It’s been a bumpy week for the FTSE 100. Hardly calamitous, the index is just down 1.33% over the last five trading days, but some stocks have fallen much further.
These three have taken a bit of a beating but are suddenly cheaper as a result, while their dividend yields have climbed too.
NatWest share price bargain
The NatWest Group (LSE: NWG) share price has enjoyed a blistering run but that came to a juddering halt on Friday, when it was rumoured that the government may slap windfall taxes on the big banks in the autumn Budget.
The NatWest share price has slumped 9.3% over the last week, one of the biggest fallers on the index, but long-term investors can hardly complain. It’s up 48% over 12 months, and 350% over five years.
As with every stock, there are risks. Higher interest rates have boosted margins, and these may be squeezed when rates are finally cut. On the other hand, lower rates would get the economy moving again, cutting customer debt impairments and boosting mortgage business.
I don’t know what will come in the Budget. But I do know that NatWest looks decent value with a price-to-earnings ratio of 9.5, well below the 15 seen as long-term value.
And with the stock forecast to yield 5.85% in 2025, and 6.52% in 2026, there’s income here too. I think it’s well worth considering today.
Legal & General, dividend hero
I’m more cautious about the next beaten-down stock, even though I hold it myself. Insurer Legal & General Group (LSE: LGEN) fell 8% in the last week, but that brings one positive. The trailing dividend yield is now an eye-popping 9.15%.
That’s a simply staggering rate of income, but I have two concerns. First, the Legal & General share price has idled for ages. It’s up a modest 5% in the last year, and 13% over five years.
Second, the yield is so high we have to start asking whether it’s sustainable. The board has suggested it is, and plans to increase shareholder payouts by 2% a year. However, last month JP Morgan noted that Legal & General’s net profit, dividends and buybacks aren’t covered by free cash flow.
It also warned of rising competition in the bulk annuity market, a key potential growth area. Investors dazzled by the yield should explore these risks first.
Kingfisher yield climbs
B&Q owner Kingfisher (LSE: KGF) is another big recent faller, down 7.5% in the last week. This isn’t a one-off. It’s down 12% over a year and 8% over five.
Like many retailers, it’s been hit hard by the cost-of-living crisis, which has squeezed consumers, and driven up the cost of labour and materials. Sadly, we don’t appear to be out of the woods yet.
Kingfisher has operations in France and Poland, which have been struggling. It’s actually the UK segment that has been holding up, despite concerns over here.
The Kingfisher share price looks decent value trading at 12 times earnings, while the trailing yield has climbed to almost 5%. Bargain hunters might consider taking a chance on this one, but performance could be bumpy for a while yet.
