7.8% and 6.5% yields! Are these FTSE 100 dividend stocks too cheap to miss?
These FTSE 100 dividend stocks trade on low earnings multiples and carry juicy dividend yields. Should I add them to my investment portfolio today?
Banks like NatWest Group (LSE:NWG) have felt increased scrutiny following recent events at Silicon Valley Bank and Credit Suisse. Yet news flow over the past week hasn’t altered my opinion of the FTSE 100 business.
You see, I’ve long believed UK-focused banks like these should be avoided, given the tough economic backcloth. Certain key data has beaten forecasts in recent weeks. However, GDP growth remains weak and looks set to remain so for a prolonged period. This casts a shadow over NatWest’s earnings potential.
The rapid progress challenger banks are making in attracting customers is another big danger to established banks like this one. Another less-discussed (but still significant) problem is how climate change will affect the bottom lines of Britain’s banks.
The Bank of England recently said there was “uncertainty over whether banks and insurers are sufficiently capitalised for future climate-related losses”. If capital rules change because of this, the level of profits and dividends that NatWest and its peers deliver could suffer.
NatWest’s recent share price woes leave it trading on a price-to-earnings (P/E) ratio of just 6 times. It also boasts a FTSE 100-beating 6.5% dividend yield at current levels.
These are attractive numbers but I’m not tempted to invest. Not even its drive to cut costs and boost earnings by investing in digital is enough to encourage me to build a position.
I’d rather hold onto my cash and consider increasing my holdings in homebuilder Barratt Developments (LSE:BDEV) instead.
Conditions in the UK homes market remain challenging as the economy struggles and interest rates rise. Buyers could find it even more difficult too if a banking crisis comes along and lenders pull mortgage products en masse.
Worries over home loan availability have already been growing in the lead up to a new Consumer Duty this summer. The head of trade body UK Finance, David Postings, recently warned that a new rules might hit mortgage availability for many.
Yet the stunning value of FTSE 100 housebuilder stocks is encouraging me to take a close look. Barratt, for instance, trades on a forward P/E ratio of 6.6 times. It also boasts a corresponding 7.8% dividend yield.
I have no plans to increase my exposure to Barratt right now. There may be better stocks for me to buy for passive income in 2023. However, if news surrounding the UK homes market suggests a crash is unlikely, I’ll be looking to increase my stake.
In its early February market update Barratt said that “we have seen some early signs of improvement in current trading”. It was one of several encouraging updates from the housing industry, in fact.
I’ll be looking for further clues of recovery so I can buy more of this cheap UK share for my portfolio.
The post 7.8% and 6.5% yields! Are these FTSE 100 dividend stocks too cheap to miss? appeared first on The Motley Fool UK.
Like buying £1 for 51p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
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Royston Wild has positions in Barratt Developments Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.