I’m using the stock market dip to buy dirt-cheap FTSE 100 dividend shares

Dividend shares are a great way to build my wealth and now looks like a good time for me to buy them.

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.

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FTSE 100 dividend stocks have performed brilliantly this year, at least compared to the rest of the world. While the Nasdaq has fallen 31.61% and the S&P 500 by 22.12% year-to-date, the FTSE 100 has only dipped 4.23%.

The sell-off has picked up in recent days as recession fears grow, and suddenly I’m seeing plenty of buying opportunities.

Income stocks are back in vogue and the FTSE is packed with them. After a decade when investors were fixated on growth stormers such as Amazon and Tesla, they are now remembering the joy of boring old value stocks.

I’m looking to buy FTSE 100 dividend shares today

Dividends are a lifeline in inflationary times, as those regular shareholder payouts help my portfolio keep up with prices. Blue-chip dividend income stocks typically generate regular cash flows today, rather than hopes of growth tomorrow.

I kept the faith with FTSE dividend stocks through the dark years, because I felt their merits were being overlooked. 

Those regular shareholder payouts roll up over time, until they compound into something pretty meaty. I reinvest all my dividends for growth, but will draw them as retirement income when I finally stop working. So they give me a double benefit.

I’m keen to buy more of them now because after the turbulence of recent days. Their valuations are lower while their yields are even higher.

FTSE 100 housebuilder Persimmon now yields an incredible 10.93% a year, yet it trades at just 8.6 times earnings. Similarly, insurer Aviva yields 9.40%, but is available at a bargain valuation of 7.2 times earnings.

Remember, a share price trading at 15 times earnings is considered reasonable value, by traditional metrics. 

These two are only the start. Fund manager Aberdeen yields 8.62% and trades at 12.2 times earnings. Mining giant Antofagasta yields 8.53% and is valued at 11.7 times earnings. Cigarettes giant Imperial Brands yields 7.72% and trades at 7.3 times.

These figures don’t automatically make these companies great investments for me. I’m certainly not expecting their share prices to suddenly double, so they trade at a more sensible 15 times earnings. Many of them have looked cheap for years, without rebounding. But that dirt-cheap valuation is still a comfort to me, especially in troubled times like these.

High yields, low valuations

I also accept that dividend stocks aren’t surefire bets. Those shareholder payouts aren’t guaranteed. If the economy tanks, management could be forced to cut them. I could buy any of these companies I have listed here only to see them dip again tomorrow. But this year’s performance suggests they should avoid the worst of the sell-off.

Even if they do fall, I won’t worry too much. At The Motley Fool, we’re long-term investors. We know stocks go in and out of fashion, but put our faith in good, solid companies to hopefully make us richer over the years and decades. 

I reckon FTSE 100 dividend stocks like those mentioned are among the best ways of achieving that, especially 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 considered so you should consider taking independent financial advice.

Harvey Jones doesn't hold any of the shares mentioned in this article. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon, Imperial Brands, and Tesla. 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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