2 cheap Footsie stocks to buy for BIG dividends!

The recent stock market sell-off leaves plenty of top stocks looking too cheap to miss. Here are two great Footsie shares I’m considering snapping up today.

| 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.

New Ways of Investing - Hands Only Using Smart Phone

Image source: Getty Images

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.

sdf

Investing in housebuilding stocks has proved an effective way for me to make a passive income down the years. And I continue to believe that stocks like Footsie share Berkeley Group (LSE: BKG) remains a great idea.

There’s a danger that the housing market could slow sharply as interest rates rise. But it’s my belief that the low valuations of the FTSE 100 housebuilders reflect this possibility. Berkeley, for instance, trades on a forward price-to-earnings (P/E) just above the bargain benchmark of 10 times.

I like Berkeley in particular because of its focus on London and the Southeast. The UK capital has been an economic, social and cultural hotspot for centuries and will continue to be so. So I’m tipping house price growth in and around the region to remain rock-solid.

6.2% yields

To illustrate the point, a report by insurer Direct Line shows that the average first-time buyer in London now needs to pay £223,751 to get on the property ladder. That’s almost 25% more than they had to fork out just six years ago.

I expect these strong price increases to continue, even if growth slows due to Bank of England rate hikes. It’s my belief that homes demand will keep on outstripping supply by some distance. And in this landscape Berkeley is likely to remain a big payer of dividends.

For this financial year (to March 2023), Berkeley carries a large 6% dividend yield. And for next year the reading moves to 6.2%.

A safer stock for tougher times

SSE (LSE: SSE) is another cheap Footsie stock on my radar for these uncertain times. I think its ultra-low price-to-earnings growth (PEG) ratio of 0.7 represents excellent value.

Buying stocks that generate all or most of their profits from the UK is dangerous as recessionary risks increase. But electricity producers like SSE don’t face the considerable pressures of cyclical shares due to the essential nature of their operations.

This gives SSE the financial strength and the confidence to pay big dividends, regardless of the economic landscape.

I also like SSE because of its vow to link dividend growth to the rate of retail price inflation (RPI) this fiscal year. Prices are rising at their fastest for decades and investors need to protect themselves from this threat.

Renewable energy giant

SSE isn’t just a great buy for today though. Because of its focus on renewable energy, it’s likely to flourish as the world transitions from fossil fuels to green sources.

The International Energy Agency says that some 295GW of new renewable energy capacity was added in 2021. It predicts that the annual figure will rise to 320GW in 2022.

SSE’s dividend yield sits at a chunky 4.8% for this financial year (to March 2023). And it sits at a healthy 3.4% for fiscal 2024 too, despite plans to rebase the dividend.

Like Berkeley Group, this is a FTSE 100 dividend stock I’d buy today and look to hold for the next decade.

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 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

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to consider buying in July [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Portrait of a boy with the map of the world painted on his face.
Investing Articles

Warren Buffett’s Berkshire Hathaway dumped this growth stock. Here’s why I won’t

Eyebrows were raised when Warren Buffett's company invested in this Latin American fintech disruptor a few years ago. But now…

Read more »

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

£15k to spend? 3 UK shares, investment trusts and ETFs to consider for a £1,185 second income

By harnessing a range of different dividend stocks, I'm confident this mini portfolio might pay a large long-term second income.

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Tesla stock about to crash?

Tesla stock was on the slide today, shedding around $80bn in market value. What's going on with the electric vehicle…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

Should British investors consider buying Apple stock while it’s down 14% in 2025?

Apple stock has underperformed in 2025, falling more than 10%. Is this the buying opportunity UK investors have been waiting…

Read more »

Two business people sitting at cafe working on new project using laptop. Young businesswoman taking notes and businessman working on laptop computer.
US Stock

2 AI growth shares that I think are still undervalued

Jon Smith flags up two AI growth shares that aren't as overhyped as some peers, making them appealing for him…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
Investing Articles

Where is the next Nvidia stock right now?

Nvidia stock has delivered jaw-dropping gains. Here are 10 growth shares that have the potential to also produce big returns…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Could these FTSE 100 stocks explode in July?

Looking for FTSE stocks that could catch fire this month? Here are the share price prospects of two popular London…

Read more »