Business & Investment

Three cheap dividend stocks from the FTSE 100 bargain bin

Every week i FTSE 100 Index bargain bin. I like to search for cheap British stocks in an attempt to identify diamonds in the rough. And because Footsie is rarely loved and undervalued by investors, I usually find value stocks that fit my bill. Here are three FTSE 100 shares that I don’t own, but I will buy and hold them at the current price.

Digging up the FTSE 100 bargain

When wandering downstream of the FTSE 100, I’m not looking for stock in an old company. I’m looking for a specific value stock. It’s a stock that I believe has the potential to generate excellent future returns. This means I’m looking for a low-rated stock that could be upgraded over time. Moreover, like Warren Buffett, I’m not “picking up a cigar butt from the pavement.” I want to invest in a quality company that has a simple business plan and ideally has a strong or well-known brand. We also aim to find highly profitable businesses to facilitate future share buybacks and increased cash dividends.And when it comes to dividends, I reinvest High yield To buy more shares for future portfolio growth.

3 Cheap Footsie Stocks

By finding a good business that I have outlined above, which is fundamentally undervalued, here are three cheap UK stocks on the FTSE 100 Bargain Bin today. We are happy to buy and hold these three value shares for future capital gains and bumper dividends. These are sorted by company name.

society sector Stock price market price Price earnings ratio Revenue yield Dividend yield
Evraz Mining 591p £ 8.6 billion 7.8 12.9% 12.9%
Imperial Brands tobacco 1552.5p £ 14.7 billion 5.3 5.3 18.9% 8.9%
Legal & General Finance 276.4p £ 16.5 billion 7.3 13.7% 6.5%

I have three very different businesses here, but the basics are pretty similar. As members of the FTSE 100, these are all large, well-established companies with a market capitalization of billions. Similarly, all three trade at low price-earnings ratios (single digits). The three also offer high rates of return (in teens). Finally, each offers a dividend yield that far exceeds the 2021 FTSE 100 forecast yield of 3.8%. This checks 3 out of 3 value boxes for me.

Cheap stock sales

Evraz teeth World steel makers and minersHas major businesses in Russia, Ukraine and North America. The miner’s largest shareholder is Roman Abramovich, the owner of football celebrity Chelsea FC. Evraz’s share has grown 323.7% over the last five years, making it a prominent superstar for Footsie.

Imperial Brands (LSE: IMB) Is one of the world’s largest producers of tobacco, cigarettes and e-cigarette products. Smoking has declined in developed countries, but sales growth in developing countries has actually increased cigarette sales in the first quarter of this year. My third FTSE 100 bargain, Legal & General (LSE: LGEN) Is a leading UK provider of life insurance, savings and investments. Founded in 1836, L & G currently manages over £ 1 trillion in assets of over 10 million clients. It’s a business I’ve widely admired for many years.

Finally, there may be reasons why these FTSE 100 stocks are cheap. Mining stocks (including Evraz) are notorious for their volatility and tend to cut dividends during difficult times. Imperial Brands has a huge debt burden, which gets even worse when interest rates rise. L & G is also facing fierce competition from its customers and the US giants who boost their financial wealth. But after all, I’m happy to buy these three today.

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Cliff Darcy There are no positions in any of the listed shares. Motley Fool UK recommends Imperial Brands. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by examining different insights, Better investors than us.

Three cheap dividend stocks from the FTSE 100 bargain bin Three cheap dividend stocks from the FTSE 100 bargain bin

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