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Income stocks have a place in my heart. I love the steady drip of dividends into my Self-Invested Personal Pension. A bit of share price growth doesn’t hurt either. Here are two FTSE 100 dividend shares that have fallen out of favour lately. They have pretty decent yields, but can they start to grow as well?
Kingfisher struggles to fly
Shares in B&Q owner Kingfisher (LSE: KGF) have struggled for years. They’re up just 3% over the past year and 5% across five.
That compares with increases of 10% and 50% across the FTSE 100 over the same time periods, so that’s a sizeable underperformance. None of these figures include dividends.
The cost-of-living crisis continues to take its toll on the DIY retailier. It hasn’t just squeezed consumers, but driven up the cost of labour and materials. Lingering post-Covid supply-chain snarl-ups haven’t helped.
While Kingfisher’s UK arm has shown some resilience, its French and Polish operations are still feeling the strain.
In the group’s Q1 update, published 28 May, the board reaffirmed full-year guidance for adjusted pre-tax profit of £480m to £540m. That holds out the prospect of a big drop on last year’s £528m. Any other performance would lift the share price though.
Unsurprisingly given its troubles, the shares look modestly valued on a price-to-earnings ratio of 13.3. The dividend yield has edged up to 4.5%, which sits ahead of the index average.
But I’m not convinced and neither are analysts. Only two out of 15 think Kingfisher is a Buy. Eight say Hold and five advise selling.
There may be hope yet if wider economic challenges ease, but I don’t see a compelling reason to consider buying Kingfisher today.
GSK struggles on
Pharmaceuticals giant GSK (LSE: GSK) is a stock I hold myself but being honest, I wish I didn’t. The shares have declined 10% over one year and 12% over five.
The yield has crept to around 4.5% but that’s down to the falling share price rather than generosity from the board.
The dividend was frozen at 80p per share way back in 2014 and stayed there until 2021, only to be cut to 57.75p in 2022. It crept up to 61p in 2024, but it’s still a poor showing.
CEO Emma Walmsley is battling to replenish the drugs pipeline while fending off the usual pharma sector threats such as US class action litigation and blockbuster drugs coming off patent. She’s had to do it while watching FTSE 100 rival AstraZeneca growing at speed.
Throw in Donald Trump’s war on big pharma, and the path ahead is unclear. On a P/E of 8.75, GSK looks cheap. Yet despite the yield and valuation, I wouldn’t say investors should consider buying it today.
Solid income, growth concerns
Both names offer generous payouts, which may look even more attractive as interest rates are cut. Kingfisher shows clearer potential if conditions improve, but it needs the economic backdrop to change. GSK is cheap but is under a political shadow.
At the moment, neither feels worthy of being snapped up. But when clarity returns, both could jump back into favour. Investors hate these stocks today, and I’m not too keen either. I’ll keep an eye on them, but I can see far more exciting opportunities across the FTSE 100 today.
