7%+ yields! 2 cheap FTSE 100 dividend stocks to buy in May 

I’m searching for the best low-cost FTSE 100 dividend stocks to buy next month. Here are two whose gigantic yields have caught my eye.

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I’m searching for the best FTSE 100 dividend stocks to buy for my portfolio next month. Here are two brilliant blue-chips with yields far above the 3.5% Footsie average.

Safe as houses?

Rising interest rates pose a growing threat to the UK housing market. So does the tightening of mortgage affordability rules by lenders in response to the cost of living crisis.

But are these dangers baked into the rock-bottom valuations of some of London’s quoted housebuilders? The answer is ‘yes’, in my opinion. And it’s why I’m considering increasing my holdings in Taylor Wimpey (LSE: TW).

Today, the FTSE 100 housebuilder trades on a forward price-to-earnings (P/E) ratio of 6.8 times. What I also like is that Taylor Wimpey also offers great value from an income perspective. Its dividend yield for 2022 sits at a mighty 7%.

Good news keeps coming!

I’m also encouraged by the steady stream of positive data on Britain’s homes markets. Prices keep surging as, despite the twin pressures of soaring inflation and rising rates, demand continues to outstrip supply.

Latest government data showed the average UK home value hit a new all-time high of £276,755 in February. That was up 10.9% on an annual basis.

I’m confident that house prices will continue growing too, albeit possibly at a lower rate than in recent months. Intense competition among lenders and ongoing support from government for first-time buyers means that property prices — and as a consequence profits at Taylor Wimpey — should keep climbing.

7.1% dividend yields

I also believe Aviva (LSE: AV) offers unmissable all-round value today. Not only does the FTSE 100 financial giant trade on a forward P/E ratio of just 9.6 times, Aviva’s current share price creates a 7.1% dividend yield, even larger than Taylor Wimpey’s colossal reading.

The danger for Aviva is that it operates in a massively competitive marketplace. Some big names like AXA, Zurich and AIG are out there to win the same customers. Then there’s the fact that Aviva’s earnings could take a whack if economic conditions keep worsening and customers tighten their pursestrings.

Another heroic FTSE 100 dividend stock

But, as a pure dividend stock, I think Aviva is hard to beat. I love the highly cash-generative nature of its operations which allows it to pay big dividends year after year. I also like recent streamlining at the business that’s given Aviva’s balance sheet a massive boost.

The business is so cash rich that in March it announced plans to return £3.75bn worth of capital to shareholders via a B share scheme. This follows the £1bn share buyback scheme which Aviva completed earlier this month.

I like the work Aviva has undertaken to produce a more efficient earnings creator focused on a handful of markets like the UK. I’m also encouraged by the excellent sales opportunities it will have as people become savvier with planning for retirement. I’d happily buy this top dividend stock alongside Taylor Wimpey in May.

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.

Royston Wild owns Taylor Wimpey. 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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