I believe national grid (LSE: NG) is one of the best FTSE 100 stocks to buy for my portfolio in the current climate. Many dividend-paying stocks face growing headwinds as cases of Covid-19 continue to rise and inflation soars, putting economic recovery at risk. On the other hand, the essential role of this company in ensuring that the lights stay on reassures me. Its services are essential at all points of the economic cycle.
Let’s look at the bad stuff before we continue. National Grid’s operations are highly regulated, which means profits are at the mercy of what lawmakers deem acceptable. It is even said that its monopoly on the management of the British electricity infrastructure could be called into question and that it could be replaced.
A safer FTSE 100 share?
It should be remembered, however, that discussions of such changes are not new. And I’m not sure there is enough will on the part of the government to shake up the system. Especially since the problem of soaring natural gas prices (and by extension of consumers’ bills) distracts the attention of ministers.
Speaking of which, I like that this particular FTSE 100 stock is not at the mercy of soaring wholesale energy prices. The number of power providers going bankrupt continues to rise, but National Grid is only moving electricity through pylons and cables across the country. So he will always be paid no matter how bad the crisis is.
National Grid is posting a 5.6% dividend yield for this fiscal year (through March 2022). This figure also rises to 5.7% for next year. I’m taking a very close look at this UK dividend stock right now.
Dividend yield of 15.2%
I think Rio tinto‘s (LSE: RIO) Dividend yields of 15.2% also make it a very attractive dividend-paying stock. This is even if its short-term profit situation remains fraught with dangers. China’s commodity-hungry GDP grew just 0.2% between July and September, the worst result on record in the third quarter.
Specifically, Rio Tinto could be hit harder than other FTSE 100 mining stocks if China’s real estate industry collapses. The two Barclays and UBS have warned of contagion in the country’s real estate market as a result of Evergrande‘s high profile work. Rio Tinto derives more than three-quarters of its income from the sale of iron ore, a key component of the construction industry.
In my opinion, however, the problems in China are due to the low valuation of the company. Analysts in the city believe Rio Tinto’s earnings will rise 75% in 2020, leaving it trading at a record five-fold forward P / E ratio.
In fact, I think there is something to be excited about with this FTSE 100 title. The increase in infrastructure spending in developed and emerging markets over the next decade is expected to generate huge profits here. Massive investments in renewable energy sources and other green technologies are also expected to boost demand for its copper.
Importantly, Rio Tinto’s 15.2% dividend yield reflects the payment of special dividends in 2020. But the miner’s brilliant cash flow and strong long-term outlook means brokers believe dividends will remain huge if they stay below this year’s levels. As a result, Rio Tinto posts a return of 9.5% for next year.
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Royston Wild has no position in any of the stocks mentioned. The Motley Fool UK recommended Barclays and National Grid. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.