With the FTSE 100 reaching another all-time high, it might seem as if there are no bargains to be found. But despite the buoyant index, I think some of the individual shares within it look cheap right now. They also have juicy yields.
Here is a trio of FTSE 100 shares that I think could offer my portfolio good value and juicy dividends.
Vodafone
As an investor, there is often a “half glass empty or half full?” element to considering shares that have fallen in price.
Take telecoms giant Vodafone (LSE: VOD) as an example. Over the past year, the Vodafone share price has tumbled 27%. Given how well FTSE 100 shares overall have been doing, that is quite a fall.
Taking a glass-half-full approach, I see a lot to like here. The company has a well-known brand and large customer base across multiple markets. It is the number one or two provider in many of them. I expect demand for telecom services to stay strong. At the current share price, the yield here is an attractive 7.5%.
But could the glass be half empty? Revenue growth has been sluggish and adjusted free cash flows were negative at the mid-year point. Combined with heavy debt, if that trend of money going out the door continues, the company could cut its dividend. It has done so before.
Given the attractive price, I am taking a glass-half-full approach and hold the shares in my portfolio.
Legal & General
While some FTSE 100 shares are better known in the City than by the general public, insurer Legal & General (LSE: LGEN) has a brand recognised by millions. That is a valuable asset that can help it attract and retain customers.
It operates in an area with robust demand, has long experience in its field, and can benefit from its brand recognition. That adds up to a highly profitable business with a price-to-earnings (P/E) ratio of just 8. The dividend yield is 7.1%.
Perhaps that cheap-looking valuation reflects risks such as higher claims costs, something that caused rival Direct Line to axe its dividend last month. But as a long-term investor, I like the outlook for Legal & General. If I had spare cash to invest, I would add the company to my portfolio.
Imperial Brands
Cigarette giant Imperial Brands (LSE: IMB) also looks like good value to me. Its shares trade on a P/E ratio of 12.
Imperial owns a range of well-known brands, such as John Player Special and Lambert & Butler. Tobacco is a highly cash generative business. Imperial’s free cash flows jumped last year to £2.6bn. That helps support a sizeable payout with the shares offering a 7.1% dividend yield.
But cigarette sales are declining globally. Imperial is trying to increase its share in key markets but that can only go so far as a strategy if fewer and fewer people smoke. That means there is a risk that revenues and profits will fall. Indeed, revenues showed a slight decline last year despite the positive impact of price increases.
For that reason, although I think Imperial looks cheap, I am sticking to rivals like British American Tobacco that I think have a stronger long-term strategy to cope with declining cigarette use.
