The past month or so has shown the resilience of the FTSE 100. It dipped when President Trump launched his tariff assault on the world, but it’s bounced right back.
US stock markets are still off from their 52-week highs. But the FTSE 100 is closer, less than 300 points from its March peak. The prospects for a new bull market are surely better now.
Buy the market
Working out how to benefit might sound like hard work. But if we think the FTSE 100 is cheap — why not just buy the FTSE 100?
That’s what an index tracker like iShares Core FTSE 100 ETF does. It spreads investors’ cash across the index, aiming to replicate the overall performance.
We still face general stock market risk. But for me it sure beats sitting and twiddling our thumbs with our money idling in a Cash ISA.
Bag some dividends
My favourite approach is to try to lock in big dividends before I miss the chance. Look at M&G (LSE: MNG), with a forecast dividend yield of 9.3%.
How did the yield get so high? It’s in part due to the share price performance since M&G was floated off from Prudential in 2019. Nobody saw Covid just round the corner, nor the years of economic strife that would follow. Not to mention a serious bout of stock market pessimism.
It’s all helped the M&G share price go almost nowhere since then. Specifically, it’s down 1.5%. But things might finally be looking up. The stock has bounced back nicely from the tariff panic. And we’re looking at a year-to-date gain of 9.6% in 2025.
Valuation
With a forecast price-to-earnings (P/E) ratio of only 9.2, dropping to 7.7 on 2027 forecasts, do I think M&G is still cheap? If I believe the next five years for the FTSE 100 will be better than the past five, I really have to think that.
If the UK stock market doesn’t do as well as I hope, M&G could underperform. And dividend cover might be a bit weak for the next few years. But I think long-term dividend investors could do well to consider taking these risks.
Look for value
We could look for stocks on low fundamental valuations relative to their sector peers. And they don’t necessarily have to be in the FTSE 100, as I’d expect the FTSE 250 to follow any bull market.
Defence and engineering company Babcock has a forward price-to-earnings (P/E) ratio of 17, a fair bit lower than the 24 at BAE Systems. There can be more risks with a smaller company. But I rate this a good candidate for further value research.
Housebuilder Taylor Wimpey is another possibility. Its P/E of 14 is a fair bit below sector leader Barratt Redrow‘s 20. And a predicted dividend yield of 8% wipes the floor with the 3.8% expected from its rival.
Again, more digging is needed and the relative risks must be compared. But I’d say this lower fundamental valuation provides another good starting point for further research.
Whatever stocks we might pick, I do think adopting a specific approach can help us focus.
