2 embarrassingly cheap FTSE 100 dividend stocks I’d buy today

These two FTSE 100 dividend stocks have a guaranteed income stream that should help support dividend payouts for many years to come.

| More on:

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.

The stock market crash means that many FTSE 100 shares now trade on relatively attractive valuations.

Indeed, even after the recent recovery in stock prices, some FTSE 100 shares still look too cheap. Their valuations suggest they offer margins of safety.

Here are two companies that appear to me to fit the bill. They may experience further uncertainty in the short term, but they seem likely to produce healthy recoveries in the long run. Therefore, buying these stocks today could help improve your financial situation in the years ahead. 

FTSE 100 dividend stock: Morrisons

The recent first-quarter update released by FTSE 100 retailer Morrisons (LSE: MRW) highlighted the financial impact that coronavirus is having on its performance.

While the crisis has thrown up some unprecedented challenges for the business, sales jumped by nearly 6% during the first quarter of the year.

Sales growth came from both the group’s bricks and mortar stores and its online operation. According to the business, it has increased its number of online delivery slots by more than 100% this year. 

Morrisons also reported that there was a significant recent increase in wholesale sales to convenience store partners during the first quarter. This further helped support overall group growth during the period. 

Unfortunately, while sales grew substantially during the first quarter, costs also grew. This caused the FTSE 100 company to review its cash return policy for the rest of the year. 

Morrisons is still planning to pay a regular dividend this year. However, it is unlikely to repeat the special dividend distributed last year. Yet even without this payout, the stock yields 4.6%. 

Therefore, with the FTSE 100 stock down around 10% since the beginning of the year, now could be an opportune moment to buy a slice of this dividend champion while it trades at a relatively low price. 

Prudential

Financial services firm Prudential (LSE: PRU) may face further uncertainty in the short term. Nonetheless, the company seems well-positioned to deliver relatively strong growth in the long run. 

After disposing of its UK business last year, the FTSE 100 company is primarily focused on Asia and the US. It is reportedly in the process of selling its US business Jackson Life. Analysts think this could be worth a substantial percentage of Prudential’s current market capitalisation.

When Prudential’s US business is gone, the corporation will be purely focused on the Asian life insurance and wealth management market. This is still a relatively undeveloped market. There are tens, and potentially hundreds, of millions of customers who will need the company’s services over the next few years. 

If Prudential can capture just a small share of this massive market, the stock could generate attractive returns over the long run. 

Despite this potential, shares in the financial services group are still off around 12% year-to-date. With a dividend yield of 2.6% on offer, now could be the time to buy a share of this growth champion for the long run. 

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.

Rupert Hargreaves owns shares in Prudential. The Motley Fool UK has recommended Prudential. 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

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »