The first bargain FTSE 100 stock that catches my eye is Aviva (LSE: AV). By its most basic metrics, it appears to be cheap, operating on a price-to-earnings (P/E) ratio of under 10. It also has a forward dividend yield of just over 5%, which makes it appealing for passive income.
Aviva’s share price has stagnated over the last six months, which may be due to uncertainty about its sale of joint ventures in Italy and Turkey and the further disposal of other joint ventures later in the year. In my view this is a positive step, though, because it will allow Aviva to focus on its more profitable and mature markets in the UK, Ireland and Canada to ensure adequate future returns.
Aviva is already the leading life and general insurer in the UK, as well as being the largest equity release provider, which saw revenue growth of 43% between H1 2020 and H1 2021. With further cost-cutting and a shift to digitalisation, the long-term outlook for the company is positive, in my opinion. As long as imminent disposals of more of the insurer’s foreign business go smoothly, then Aviva looks like a sound pick for my portfolio, especially with the recently increased dividend and the announcement of a £750 million share-buyback to sweeten the deal.
A sleeping giant of the FTSE 100
My second choice from the FTSE 100 is Vodafone (LSE: VOD). With a recognisable brand and a strong presence in markets all over the world, including Europe, Africa and Asia, Vodafone is in a strong position to consolidate its position as a market leader in telecommunications. In its most recent trading update, Vodafone reported a revenue increase of 5.7% over the comparable quarter last year. This is solid growth for a company that is already the market leader in business and consumer mobile services in many of the markets in which it operates.
As cross-border travel returns, roaming charges will provide an extra boost for Vodafone, especially with the introduction of charges for UK customers travelling in the European Economic Area. Furthermore, the largest provider of mobile data and payment services in Africa is Vodafone, which is appealing for me as a potential investor. I also see its M-Pesa and VodaPay payment apps as evidence that the company is willing to embrace new ideas and is prepared to invest in its expansion to the benefit of shareholders in the long run.
Despite Vodafone’s rather sluggish performance over the last few years, I see it as a long-term investment that I’d add to my portfolio. The 6% yield is too good to miss, as I don’t believe the FTSE 100 company to be a value trap, but rather just a value stock at its current price.
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Guy Quelch 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.