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Have £2,000 to invest? These FTSE 100 dividend stocks look far too cheap

Looking for value in the FTSE 100? Keen to receive dividends to reinvest or spend as you please? Here are just two companies trading on seriously low earnings multiples at the current time that also provide a welcome income stream. 

Ready to shine?

I remain bullish on medium-to-long-term prospects for ITV (LSE: ITV), despite the reversal in its share price since July. That follows rumours the integrated producer/broadcaster is interested in buying production firm Endemol Shine (which has given us the likes of Big Brother, Deal or No Deal, and Masterchef).

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Notwithstanding understandable concerns that ITV may end up overpaying for the heavily-indebted business that’s already over half its size, this could still turn out to be a smart move by ex-easyJet boss Carolyn McCall and her management team.

With revenue from TV advertising continuing to suffer, a deal would put a rocket under the growth of ITV Studios — the £6bn-cap’s production arm — while also further diversifying its earnings.

There is, of course, the possibility that a bid could fail, just as it did when ITV attempted to buy Entertainment One a couple of years ago. Even if it does, I wouldn’t be concerned. 

Recent results have been encouraging, with the company reporting a “strong operating performance” over the first half of 2018, thanks, in part, to the contributions from Love Island and England’s unexpectedly decent run in the World Cup.

Revenue growth of 16% at the aforementioned ITV Studios was a particular highlight and this is expected to continue over the rest of 2018, supported by double-digit revenue growth online. We’ll get an idea just how things are going when the company next reports on trading in November.

In the meantime, ITV’s shares can be purchased for just 10 times forecast earnings. Taking into account the 5.1% dividend yield, that looks seriously good to me… deal or no deal.

Bargain buy

Changing hands on a price-to-earnings (P/E) ratio of under 9 for 2018, another FTSE 100 firm that looks too cheap is insurance giant Aviva (LSE: AV).

At under 500p each, the shares are already lower than the average price paid by the company to purchase its own stock in the now-completed buyback programme that commenced in May (502p). Since it’s always worth comparing a company’s valuation with others in the same industry, it’s interesting to note that Aviva is also cheaper than peers Legal & General and Prudential.  

It gets better. Not only does Aviva offer value, it’s stock also comes with a bumper dividend that eclipses that of ITV.

Based on the current share price, the £19bn-cap yields 6.1% this year. On top of this, analysts are anticipating a near-11% hike in 2019, equating to a very impressive 6.7%. And at a time when the profits of some FTSE 100 stocks barely support their payouts, Aviva’s returns to shareholders are expected to be covered 1.9 times in 2018, and 1.8 times in 2019. 

That’s not to say these payments are guaranteed, of course. As my Foolish colleague Rupert Hargreaves highlighted, the firm’s exposure to lucrative lifetime mortgages could prove the undoing of the dividend if the Prudential Regulation Authority ends up forcing Aviva to hold more capital to protect itself.

Given that the dividend is already as high as it is, however, I doubt even a slight cut should concern owners.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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.