3 dirt-cheap FTSE 100 shares I’d buy for powerful passive income

Together, these three cheap FTSE 100 shares offer an average dividend yield of 8.3% a year. I’d buy this passive income to boost my portfolio’s returns.

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Unfortunately, due to illness (not Covid-19), I’ve barely glanced at global stock markets since Friday, 11 March. Since then, the UK FTSE 100 index has added almost 310 points (+4.3%). Meanwhile, the US S&P 500 index has gained nearly 300 points (+7.1%). And the tech-heavy Nasdaq Composite index has leapt over 1,250 points — a  bumper gain of 9.7%. Despite these rises, I still see deep value hidden within the FTSE 100. Therefore, here are three Footsie dividend shares that I don’t own today, but would gladly buy for their passive income.

FTSE 100 share #1: Rio Tinto

My first FTSE 100 income share is Anglo-Australian mining giant Rio Tinto (LSE: RIO). As I write, Rio shares trade at 5,710.19p — 13.3% below their 10 May 2021 high. Yet Rio paid out an enormous $16.8bn (£12.7bn) in cash dividends for 2021. That’s the second-highest dividend ever paid by a London-listed company. Rio — a global supplier of iron ore, aluminium, copper and lithium — is a FTSE 100 super-heavyweight valued at £93.9bn. But its shares trade on a lowly price-to-earnings ratio of 5.8 and offer an earnings yield of 17.2%. What’s more, Rio’s dividend yield of 10.1% a year is a rare double-digit cash yield from a Footsie share. To me, the shares offer compelling value to an income-seeking investor like me. Though history has taught me that miners’ earnings — and their share prices — are often highly volatile, I want to own Rio for its powerful passive income.

Dividend share #2: Legal & General

My second FTSE 100 dividend share is a very different beast to Rio Tinto. Legal & General (LSE: LGEN) is a leading provider of life assurance, savings and investments. Since 1836, L&G has grown to be a highly respected brand in these fields. Today, it manages more than £1trn of assets for over 10m customers worldwide. Yet its shares are down 8.5% in 2022 and currently hover around 279p, valuing this Footsie firm at £16.7bn. Again, what attracts me to this share is its low valuation and solid dividend history. At the current share price, L&G shares trade on 8.6 times earnings and offer an earnings yield of 11.7%. In addition, the dividend yield of 6.4% a year is roughly 1.6 times the wider FTSE 100’s cash yield. While I’d happily buy this bargain share today, I’m aware that a stock market crash could knock L&G’s future earnings — and its share price.

Income share #3:  Imperial Brands

My third and final FTSE 100 share for portfolio passive income is Imperial Brands (LSE: IMB). As one of the world’s leading tobacco and cigarette suppliers, Imperial’s shares are usually shunned by Environmental, Social and Governance (ESG) investors. However, as a long-term smoker, I take the opposing view. This Bristol-based firm — which dates back 235 years to 1786 — produces massive cash flows, earnings and dividends. In 2020, Imperial sold over 330bn cigarettes in 160 countries via brands including Davidoff, Gauloises, JPS, Kool, West, and Winston.

At the current share price of 1,631.5p, Imperial is valued at £15.6bn, making it a major Footsie firm. Right now, the shares trade on a lowly price-to-earnings ratio of 5.5 and a hefty earnings yield of 18.3%. This share also offers a dividend yield of 8.5% a year — more than double the FTSE 100’s cash yield. And although Imperial carries a high level of (cheap) debt on its balance sheet, I would buy this share for passive income today.

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 recommended Imperial Brands. 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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