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3 FTSE 100 income stocks I think are seriously cheap

If you’re looking for undervalued income stocks, I think you should take a look at low-cost airline easyJet (LSE: EZJ).

Nosedive 

Over the past 12 months, shares in this airline have declined by 27%, excluding dividends, underperforming the FTSE 100 by 26%. Investors have taken flight because the City has downgraded its growth outlook for the company.

Back in August, analysts were expecting easyJet to report earnings per share of 139p for 2019, up slightly from 2018’s figure of 131p. However, analysts are now expecting earnings to decline 27% this year to 95p.

As my Foolish colleague Peter Stephens recently pointed out, the airline is blaming Brexit and economic uncertainty for this bleak outlook. These headwinds are disappointing, but I think investors should look past these short term woes and take a long term view of the company.

easyJet has been able to get to where it is today due to its streamlined business model and customer offering, which has enabled it to ride out the airline industry’s peaks and troughs. And I believe the company still has what it takes to emerge from its current problems in a stronger position than its peers.

While investors wait for a recovery, the stock offers a 4.3% dividend yield that’s covered 1.9 times by earnings per share and backed up by nearly £400m of cash on the balance sheet. Shares in the airline also trade at a 10% discount to the rest of the global aviation sector on an EV/EBITDA basis.

Global leader 

As well as easyJet, I’m also bullish on the outlook for Experian (LSE: EXPN). Like the carrier, Experian is a leader in its field, the processing of data, specifically financial data such as credit ratings.

As the market for data gathering and processing has expanded over the past few decades, Experian has been at the forefront of this revolution, and the company’s shareholders have reaped the benefits.

Earnings per share have grown at a compound annual rate of 29% since 2013 and shares in the company have returned 18.6% per annum over the past decade, including dividends. I expect this trend to continue as the global data market grows further in the years ahead.

Shares in Experian currently yield 1.6%, and the payout is covered 2.2 times by earnings per share, so I expect further payout growth over the next few years.

Saving for retirement

Lastly, I’m going to highlight long-term savings company Legal & General (LSE: LGEN) as an FTSE 100 income stock that I think is seriously cheap.

Shares in this company are currently dealing at a discount 8.9 times forward earnings, that’s 39% below the UK’s financial services industry average of 14.6. On top of this, the stock supports a dividend yield of 6.3%. The distribution is also covered 1.8 times by earnings per share leaving plenty of room for payout growth, in my opinion.

Managing pensions might not be the most exciting business, but Legal’s returns won’t send you to sleep. Over the past five years, the group’s earnings per share have grown at a compound annual rate of 14% and the stock has returned 13.4% per annum, including dividends, outperforming the FTSE 100 by 3% per annum over the same time frame.

As the world’s population gets older, and more customers turn to Legal to provide pension management services, I reckon the firm will remain on this growth trajectory.

Why ‘Boring’ Is Best

The likes of hospitality, consumer goods and global business services may not quicken your pulse, but they could make you richer. Three of our Five Shares To Retire On occupy these ‘boring’ sectors for good reason: we looked for companies you can buy into today that shouldn’t give you sleepness nights!

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Experian. 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.