2 FTSE 100 shares I’d buy in a heartbeat!

The FTSE 100 has leapt 6% since 7 July, yet many of its stocks look incredibly cheap. Here are two I’d buy now for their market-beating dividends.

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Having recently returned to work after almost three weeks off, I’ve been eagerly scouring the London market in search of undervalued shares to buy when I next make a purchase. I’ve concentrated on FTSE 100 stocks, which I regard as cheap as chips, both in historical and geographical terms.

Two bargains

I’d gladly buy these two Footsie shares today for their future cash dividends and capital gains. By the way, my wife and I already own Barclays (LSE: BARC) stock.

#1: Barclays

As I write, the Barclays share price stands at 163.62p. This values the Blue Eagle bank at £25.5bn, making it a FTSE 100 stalwart. During this spring’s US banking crisis, the shares plunged to a low of 128.12p on 20 March. As panic receded, this stock has gained 35.5p — rebounding by more than a quarter (+27.7%).

Over one year, it’s up 1.8%, but has slumped 14.3% over five years (both excluding dividends). My wife bought it for our family portfolio at 154.5p a share in early July 2022. While this popular share is up only 5.9% since then, we bought it for its ability to provide us with hefty cash dividends in the long term.

At their current price, Barclays shares trade on a lowly multiple of five times earnings, for an earnings yield of 20%. This means that their market-beating dividend yield of 4.4% a year is covered a whopping 4.5 times by earnings.

Now for the bad news. UK consumers are being hammered by a toxic combination of rising interest rates, sky-high inflation and crippling energy bills. As a result, I expect British banks to report lower credit growth and higher bad debts and loan losses in 2023.

Despite these worries, I see Barclays shares as among the most undervalued in the entire UK market. And if we didn’t already own part of this business, I’d buy this stock today without hesitation.

#2: M&G

My second mispriced stock is that of asset manager M&G (LSE: MNG). At the latest share price of 201.4p, this investment group is valued at £4.8bn, making it a FTSE 100 minnow. This stock is down 4.2% over one year and 10.5% over five years.

Over the past year, M&G’s share price has ranged between a low of 159.3p on 29 September 2022 and a high of 229.9p on 2 March. While it’s presently trading in the upper half of this range, I still see it as cheap as chips.

Although M&G made a loss in 2022, analysts expect it to record a healthy profit this year. As with Barclays, what attracts me to this financial firm is its ability to deliver delicious dividends in the long run.

Right now, this long-established group’s stock offers a dividend yield above 9.7% a year, versus around 4.1% for the wider FTSE 100. Were the group to maintain this payout, it would be a delightful addition to our family portfolio’s passive income.

Also, with consolidation gathering pace in this industry, M&G could fall to a takeover bid from a larger rival. Conversely, if financial markets collapse (as they did last year), then M&G shareholders could take another hit. Even so, with some spare cash, I’d aim to buy and hold this stock for 10+ years!

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.

Cliff D’Arcy has an economic interest in Barclays shares. The Motley Fool UK has recommended Barclays and M&G. 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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