see the prices of the commodities it produces reverse sharply in the short to medium term. That in turn could hit earnings hard and see dividends lower than City analysts currently expect.
Still, there’s a good chance, in my view, that Rio Tinto’s dividend yield will still beat Footsie’s broader average of 3.6% by a big margin. The company’s strong balance sheet certainly gives it the ability to pay big dividends if it chooses. Rio Tinto had $1.6 billion of net cash on its books in December.
I think owning the mining business could be lucrative for me, as the demand for commodities is likely to skyrocket over the next decade. Growing demand for consumer electronics, electric vehicles and renewable energy technologies, for example, is expected to drive demand for its copper alone. I would buy these dividend-paying stocks hoping to make excellent long-term returns.