One old City saying goes: “Sell in May and go away, don’t come back until St Leger’s Day.” In some ways, I wish I’d taken this advice, because the FTSE 100 index has fallen almost 5.3% since 28 April.
We snapped up FTSE 100 shares in August
Instead of steering clear of stocks this summer, my wife and I have been on a share-buying spree. We acquired eight FTSE 100 stocks, plus two FTSE 250 shares. This buying spree completed a new portfolio that we began building in June 2022.
But why buy Footsie shares, given that the UK market has disappointed for years? For example, the index is only 2.5% higher than it was five years ago. Simply because this return excludes cash dividends, which can be very generous from many large companies.
Two dividend dynamos we now own
For example, here are two stocks we bought in August for their ability to pour cash into patient shareholders’ pockets.
#1: Glencore
As a global miner and commodities trader, Glencore (LSE: GLEN) extracts and sells various natural resources worldwide. This is a messy business, which is why this stock isn’t popular with ESG (environmental, social and governance) investors.
Over one year, Glencore stock is down by 7.3%. However, it has thrashed the FTSE 100 over five years, leaping by 47.7%, versus 2.5% for the wider index. But we bought Glencore shares for their powerful passive income.
At the current share price of 436.2p, this group is valued at £54.3bn. Yet its shares look too cheap to me, trading on a multiple of 7.2 times earnings. Glencore’s high earnings yield allows this FTSE 100 stock to pay a chunky dividend yield of 8% a year.
However, miners’ earnings and share prices are often volatile. Hence, Glencore previously cut its dividend in 2015, 2016 and 2020. But with the current yield covered almost 1.8 times by trailing earnings, I hope the company won’t axe this payout again.
#2: Phoenix
Like the mythical bird after which it’s named, I expect Phoenix Group Holdings (LSE: PHNX) shares to rise from the ashes. Indeed, I hope that the next five years will be better for Phoenix than the previous five. That’s because its main business — buying up pension funds and insurance books — is booming as interest rates rise.
At their 52-week high, Phoenix shares peaked at 647p on 2 February. But then a US banking crisis sent financial stocks plunging in March. As I write, the stock trades at 514.88p, valuing this business at £5.2bn.
What’s more, the share price is only 2.8% above its 52-week low of 501p, hit on 13 October last year. That’s largely because the FTSE 100 financial firm had a tough 2022, with profits wiped out by steep falls in stock and bond prices.
Over one year, the stock is down 15.6%, plus it has declined by 24.6% over five years (excluding dividends). But we bought Phoenix for its whopping dividend yield of nearly 9.9% a year — one of the very highest in the London market.
Of course, future dividends are not guaranteed, so they can be cut or cancelled at any time. Nevertheless, I anticipate banking many years of cash payouts from these dividend dukes!
