A lacklustre start to 2024 means the FTSE 100 and FTSE 250 indexes remain packed with exceptional value stocks.
I’m currently building a list of cheap blue-chip shares to buy for my Stocks and Shares ISA. And I’m giving close attention to two shares that trade on low forward earnings multiples and carry huge dividend yields: Vistry Group (LSE:VTY) and Vodafone Group (LSE:VOD).
| Company | Forward P/E ratio | Forward dividend yield |
|---|---|---|
| Vistry Group | 11.2 times | 4.9% |
| Vodafone Group | 9.9 times | 11.1% |
Buying undervalued stocks give me a chance to enjoy market-beating capital gains. The theory is that they will soar in price once the market wises up to their cheapness.
I also like Vistry and Vodafone shares as they could give me a chance to supercharge my passive income. If broker forecasts prove correct, then £10,000 invested equally across them could provide me with dividends of £800 in 2024. And I’m confident they will steadily grow their dividends over time, too.
Here’s why I’m considering adding them to my ISA today.
Time to buy?
I’ve been reluctant to add to my existing stake in Britain’s housebuilders over the past year as the housing market has slumped. While the challenge isn’t over yet, recent encouraging data suggests that an upturn is coming. So I’m thinking of adding some Vistry Group shares to my portfolio.
Latest house price data from Halifax showed average residential prices in the UK increase 2.5% in January. This was the biggest annual increase for exactly a year, the building society said, and represented the fourth consecutive rise.
Housebuyer appetite is improving as inflationary pressures recede and mortgage products become more affordable. And it’s being felt on the ground by the country’s largest housebuilders.
Barratt, for instance, said on Wednesday (7 February) that “we have seen early signs of improvement in both reservation rates and buyer sentiment” since the beginning of the year. This follows Vistry’s announcement in January that last year’s profits would top expectations thanks to “a strong run into the year end“.
I’m confident that Vistry will deliver strong returns over the long term as Britain’s growing population drives demand for newbuild properties. And with the outlook improving, now could be a good time to open a position.
Double-digit yields
At 11.1%, Vodafone shares currently carry the largest dividend yield on the FTSE 100 today. In fact this yield blasts past the index’s 3.9% forward average.
But as a potential investor, I’m conscious that the final dividend the telecoms giant pays could fall short of forecasts. This reflects speculation over future cash flows that could see Vodafone overhaul its dividend policy.
That said, I’m also aware that rumours of dividend cuts have long been circulating. And yet Vodafone has still kept its full-year payout locked at 9 euro cents per share since 2019.
Encouragingly, the company’s cash flows remain formidable. And, pleasingly, conditions are improving in core markets like Germany. With restructuring also underway, and the firm embarking on asset sales to boost the balance sheet, I think there’s a good chance Vodafone will keep dividends stable over the short term.
And even if dividends are rebased, I’m confident shareholder payouts will still beat that FTSE 100 average by a massive margin.
