The Motley Fool

3 FTSE 100 dividend stocks I think are absurdly cheap right now

When markets start falling, some investors choose to sell and wait for the climate to improve.

As a long-term investor, I’m not keen on this approach. Timing such trades so that they’re profitable is very difficult. You also miss out on dividend income while you’re out of the market.

I don’t sell anything just because the market’s falling. Instead, I like to top up some of my existing holdings, taking advantage of cheaper prices. Today, I want to look at three stocks I think look cheap at the moment.

A takeover target?

One of my larger personal holdings is broadcaster and media group ITV (LSE: ITV).

The ITV share price has fallen by about 35% over the last year as investors have questioned the company’s ability to replace profits from broadcasting advertising with lower-margin online revenues.

I agree that this is a valid concern. But in my view, the bad news is already in the price. ITV is still making a profit of about £500m a year, with an operating profit margin of 18%. In my view, even if profits fall by another 20%, the valuation would still look reasonable.

As things stand, the shares trade on a forecast price/earnings ratio of 8, with a 7.6% dividend yield. I rate the shares as a buy. I also believe that ITV could become a takeover target at this level.

Buy the best

Another stock I own that’s unloved by markets at the moment is FTSE 100 landlord British Land (LSE: BLND).

There are good reasons to hate this stock, starting with its exposure to retail property. But only 45% of British Land’s portfolio is in retail. And the company intends to reduce this to between 30% and 35% within five years.

It’s also worth noting that 96.1% of British Land’s retail property was occupied at the end of March.

The majority of the group’s assets are prime London office buildings. History suggests that while demand for these properties can dip during recessions, over longer periods, this asset class is always in strong demand.

At under 500p, BLND shares are trading at a 45% discount to net asset value and offer a 6.7% dividend yield. Over time, I think that’s likely to be good value. I’ve topped up recently and may buy more if the current weakness continues.

Is this 11% yield for real?

Iron, coal and steel group Evraz (LSE: EVR) is one of those stocks that always looks cheap. As I write, the shares are trading on 5.5 times 2019 forecast earnings, with an 11.4% dividend yield.

Is this for real? I think so. The group’s financial performance over the last 18 months suggests to me that these forecasts are realistic.

Of course, there are risks. Evraz’s majority ownership by a group of wealthy Russian businessmen means that UK shareholders are never likely to have much influence.

However, Evraz operates in the US, as well as Eastern Europe. I see this as a positive, in terms of reducing political risk.

I also believe that the group’s owners see the firm as a safe place to store their wealth and generate income. I wouldn’t expect them to do anything that was likely to jeopardise this.

These shares aren’t without risk. But for investors who are comfortable with the cyclicality of the mining sector, I think Evraz could be an interesting choice.

High-Yield Hidden Star?

Discover the name of a Top Income Share with a juicy 7% forecast dividend yield that has got our Motley Fool UK analyst champing at the bit! Find out why he thinks “the stock’s current weakness may offer us the chance to buy a proven dividend performer at what could be a bargain price”. Click here to claim your copy of this special report now — free of charge!

Roland Head owns shares of British Land Co and ITV. The Motley Fool UK has recommended British Land Co and 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.