At this moment, I think a host of FTSE 100 stocks offer great value. The index has failed to produce exciting returns in recent times. But I’m not complaining because this means buying opportunities.
With August upon us, I’m looking to add to my portfolio.
If I had the cash, here are two stocks I’d strongly consider buying this month.
Footise stalwart
First is the FTSE 100 financial services giant Legal & General (LSE:LGEN).
There are a few reasons I like the look of the stock, with the most obvious being its 8.6% dividend yield. This places it comfortably among the index’s highest returners. But what allows it to stand out from the crowd is its dividend growth over the last decade.
More recently, the business has also put its returns to shareholders in the spotlight, highlighted by its cumulative dividend plan that finishes next year.
Elsewhere, the stock also looks undervalued, trading on a price-to-earnings (P/E) ratio of just 6. This is a big discount to the FTSE 100 average of 14 times.
Last year saw the firm grow operating profit by 12%, while its earnings per share also rose to 38p, more than enough to cover its dividend rate of 19.4p per share. With the release of its half-year results due on 15 August, I’ll be watching closely for updates.
I also like the company due to its well-known brand, solid reputation, and diversification across a host of business areas. This means that regardless of short-term headwinds, the firm is well-placed to succeed in the long run.
The volatility in the banking sector in 2023 may spill over and harm the stock’s price. And we may see a short-term fall in demand for its services given economic conditions. But with its diversification, along with the passive income opportunity, I like the look of Legal & General.
Tobacco powerhouse
Next up is British American Tobacco (LSE: BATS).
Like Legal & General, I’m attracted to the stock given its meaty yield. It currently offers investors a 9% payout, albeit boosted by its flagging performance in 2023.
Regardless, last year saw the business raise its dividend by 6%. And similar to Legal & General, its shares look cheap, with a P/E ratio of around 6.
Of course, the largest risk to the company is the dwindling popularity of smoking. It’s been touted by some that the habit will be extinct by 2050.
However, the tobacco industry is still monumental in size. And to offset the predicted fall in demand in the years ahead, the company has shifted its attention to non-cigarette income streams.
New Categories revenue spiked 25% in the first half of the year, catalysed by the rising use of brands such as Velo, which offer consumers an alternative tobacco hit.
As part of this push, the business also has ambitious plans for the future, with New Categories expected to contribute over £5bn in revenue by 2025.
The play
As high-quality companies with low valuations and solid passive income opportunities, these stocks tick all my boxes.
I already hold shares in Legal & General. So should I have the cash, I’ll look to add British American Tobacco shares to my portfolio this month.
