There are loads of incredibly cheap shares on the FTSE 100 today, and many offer fantastic rates of dividend income. I think now may prove a brilliant time to buy them.
At some point, interest rates may fall appreciably. When this happens, yields on lower-risk investments like cash and bonds will decline, making dividend-paying stocks more attractive.
FTSE 100 income stocks have been out of favour for years, as investors throw money at US tech. However, the rise of Chinese AI player DeepSeek could cool enthusiasm for the related US mega-caps, potentially leading investors back to old-school value stocks.
Should you invest £1,000 in British American Tobacco 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 British American Tobacco made the list?
Today’s lower UK share prices mean higher dividend yields for new investors, and reinvesting dividends today can build my stake for the day when income stocks rebound.
With this in mind, here are three high-yield dividend stocks I think look particularly attractive right now.
I’m sorely tempted by Shell
Oil giant Shell (LSE: SHEL) has had a solid year, its share price climbing 6% over the past 12 months.
Despite this, it remains attractively valued, with a low price-to-earnings (P/E) ratio of just 7.6. Investors are also rewarded with a respectable 4% trailing dividend yield.
Shell’s strong financial position and significant cash flow generation should help fund its dividend and share buybacks. The biggest risk is oil price volatility. It’s just impossible to say where prices will go. The company also faces the challenge of balancing profitability from fossil fuels while investing in renewables and low-carbon energy solutions.
But long-term, I believe Shell remains attractive for investors seeking both dividend income and share price growth. With its commitment to returning capital to shareholders, it’s well-positioned to reward patient investors.
Rio Tinto looks good value
Mining giant Rio Tinto‘s (LSE: RIO) struggled, with the share price dropping 13% over the past year.
However, this has pushed its dividend up to an impressive 7.3%, making it one of the highest yielders on the FTSE 100. Its low P/E ratio of 8.3 suggests it’s undervalued.
Rio Tinto’s been hit hard by the Chinese economic slowdown, which has dampened demand for metals and minerals. The China growth story may be over for good but Rio Tinto may benefit from the shift towards renewable energy and electric vehicles (EVs), which require industrial metals including copper and aluminium.
Mining’s cyclical, but downturns present buying opportunities. With its strong balance sheet and disciplined approach to capital allocation, Rio Tinto looks well-positioned to benefit when demand recovers.
If only I could buy British American Tobacco
British American Tobacco‘s (LSE: BATS) surged 36% in the past year, yet still offers a high dividend yield of 7.4% and trades at a low P/E of just 8.4.
While smoking’s declining in the West, the company has diversified into next-generation products including vapes and heated tobacco.
Regulatory risks remain, as governments may tighten restrictions on new nicotine products. However, British American Tobacco sells billions of ‘sticks’ every year and continues to generate strong cash flows, supporting its generous dividends.
Despite ethical concerns, investors seeking reliable income may find it attractive. Personally, I don’t invest in tobacco stocks, otherwise I’d have bought this one years ago and might be significantly wealthier.
But I’m now considering buying Shell to supplement my holding in rival BP, while Rio Tinto’s high on my shopping list.
