Here are four mega-cheap FTSE 100 shares I’d happily buy next year. Each carries a dividend yield that’s ahead of the 3.5% Footsie average.
Building big returns
Britain’s housebuilders had a strong 2021 as Stamp Duty holidays helped massage homebuyer interest. The tax has returned to normal rates more recently and this poses a threat to the likes of Barratt Developments in the new year.
But I’m confident that these UK shares will perform robustly again in 2022 as cheap borrowing will still be available to homeowners, keeping demand for newbuild properties bubbling nicely.
I own Barratt shares and I am thinking of buying more today. At current prices, it trades on a forward price-to-earnings (P/E) ratio of just 9.6 times. It also sports a meaty 5.7% dividend yield for 2022 too.
Another FTSE 100 bargain
I also believe ITV shares could be too cheap for me to miss right now. Sure, the recent recovery in the advertising market could stall if a toxic blend of Covid-19 and soaring inflation smacks the economy. But as things stand, things look pretty peachy for broadcasters that rely on fatty ad revenues like this. The Advertising Association reckons ad spending will rise at its fastest-ever rate this quarter and by 7.7% year-on-year in 2022.
Today, ITV trades on a P/E ratio of 7.2 times for next year. The broadcaster carries a 5.4% dividend yield as well.
Set for take-off
Defence contractor BAE Systems also offers attractive value for money in my eyes. On top of trading on a forward P/E ratio of 10.8 times, its dividend yield comes in at 4.9% for 2022. I think it’s a perfect buy for these economically-uncertain times as government spending (largely speaking) on weapons tends to remain robust, even when cash becomes tight. Nations need to be in a constant state of readiness to protect themselves, after all.
In fact, global defence spending is tipped to grow again next year as worries over threats from nations and terrorist groups grow. Analysts at Statista think worldwide arms spending will breach $2bn in 2022 to come in at $2.02bn. That compares with a predicted $1.96bn for this year and $1.9bn in 2020.
But there is no guarantee BAE Systems will seal further contracts to exploit this theme and this could hit the share price hard. But at current prices, I’m still tempted to buy the business.
Riding the e-commerce boom
Packaging manufacturers like DS Smith could take a big hit in 2022 if paper prices continue to rocket. It’s my belief though that the potential rewards as e-commerce balloons offsets this risk.
This FTSE 100 firm makes the boxes that Amazon and other online retailers use to get their products to customers. It also makes a variety of other packaging materials and is increasing its use of sustainable materials. This should give profits an extra kick as companies seek to reduce their carbon footprints.
Today, DS Smith trades on a price-to-earnings growth (PEG) ratio of 0.5 for financial 2022. It carries a meaty 3.8% dividend yield as well, making it a great buy, in my opinion.
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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Royston Wild owns Barratt Developments and DS Smith. The Motley Fool UK has recommended Amazon, DS Smith, and ITV. 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.