£15k in these 3 cheap FTSE 100 stocks would give me a second income of £1,196 a year

Top FTSE 100 stocks are cheaper after this week’s stock market dip and offer even higher yields. Here are three I’d like to buy today.

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For investors who love to generate high levels of dividend income, today’s FTSE 100 stocks are a wonder to behold, with a dozen blue-chips yielding more than 7% a year.

This week’s stock market dip has lifted their yields to new highs and cut their valuations. I’d buy these three today if I could scrape enough cash together.

My first pick is housebuilder Taylor Wimpey (LSE: TW), which now yields 8.01% a year. Unlike rival Persimmon, management seems willing and able to stand by its dividend.

The power of three high yields

Nothing is guaranteed, of course. The UK housing market has escaped a crash, so far, but with mortgage rates likely to rise, it will come under growing pressure. If it does, that will hit demand and sales, forcing management to cut the dividend to save cash. Yet the UK housing market has proved pretty resilient, so far.

Taylor Wimpey’s total order book value stood at £2.38bn last month, down from £3.3bn a year earlier, but demand and mortgage availability has recovered. There are risks, but like all three shares, I’m buying to hold for at least 10 years, and ideally longer. Risks are priced in with Taylor Wimpey trading at just 6.2 times earnings.

I want to spread my risk across different sectors, and I’m keen to top up my small stake in Rio Tinto (LSE: RIO). The mining giant currently yields 8.4%, despite cutting its dividend by half earlier this year.

That doesn’t rule out another cut, but I think management would be reluctant to cut twice in a short period. The mining sector has been hit by Chinese lockdowns (which are now over), and fears of a US recession. Rio Tinto’s stock has fallen 15.73% in the last 12 months. It now looks cheap, trading at just 7.1 times earnings.

Rio would suffer if global demand for metals and minerals falls or the global downturn drags on and on. Again, I’m buying for the long-term and will keep reinvesting my dividends to benefit from the recovery, whenever it comes.

My third pick is Aviva (LSE: AV), which gives me exposure to another sector, in this case financial services. It also serves up another whopping yield of 7.75%. The stock is down 7.98% in the year, which looks like a buying opportunity to me.

Aviva’s latest quarterly results were a mixed bag, with general insurance premiums rising along with private medical insurance sales, as disillusioned NHS users go private. But its investment division suffered as stock market volatility hit inflows.

Now I need cash to buy them

I was pleased to see activist investor Cevian Capital has exited its position, saying Aviva had been “transformed from a poorly performing conglomerate to a focused and well-performing insurance company”.

The most I invest in any stock is £5,000. If I invested that sum in each of these, I would get an average yield of 7.97%. That would generate income of £1,196 a year on my £15k stake. Now I just need to find the cash to buy them. Starting with Aviva.

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.

Harvey Jones has positions in Rio Tinto Group. 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.

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