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9.1% dividend yields! Should I buy these cheap FTSE 100 shares?

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Scene depicting the City of London, home of the FTSE 100
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I do love shopping for cheap UK shares that the market has overlooked. And particularly when they offer lip-smacking dividend yields. Here are two FTSE 100 stocks that have caught my attention. Both trade on forward price-to-earnings (P/E) ratios of below 8 times, comfortably inside the accepted bargian-benchmark of 10 times and below.

Big yields, high risk

Near-term dividend yields at Royal Dutch Shell (LSE: RDSB) are highly attractive right now. In fact they beat the corresponding average of 3.4% for FTSE 100 shares by a wide margin. For 2021 and 2022 these sit at 4.3% and 4.8% respectively.

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However, a tricky outlook for oil prices means I won’t be buying Shell share’s soon. The US Energy Information Administration has already predicted that oil prices will fall from current levels in 2022 to average $66 per barrel. It says that “growth in production from OPEC+, U.S. tight oil, and other non-OPEC countries will outpace slowing growth in global oil consumption.”

But as I noted recently, I think the supply/demand imbalance could end up worse than industry analysts expect as rising Covid-19 rates hit the global recovery and supply sharply rises.

I also worry about how rising demand for renewable energy will hit the Shell share price over the long term. Though I must confess that the oil giant’s considerable financial resources could help it grab a significant foothold in the fast-growing green energy segment. It plans to spend between $2bn and $3bn a year in its Renewables and Energy Solutions division.

A better FTSE 100 dividend share

I’d much rather invest my hard-earned cash in Polymetal International (LSE: POLY) today. That’s not just due to the FTSE 100 gold-miner’s superior dividend yields of 6.6% for 2021 and 9.1% for 2022. It’s also because I think the outlook for gold prices is much more solid than that of oil prices.

Gold and silver have been popular metals for thousands of years. Their visual appeal makes them staple materials in the production of jewellery. They also have uses as currency because, despite the end of the gold standard in 1971, the precious metals are still used as a medium for trade in some instances. Gold prices have risen strongly since the beginning of Covid-19 too, demonstrating the commodity’s eternal role as a flight-to-safety asset. And I think it could move to fresh highs before too long as the pandemic stretches on, the economic recovery stutters, and inflationary pressures rise.

It’s worth remembering that Polymetal’s operations are highly complex and unpredictable. Production rates can disappoint and costs can unexpectedly balloon, putting a big dent in the profits column.

Still, I’m quite excited about this FTSE 100 share’s production prospects in the short term and beyond. And especially as development of its open-pit silver mine at Prognoz, northern Russia has been signed off to be accelerated. Production here brought payable production at the site forward by at least three years.

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Royston Wild 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.

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