3 ridiculously cheap shares I’d buy now for mouth-watering passive income

For investors seeking high-yield passive income, the FTSE 100 appears to be the place to be. Here are three shares I think offer great value.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Middle-aged black male working at home desk

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Every now and again, I look at some FTSE 100 shares and shake my head. I just can’t believe the attractive passive income on offer. With that in mind, here are three cheap dividend shares I’d scoop up today if I had spare cash to invest.

Resilience

Shares of insurers Legal & General (LSE: LGEN) and Aviva (LSE: AV.) still haven’t fully recovered from the US banking crisis in March. Indeed, both stocks are more than 10% lower than they were before Silicon Valley Bank collapsed.

One reason for the drop is that investors fretted over the prospect of unrealised bond losses at insurance firms. The inverse relationship between bond prices and interest rates means the recent sharp rises in rates have lowered the value of fixed-rate bonds.

Put simply, as interest rates go up, the value of older bonds goes down. And this can impact an insurance company’s balance sheet and capital reserves.

However, there is no suggestion that either firm needs to raise funds and sell these bonds at a loss. Therefore, they will most likely be held till maturity.

Meanwhile, earnings at both firms have remained resilient, resulting in cheap forward P/E multiples of 9.5 for Aviva and 9.7 for L&G shares. And incredibly juicy forward-looking dividend yields of 8.6% and 9.3%, respectively, for 2024.

Of course, those high yields aren’t there for no reason. If markets tumble further due to a weakening global economy, the investment portfolios of both insurers would fall in value. This is something for investors to consider, though I think the passive income potential here remains alluring.

Thinking long term

Glencore (LSE: GLEN) is another lowly-valued stock I’d buy today. The miner’s share price is down 17% year to date, mainly due to falling commodity prices as China’s economy shows signs of weakening.

Additionally, the Chinese property market is also weighing on the nation’s growth outlook. And if that massive market collapses, then demand for metals linked to construction could fall off a cliff. In that scenario, Glencore’s share price would likely have further to fall.

However, I think these concerns open up an opportunity to buy this stock for both income and a potential share price rebound. That’s because China is likely to continue ramping up stimulus measures, keeping demand for commodities relatively stable.

Plus, the nation’s increasing spending on clean energy — a multi-decade process — should significantly lift overall consumption of materials linked to the green transition. These include copper and aluminium, both of which Glencore supplies.

Another positive is the ongoing resilience of the US economy, which is set to benefit long term from massive federal spending on infrastructure.

Glencore stock is dirt-cheap on a forward P/E ratio of around 8.4, which is below the Footsie average. And it carries a 7.5% dividend yield for 2023, which is way above the market average. The payout could even be cut and still offer attractive passive income.

This is a share I’d buy today to own for the next decade and beyond. Swiss bank UBS reckons the company could quadruple its earnings from its battery recycling business over the next five years.

Plus, Glencore also trades commodities, meaning it has multiple ways to win during the planet’s transition to a greener future.

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.

Ben McPoland has positions in Glencore Plc and Legal & General Group Plc. 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.

More on Investing Articles

Investing Articles

The FTSE 100’s newest member looks like a no-brainer to me!

This Fool explains why she sees the newest member of the FTSE 100 as a great opportunity after its recent…

Read more »

Investing Articles

Empty Stocks and Shares ISA? Here’s how I’d start earning a second income from scratch

Like the thought of earning extra cash tax free? Our writer explains what he'd do to begin earning passive income…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

No savings at 25? I’d start by investing £3k in these 3 red-hot FTSE 100 shares

Harvey Jones thinks these three FTSE 100 stocks would be a great way to kickstart a portfolio of UK shares.…

Read more »

Young Black woman using a debit card at an ATM to withdraw money
Investing Articles

Up 35% from this year’s low! Here’s where I think Lloyds shares are headed in H2 of 2024

My Lloyds shares are already doing well this year but that’s not guaranteed to continue. What factors could turn the…

Read more »

Investing Articles

Approaching £5, is there still growth ahead for the Rolls-Royce share price?

The Rolls-Royce share price has been flying in the last year. But is there more growth ahead or should investors…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

Could Raspberry Pi be a growth share to buy and hold?

Our writer explains why he thinks a newly-listed UK growth share could have a bright future -- and considers whether…

Read more »

A pastel colored growing graph with rising rocket.
Market Movers

The FTSE 100 jumps after the Bank of England meeting. Here’s what’s next

Jon Smith runs over the takeaways from the Bank of England meeting today and flags up which FTSE 100 stocks…

Read more »

Middle-aged white male courier delivering boxes to young black lady
Investing Articles

How I’d start investing in great value UK shares with £10,000 today

Harvey Jones can see a heap of UK shares he'd like to add to an ISA today. Many combine low…

Read more »