This bargain FTSE 100 stock yields 10%. I’d buy it today

This bargain FTSE 100 (INDEXFTSE:UKX) stock yields 10.28% and is a great way to invest £1k to take advantage of the stock market crash.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If you are looking to snap up a bargain FTSE 100 stock, you are spoilt for choice after the recent crash. You can now grab top blue-chip companies at half the price you would have paid in January. In a few rare cases, you can grab a yield worth 10% a year or more. Here’s one bargain I really like.

The Royal Dutch Shell (LSE: RDSB) share price is trading 47% lower since Covid-19 struck. Yet the oil major is standing by its legendary dividend, which means it now yields an incredible 10.82% a year. That makes it a highly tempting bargain FTSE 100 stock.

Inevitably, there are risks. The oil industry has suffered a double blow. The coronavirus travel ban and lockdown has hit fuel consumption, while the decision by competitors Russia and Saudi Arabia to flood the market has done the rest.

I’d buy this bargain FTSE 100 share

At time of writing, a barrel of Brent crude trades at just over $21. At one point, producers were paying for people to take WTI crude off their hands. There is so much of the stuff washing around, they do not know where to store it.

This is bad news for Royal Dutch Shell, as its break-even price is $65 a barrel, according to Redburn. Yet the company will be unwilling to drop its dividend, like so many others have on the FTSE 100. Management is well aware of its proud record of never cutting its payout since the war. It showed tenacity in maintaining the payout in 2016, when oil crashed from around $115 a barrel, to a low of $26. Shell was a bargain FTSE 100 stock then, it’s a bargain now.

Shareholder payouts appear to be safe this year. Management is surely hunkering down in the hope of sitting out the current meltdown, and waiting for higher oil prices later this year or in 2021.

Royal Dutch Shell share price is cheap

The oil price has picked up in recent days, despite another big rise in US crude stockpiles. The first sign of an upward movement triggered a sharp 45% jump in the Shell share price, from its low of 916p on 18 March. Now that was a great time to buy this stock. This is why we at the Fool always urge long-term investors to go hunting for bargain FTSE 100 stocks when markets fall and everybody is panicking. The resurgence can be just as swift.

Anybody who buys Shell shares today must accept that the price could fall further, and the dividend could come under further pressure. If that wasn’t the case, its stock would be a lot more expensive to buy and nowhere near as tempting. Shell is still a great UK company and its shares are going cheap. I’d buy it.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has no position in any of the shares mentioned. 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.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »