I’m expecting to receive some funds soon that I plan to use to invest in more UK shares. Should I buy these low-cost FTSE 100 shares to boost my passive income?
Glencore
While the FTSE index has soared in early 2023, the index’s miners have endured a more turbulent journey. Recent data from China suggests these blue-chip shares could be about to rebound, prompting me to consider buying Glencore (LSE:GLEN) shares.
China’s official manufacturing purchasing managers index (PMI) soared to 52.6 in February, smashing broker forecasts. Any reading above 50 indicates expansion and last month’s was the highest since 2012.
Factory activity is accelerating following the end of pandemic lockdowns late in 2022. This is a positive omen for commodities giant Glencore which produces and markets metal and energy products.
Today, the business trades on a forward price-to-earnings (P/E) ratio of 6.7 times. It also carries a mighty 9.5% dividend yield. I believe these readings make Glencore shares a great buy for lovers of value stocks.
Earnings at mining stocks can fall during economic downturns. But I expect profits here to soar over the long term as the energy transition turbocharges demand for materials like copper.
Industry body CRU thinks demand for the red metal — a key revenues driver for Glencore — will rise 2.1% a year to hit 28.5m tonnes by 2030. In this environment investors like me could make stunning returns.
Barclays
High street bank Barclays (LSE:BARC) also offers an attractive blend of low earnings multiples and huge dividend yields. It trades on a P/E ratio of 5.5 times for 2023 and boasts a corresponding dividend yield of 5.3%.
One thing I like about the firm is its huge investment bank. In comparison with retail-only competitors such as Lloyds and NatWest, this poses a higher risk to investors. Yet this also has the potential to deliver much higher returns than its rivals.
Still, this isn’t enough to tempt me to consider buying Barclays shares. The UK economy is stumbling and the bank faces a strong and sustained increase in bad loans. It chalked up £1.2bn worth of credit impairments in 2022, £500m of which came in during the last quarter.
There are also big questions over its net interest margin (or NIM) going forward. This measures the difference in what banks charge borrowers for taking out loans and what they pay to depositors in interest.
For one, key Bank of England policymakers seem to be dampening talk of further interest rate rises. Bank governor Andrew Bailey has said that additional increases are “not inevitable”. Its deputy governor has commented that policymakers need to “enguard against the possibility of doing too much” on interest rates.
Secondly, there is growing pressure on banks to improve the rates they offer to savers. This week, the chairman of the Treasury Committee suggested that “our biggest banks are taking advantage of their most loyal customers to increase profits and CEO pay”.
On balance, I’d avoid Barclays shares and use my money to buy other UK stocks like Glencore.
