The FTSE 100 has been through turmoil, with the government’s mini-budget turning the financial world upside down. By after more u-turns than my DIY plumbing, things look like they might be settling.
The FTSE 100 has even returned above 7,000 points. But I reckon it’s left a lot of UK shares still reeling on too-cheap valuations. And I think I’m seeing some cracking buys right now.
Banking shares have recovered a little from their recent hammering, but I still see them as cheap. Lloyds Banking Group dropped as low as 38p during the latest panic. Why do such things happen before I have my next investing amount saved? I’d have bought some more at 38p for sure. But even after getting back to 43p, Lloyds still looks cheap to me on a price-to-earnings (P/E) ratio of only a little over six.
Builders too
Persimmon shares dipped as low as 1,114p, but even after a small recovery they’re very much on my list for a top-up. The price fall has pushed the forecast dividend up to 19% as I write, which is crazy. Whether forecasts come true is a very big question, but it still suggests to me that valuations are out of touch with rationality.
Taylor Wimpey offers a more modest dividend of around 10%, but it’s around twice covered by forecast earnings. And it’s on a P/E of only five. Is that one of the best FTSE 100 shares to buy now? It carries its risks, which all investors should investigate for themselves. But it makes my list.
Investment manager M&G is suffering, with its shares only a little way back from a low of 159p. And yes, companies in the investing business itself will face tough times during a bearish phase. But a forecast dividend yield of 10% makes me think the share price is too low.
Dividends galore
There are plenty of other attractive dividend yields from FTSE 100 shares right now, thanks to all these depressed share prices. And if I suddenly had £10,000 to invest, I’d be hard pressed for choice. But I’m convinced I could put together a cracking 10-share portfolio for long-term dividend income.
Imperial Brands, for example, has long paid steady dividends. And its forecast yield is now up at 7%. Even Vodafone‘s dividend has been pushed up to 7.5%.
Forecasts even suggest that 2022 could come very close to the all-time record for FTSE 100 dividend payouts. That was in 2018, with £81.5bn handed out. And who knows, might we even see a new record this year?
A risky time?
Anyone reading this might think I’m ignoring the very real risk of investing when market sentiment is so gloomy. And I’ve not really covered individual share risks, which investors should do before they consider buying.
I wouldn’t be surprised if some FTSE 100 shares get even cheaper over the next 12 months. But that’s a short-term view. And I would never worry about share prices over such a short timescale. History shows that buying shares when markets are down tends to be a good long-term strategy — and I’m sticking to it.
