2 FTSE 100 dividend stocks with 40%+ upside, according to City analysts

The best dividend stocks are generally those that can provide consistent dividends and long-term capital gains. While dividends on their own are great, the combination of dividends and capital gains is far more powerful when it comes to building long-term wealth.

Here, I’m going to highlight two FTSE 100 dividend stocks that have considerable share price upside right now, according to City analysts. I own both of these stocks and I’d be happy to buy more shares at current prices.

Analysts see this FTSE 100 dividend stock going higher

Let’s start with financial services giant Legal & General (LSE: LGEN), which currently has a share price of 288p. Here, analysts at Barclays have a 12-month price target of 406p — 41% higher than the current price. If LGEN can achieve that price target, investors are looking at some big total returns, as the yield on the stock is nearly 7%, at present.

While there’s no guarantee Legal & General will hit 406p any time soon, I do think this dividend stock has the potential to climb higher. LGEN is a well-run business that has a good track record in terms of growth and dividends over the last decade. Looking ahead, it also has multiple growth drivers due to its diversified business model (insurance, investment management and retirement solutions).

Yet, at present, the FTSE 100 stock trades on a forward-looking price-to-earnings (P/E) ratio of just 8.8. That seems far too low, to my mind. By contrast, the median P/E ratio across the FTSE 100 is about 15.4 right now.

Of course, there are risks to consider. One is the fact that the stock can be quite volatile at times. This is illustrated by its ‘beta’ (a measure of volatility compared to the market) of 1.6, which indicates it’s about 60% more volatile than the broader market.

I see the overall risk/reward proposition as very attractive however. I think this stock has the potential to provide healthy total returns in the years ahead.

46% share price upside

A second Footsie dividend stock that has considerable share price upside, according to analysts, is investment firm Hargreaves Lansdown (LSE: HL). Its shares are currently changing hands for around 1,355p. However, analysts at Barclays have a 1,980p price target on the stock. That represents an upside of 46%.

This fellow FTSE 100 stock has been out of favour for a while. However, there’s now a catalyst that could push the share price higher in the near term. That’s rising interest rates. You see, Hargreaves Lansdown generates significant income from its clients’ cash deposits. So if UK interest rates rise, its income is likely to get a big boost. This could propel the share price higher.

One risk to consider here is that competition in the retail investment space is rising. In recent years, platforms such as Freetrade and Trading 212 have become quite popular with UK investors. This could impact Hargreaves’ growth rate going forward.

All things considered however, I see a lot of investment appeal here. The yield is almost 3% and the stock doesn’t look that expensive on a forward-looking P/E ratio of 22.

Edward Sheldon owns Hargreaves Lansdown and Legal & General Group. The Motley Fool UK has recommended Barclays and Hargreaves Lansdown. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.