I’m hoping to take advantage of the falling share prices of many FTSE 100 companies. The UK benchmark has taken a beating in the wake of an unfolding banking crisis that has claimed stock market victims in both the US and Switzerland so far.
As volatility rises, I’m looking for beaten-down dividend shares that could be bargain buys for my passive income portfolio. After all, broad market sell-offs can present unique opportunities. Macro factors often chip away at the valuations of otherwise healthy businesses.
With that in mind, here are two Footsie dividend stocks that seem cheap to me today.
Should you invest £1,000 in Next right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Next made the list?
Legal & General
The Legal & General (LSE:LGEN) share price slumped 18% over the past year. But just days ago, the stock was essentially flat on a 12-month basis.
A sharp downturn in the asset manager’s shares following the collapse of Silicon Valley Bank means today’s price could be an attractive entry point for me.
Legal & General currently offers a whopping 8.6% dividend yield, which is considerably higher than the FTSE 100 average. Sometimes an unusually high yield can be a concerning sign, but I don’t think that’s the case here.
Indeed, I believe this dividend stock is oversold. Legal & General recently posted a 12.5% increase in full-year operating profit to £2.5bn. What’s more, cash generation of £1.9bn represents a 14% rise. Crucially, the company’s solvency II ratio also increased by 49% to hit 236%.
The combination of a robust balance sheet and strong cash generation allowed the board to hike the full-year dividend by 5% to 19.37p.
Granted, challenging bond market conditions pose risks. Volatility in 2022 hurt the group’s investment portfolio, reducing the value of assets under management by £225bn. A litany of recent bank failures isn’t helping the situation.
Nonetheless, the company’s numbers look encouraging overall and I don’t think the share price movement reflects this. If I had some spare cash, I’d invest in Legal & General shares for a bumper passive income stream.
WPP
The world’s largest advertising agency, WPP (LSE:WPP), has also suffered in the past fortnight. The share price is down 15% on a 12-month basis.
Currently, WPP shares yield a healthy 4.3%.
I believe recent trading action for this stock has created another good example of a mismatch between the company’s fundamentals and its valuation. Accordingly, I think WPP might also be an attractive buy for me right now at current share price levels.
The firm’s full-year results show evidence of financial strength. Annual pre-tax profit increased 22% to £1.16bn and the group announced a big hike in its final dividend per share, up 31% to 24.4p.
New accounts helped the company considerably in 2022, with $5.9bn in net business won. Notable names on the client books now include Amazon-owned audiobook provider Audible and French foods giant Danone.
Future guidance is upbeat too. WPP anticipates it will deliver organic revenue growth between 3% and 5% in 2023.
Admittedly, the possibility of global recessions could be a major headwind considering advertising is a notoriously cyclical industry.
However, the economic environment is already challenging and WPP is displaying impressive resilience. In that context, the risk/reward profile looks good to me. If I had cash available, I’d invest in the company today.
