Two cheap FTSE 100 shares with dividend yields of up to 13%

There’s no shortage of high-yielding FTSE 100 stocks at today’s prices. These two dividend dynamos offer bumper cash payouts to patient shareholders.

| 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.

I really enjoy ‘deep mining’ in the FTSE 100 index, tracking down cheap UK shares. To me, the Footsie is both unloved and undervalued — in historical terms and by geographical comparison. While I consider US stocks to be in bubble territory, I see the Footsie as packed with attractively priced shares. As a result, my wife and I use our spare cash to buy low-priced UK stocks. Also, as I expect some form of stock-market correction in 2022, buying bargain shares is my attempt to minimise our future potential losses. Here are two shares that I don’t own, but would buy today for their delicious dividends and potential capital gains.

FTSE 100 dividend dynamo #1: Legal & General

My first stock is what some might consider a ‘boring’ FTSE 100 share: Legal & General (LSE: LGEN). At first glance, L&G looks like a fairly dull company. However, when I look at its shares, I’m excited about the prospect of future profits.

While working in the financial world from 1987 to 2002, I got to know L&G pretty well. And I’d argue today that it’s a first-class business standing head and shoulders above many of its peers. Also, having been in business since 1836, L&G has built an outstanding brand over its 185-year life. Today, the FTSE 100 firm is one of the UK’s leading provider of life assurance, savings and investments. With stock markets booming since the lows of March 2020, L&G now manages well over a trillion pounds of wealth for more than 10m customers.

Nevertheless, this stock has underperformed the wider market over the past year. At Tuesday’s closing price of 277.9p, L&G shares have risen by only 6.6% over 12 months. Meanwhile, the Footsie has leapt by 15.2% over one year. At this current share price, L&G is valued at £16.6bn. Its stock trades on a price-to-earnings ratio of 7.3 and an earnings yield of 13.6%. But L&G’s main attraction for me is its bumper (but not guaranteed) cash dividend yield of 6.4% a year, versus the FTSE 100’s 3.8% a year. Although I think L&G is a great British business, it must compete for clients with some powerful rivals, including several US super-heavyweights. Despite this competition for business, I’d still buy LGEN at today’s levels.

Footsie mega-dividend #2: Evraz

My second FTSE 100 dividend is way higher than L&G’s market-beating 6.4%. In fact, it’s one of the highest dividend yields I’ve ever seen in the Footsie. This massive (but again, not guaranteed) dividend comes from Evraz (LSE: EVR). This global steelmaker and miner has major operations in Russia, Ukraine and North America. The company’s outputs include steel, iron ore, coal and vanadium. Evraz is one of the world’s top steel producers, producing 13.6m tonnes in 2020.

The group’s biggest shareholder is a well-known figure, thanks to his ownership of Premier League club Chelsea FC. He is, of course, Roman Abramovich, whose large shareholding entitles him to a big slice of Evraz’s massive cash dividends. At Tuesday’s closing price of 586.6p, Evraz is valued at £8.6bn. Its shares trade on 7.7 times earnings and offer an earnings yield of 13%. Its dividend yield is an enormous 13% too. I’d buy Evraz for this delightful dividend alone, but I would also brace myself for price instability. Having owned mining shares in the past, I know full well how very volatile they can be at times!

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.

Cliffdarcy 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

My ISA is ready for a 30% penny stock crash on 30 October!

Investors in AIM-listed small-cap and penny stocks could be in for a fright later this month when the budget is…

Read more »

Road trip. Father and son travelling together by car
Investing Articles

Where will the Tesla share price go next? Here’s what the experts say

The Tesla share price has been going pretty much sideways since 2021, and its robotaxi event hasn't had much of…

Read more »

British Pennies on a Pound Note
Investing Articles

Can this 8%+ yielding penny share maintain its dividend?

Our writer holds this penny share and likes its yield of over 8%. But recent business performance has made him…

Read more »

Dividend Shares

How I could make a 10% yield via dividend shares for a juicy second income

Jon Smith explains how he could build a diversified portfolio of stocks with an exceptionally high yield for his second…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Top Stocks

5 top ETFs Fools own in their Stocks and Shares ISAs

Do you own any ETFs in your Stocks and Shares ISA? Here, five Fools reveal why they have positions in…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Is it madness to buy the S&P 500 now?

The S&P 500 has been on a tear for many years. But a (very) frothy valuation leaves our Foolish writer…

Read more »

Two white male workmen working on site at an oil rig
Investing Articles

The Shell share price could rocket past 3,000p, analysts claim, if oil heads for $300

In today's uncertain times the Shell share price could go anywhere, in any direction, says Harvey Jones. But he still…

Read more »

Investing Articles

What’s going on with the easyJet share price?

Harvey Jones is impressed by the strong recovery in the easyJet share price over the last couple of years. Now…

Read more »