2 FTSE 100 shares with blockbuster yields investors should consider buying

Our writer has noticed that these FTSE 100 shares offer mammoth dividend yields, and reckons investors should take a closer look at them.

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High-yielding FTSE 100 shares are tempting, but that’s usually only the tip of the iceberg.

In the case of HSBC (LSE: HSBA) and Vodafone (LSE: VOD), I think both stocks could offer excellent passive income prospects.

Let’s dig deeper to allow me to explain!

Should you invest £1,000 in The City Of London Investment Trust Plc right now?

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HSBC

I don’t think HSBC needs much of an introduction. However, the investment case is a compelling one, in my view.

Three key metrics I use to value shares all tell me HSBC shares represent great value for money right now. The shares trade on a price-to-earnings ratio of seven. Next, the price-to-earnings growth and price-to-book ratios come in at close to 0.7. Remember that a reading of below one indicates value.

Moving on, a dividend yield of close to 8% is very attractive. It’s much higher than the FTSE 100 average of 3.9%. However, I do understand that dividends are never guaranteed.

HSBC’s long and storied track record of performance, growth and wide footnote are huge positives, in my eyes. I’m particularly excited about HSBC’s presence in the burgeoning Asian market. This is an area where wealth is tipped to rise, and HSBC can use its existing presence to capitalise and boost returns and earnings.

From a bearish view, I must admit the current struggles in the Chinese economy are a slight cause for concern. As one of the biggest economies in the world, and a key market for HSBC, short to medium-term issues could dent earnings and returns.

As a long-term investor myself, I’d look at the long-term picture. I reckon HSBC shares could be a savvy buy now for building wealth.

Vodafone

Similar to HSBC, Vodafone doesn’t really need much of an introduction. However, the investment case is a bit more complex, in my view.

Vodafone shares trade on a forward price-to-earnings ratio of just over 10. Next, a dividend yield of 10.7% looks attractive, at least on the surface of things. Finally, the firm’s expansion plans into growth markets such as Africa, where telecoms take-up is rising, could provide lucrative opportunities to boost earnings and growth.

It’s worth mentioning Vodafone has been undergoing some reshaping recently. The business sold its Italian and Spanish businesses for a combined €13bn to streamline operations.

However, this sale could also help tackle the mountain of debt that Vodafone has on its balance sheet. The worry for me is that debt can often take precedence over investor returns and growth plans.

In fact, Vodafone has already confirmed that it will be halving its dividend next year. Its new yield will still be higher than the FTSE 100 index average. However, this could just be the start of cuts to conserve cash and pay down debt. Time will tell.

Conversely, a bit of pain to stimulate the business and focus on growth could be a temporary blip. As I said, the Vodafone investment case isn’t as clear-cut for me personally, compared to say HSBC’s. However, there’s still lots to like, but more risks to contend with.

Should you invest £1,000 in The City Of London Investment Trust Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if The City Of London Investment Trust Plc made the list?

See the 6 stocks

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.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Sumayya Mansoor has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Vodafone Group Public. 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.

Pound coins for sale — 51 pence?

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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