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4.6% and 9.7% yields! Should I buy these cheap FTSE 100 dividend shares?

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I’m looking for the best-value dividend shares to buy for my portfolio. Could these FTSE 100 stocks be too good to miss at current prices?

Persimmon

Persimmon (LSE:PSN) is an income stock I already own. And I’ll be watching for reasons to add to my holdings in 2023.

You see, its 9.7% dividend yield for this year is one of the FTSE 100’s biggest. Right now, the housebuilder also trades on a rock bottom price-to-earnings (P/E) ratio of 9.1 times.

It’s a valuation that reflects the huge challenges homebuilders face this year. Latest Nationwide data showed house average prices falling for the fourth month in a row in December, the worst run of results since the 2008 financial crisis.

Things could remain tough in 2023 too as unemployment is tipped to rise and interest rates increase. However, there are also reasons to be optimistic as we move into the New Year. In fact I think Persimmon and its peers share prices could recover strongly in the months ahead.

For one, the supply and demand balance in the housing market remains extremely tight. This could help home prices hold up more strongly than many predict.

Furthermore, raw material shortages that have pushed up construction costs and hit build activity could also drop sharply in 2023. Last summer Persimmon had to scale back its full-year production forecasts on the back of supply chain issues.

For the time being I’m happy to sit on the sidelines. But I’ll continue watching closely for signals to buy more of this cheap dividend share.

Tesco

The Tesco (LSE:TSCO) share price also offers excellent all-round value on paper. The retail giant trades on a forward P/E ratio of 11.2 times. The dividend yield clocks in at 4.6%, well above the FTSE 100 average of around 3.5%

Tesco could have a very bright future as e-commerce heats up. Online grocery penetration rates remain low versus those of the broader retail market. This provides Britain’s largest internet supermarket with terrific growth possibilities.

But I still believe the company could have significant trouble translating this into impressive profits growth. Competition is climbing across its bricks-and-mortar stores as well as online.

Aldi and Lidl’s market shares soared to 9.1% and 7.2%, respectively, in the 12 weeks to December 25, according to Kantar Worldpanel. This was up 1.4% and 0.9% a year earlier and driven by continued store expansion.

Rising choice for shoppers is, of course, exacerbating the price wars across the sector. Morrisons announced another £16m worth of price reductions earlier last week. Tesco’s FTSE 100 rival Sainsbury’s declared it was investing £50m in prices at the start of December too.

Elevated labour, energy and product costs are putting pressure on these firms’ ultra-thin margins too. And these could also remain a significant long-term problem for Tesco and its peers. So on balance I’d rather buy other FTSE 100 shares to boost my passive income.

The post 4.6% and 9.7% yields! Should I buy these cheap FTSE 100 dividend shares? appeared first on The Motley Fool UK.

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Royston Wild has positions in Persimmon Plc. The Motley Fool UK has recommended J Sainsbury Plc and Tesco Plc. 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.