2 cheap FTSE 100 dividend shares! Should I buy?

These two FTSE 100 dividend shares offer terrific value for money, on paper. Should I load up on them today, or are they just too risky?

| More on:

These FTSE 100 dividend shares both offer yields above the index average. Are they brilliant bargains, or investor traps that I should avoid?

Home comforts

Demand for London properties is exploding in the post-pandemic landscape. According to estate agency Hamptons, a record 30% of all rental homes in the capital have been let to people previously living outside the city in the year to date.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

The rising influx of people moving into London is buoying the sales market as well. Indeed, latest financials from Berkeley Group Holdings (LSE: BKG) showed that “the value of underlying sales reservations remaining slightly ahead of pre-pandemic levels”.

I expect the price tags Berkeley slaps on its new-build properties to continue rising as homebuyer demand — helped by historically-low interest rates and government support for first-time buyers — will likely continue to outstrip supply. Signs last week that the government is dropping its 300,000-homes-a-year target has boosted the outlook for home prices even further.

Today, Berkeley Group boasts an 5.8% dividend yield. It also trades on a low forward price-to-earnings (P/E) ratio of 10.2 times. I think this low valuation more than reflects the threat of rising building material and labour costs to the business. I’d buy.

Another top FTSE 100 bargain?

Oil major BP’s (LSE: BP) another FTSE 100 dividend share that looks dirt-cheap, on paper. The blue-chip stock boasts a 4.4% forward dividend yield at current prices. This beats the Footsie average of 3.6% by a big distance. On top of this, BP trades on a rock-bottom P/E ratio of just 5 times for 2022.

I believe though that this low rating reflects the massive risks BP faces as the world transitions towards green energy. The oilie itself is bulking up investment in renewables and is looking to have 50 GW of low-carbon power capacity by 2030.

Still, I worry about the huge costs BP is incurring to expand its green credentials. Its investment in renewables could significantly hit dividend payout levels in the medium-to-long term. And besides, BP will still generate the lion’s share of profits from oil at the end of the decade, an industry which is coming under increasing attack from legislators.

On the plus side, BP could deliver some handsome near-term returns if crude prices keep rising. Brent values, for instance, could well soar beyond recent multi-year highs of $130 per barrel if — as is looking increasingly likely — a protracted war in Ukraine pans out and oil supplies continue to be disrupted.

However, there’s also a good chance that oil could sink in the coming weeks and months as global growth slows. Last week, the International Energy Agency slashed its demand forecasts again, this time by 100,000 barrels a day, in a possible sign of things to come.

I believe the risks of investing in BP negate the appeal of its dirt-cheap share price for me.

Our 5 Top Shares for the New “Green Industrial Revolution"

It was released in November 2020, and make no mistake:

It’s happening.

The UK Government’s 10-point plan for a new “Green Industrial Revolution.”

PriceWaterhouse Coopers believes this trend will cost £400billion…

…That’s just here in Britain over the next 10 years.

Worldwide, the Green Industrial Revolution could be worth TRILLIONS.

It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead!

Access this special "Green Industrial Revolution" presentation now

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.

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

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

2 undervalued passive income stocks I’d buy today with £1,000

Falling stock prices are pushing up dividend yields. As a result, our author is looking for undervalued passive income stocks…

Read more »

Close-up of British bank notes
Investing Articles

2 cheap dividend shares I’d buy in a heartbeat

Our writer picks a pair of FTSE 100 dividend shares he would consider for his portfolio, that he thinks look…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

With £500, I’d use the Warren Buffett method to find cheap shares

The legendary investor Warren Buffett has become a billionaire by following some key investment principles. Our writer explains why he…

Read more »

Man in a clothing store in a medical mask because of a coronovirus.
Investing Articles

Down 81%, are boohoo shares set for an explosive comeback?

boohoo shares have been falling rapidly. But could interest from a billion-dollar hedge fund cause a turnaround in 2022?

Read more »

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

The Tullow Oil (TLW) share price jumps after losses! Is now the time to buy?

The Tullow Oil (TLW) share price ticked upwards on Thursday morning after falling nearly 30% over the last month. So,…

Read more »

Female analyst sat at desk looking at pie charts on paper
Investing Articles

Is the Lloyds share price about to dip below 40p?

The Lloyds share price has been trading below 50p for the better part of the year. But could the stock…

Read more »

Cheerful young businesspeople with laptop working in office
Investing Articles

2 beaten-down FTSE 250 shares I’m buying and holding for the long term

Andrew Woods explains why he's adding two FTSE 250 shares to his portfolio in the middle of a market sell-off.

Read more »

Female analyst sat at desk looking at pie charts on paper
Investing Articles

The Legal & General (LGEN) share price jumps 3%! Am I too late to buy?

The Legal & General (LGEN) share price soared in early trading on Thursday as the company registered a good start…

Read more »