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The BAE share price isn’t the only cheap FTSE 100 dividend opportunity I’d buy today

There are a number of FTSE 100 dividend stocks that appear to offer good value for money at the present time. Certainly, they may have been cheaper earlier in the year. However, for long-term income investors the index still seems to present a number of enticing opportunities.

Among them is defence business BAE (LSE: BA). It released a trading update on Thursday which confirmed it is performing in line with guidance. However, it’s not the only FTSE 100 dividend share that could be worth buying right now.

Low valuation

With a dividend yield of 6.5%, pensions specialist Legal & General (LSE: LGEN) has an income return that is 50% higher than that of the FTSE 100. The company’s recent performance has been relatively strong, with it being able to report encouraging figures despite an uncertain operating environment.

Looking ahead, there is scope for growth in its dividend. It is covered 1.8 times by profit, and has a track record of delivering impressive increases. For example, in the last four years it has risen at an annualised rate of 10%. Since the company is expected to post a rise in earnings of 4% in the current year, further inflation-beating income growth may be ahead.

Despite its solid track record of dividend growth and its strong position within a growing industry, Legal & General’s shares trade on a price-to-earnings (P/E) ratio of just 8.5. This suggests that they offer a wide margin of safety, and may be able to post FTSE 100-beating growth and income prospects over the long run. Therefore, now could be an opportune moment to buy the stock.

Growth potential

BAE’s trading update showed that the company is continuing to perform as per previous expectations. Although it is on track to meet guidance for the full year, the company faces an uncertain near-term outlook. Much of this is derived from the prospect of further geopolitical uncertainty regarding Saudi Arabia, which is a major customer of the business.

Investors, though, appear to have factored in the risks facing the company, since it trades on a P/E ratio of 10. Moreover, its update showed that it is making progress in its UK programmes, with its Air and Maritime contracted positions progressing as expected. There is also positive funding momentum in the US, with the company’s portfolio being well-aligned with customer priorities and growth areas.

In terms of BAE’s income prospects, it may lack the stability of some of its FTSE 100 peers due to it having an uncertain near-term outlook. However, a 5.1% dividend yield that is covered twice by profit suggests that the company’s dividend outlook is perhaps more robust than investors are pricing in. As such, while the company’s shares trade at a low ebb, its financial performance remains encouraging, so now could be the right time to buy a slice of the business for the long term.

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Peter Stephens owns shares of BAE Systems and Legal & General Group. The Motley Fool UK has no position in any of the shares mentioned. 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.