2 bargain FTSE 100 shares I’d buy now with £5k

I’ve got some cash to spare so I’m going to start scooping up bargain FTSE 100 shares.  Today I’ll  tell you exactly what’s on my shopping list. 

The first thing I’m looking for is great value. I follow Warren Buffett’s tactic: “Whether it’s socks or stocks, I like buying merchandise when it’s marked down.”

The current P/E average across this market is 21.3 and the average dividend income payout in the FTSE 100 is 2.3%. If my picks can beat these averages? I think I should be on to a good thing. 

Bargain FTSE 100 shares: Aviva 

British insurer Aviva (LSE:AV) was once top of most investors’ favourite bargain FTSE 100 shares list. But it disappointed shareholders when it scrapped its FY19 dividend in April 2020. Yet I believe in hindsight, it was the right choice. 

In my eyes, CEO Amanda Blanc has done a great job of turning the business around. We heard this week that Aviva had completed the sale of its 40% stake in its Turkish operations for £122m. And Blanc has also disposed of underperforming overseas arms in Singapore and Italy to refocus on Aviva’s core markets.

Dividends have returned too, albeit at a reduced rate. A 14p final dividend gives us a 3.4% yield at today’s share price. One risk is that Blanc continues to tighten Aviva’s belt and holds the dividend here, instead of adding the low-to-mid-single digit increases the City expects. 

But on the price side, I see these as bargain FTSE 100 shares with a P/E ratio of only 7.7. I’m wary that if the UK economy doesn’t recover as strongly as expected, we could see medium-term weakness in Aviva, however. Overall though, I see this FTSE 100 company in a good position to grow.

Evraz’s juicy dividend

Evraz (LSE: EVR) offers up a 5.6% dividend, way above the market average. The next one is due to be paid on 25 June, with an ex-dividend date of 25 May. 

The company is also unusual among FTSE 100 shares because it’s seeing extremely strong share price growth. In fact, it has added over 83% in the last six months and 161% in the last 12 months.

I still think there’s far higher for this stock to go. While FY20 revenue dipped from $11.9bn to $9.7bn, FY21 revenue is expected to bounce right back to FY19 levels. And the company has forecast profits to double from $848m to $1.6bn next year. That’s an incredible leap for a massive multinational business. I want a piece of that. 

A recent trading update highlighted some quarterly production weaknesses. And Evraz is suffering from the same supply chain problems as many other big businesses. So the share price could suffer in the short term. However, we also have a sector-wide rally in commodity prices. So Evraz is able to sell its iron and vanadium for higher prices. 

Evraz could lose its bargain FTSE 100 shares status because of general market concerns over the environmental impact and sustainability of miners. It appeared in a recent study by sustainable finance manager Arabesque alongside Anglo American and BHP, which said these miners were producing CO2 emissions that could see damaging global temperature increases. 

In conclusion, the market can ‘mark down’ stocks for a variety of reasons. As a contrarian value investor, I have to weigh up these reasons carefully to choose true bargain FTSE 100 shares with growth potential.