Think like Warren Buffett! 2 dividend stocks I’d buy as the FTSE 100 collapses

Don’t shrink in the face of diving investor confidence. Grab your debit card and get a slice of these undervalued FTSE 100 (INDEXFTSE: UKX) income heroes, says Royston Wild.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Be fearful when others are greedy. Be greedy when others are fearful.” It’s a trope that’s well-worn but worth reminding yourself of in times like these. It’s a philosophy which, if good enough to influence the actions of legendary investment guru Warren Buffett, it’s one I feel we should all pay close attention to.

Look, I get it. With blood spreading across the world’s trading floors, it can seem mighty tempting to offload everything, sit tight, and wait for the storm to pass. And if recent macroeconomic and geopolitical events are anything to go by, things threaten to get a whole lot worse.

The FTSE 100 just toppled to its cheapest since early February amid these fresh developments. And while its bounced off these lows, a plunge through the 7,000 marker could be imminent. My advice, however, is not to be fearful. For long-term investors there’s a sea of brilliant shares out there too good to miss at current prices.

12%+ dividend yields

One of these recent sinkers is Persimmon (LSE: PSN), a blue-chip which I myself own and a share which I’m tempted to buy some more of right now. Its recent plunge to prices not seen since last December leaves it trading on a forward price-to-earnings (P/E) ratio of 6.7 times and carrying a gargantuan corresponding dividend yield of 12.7%.

Enduring fears over Brexit, and the possibility of a no-deal exit from the European Union, are dominating sentiment towards Persimmon rather than concerns over violence in Hong Kong or Trans-Pacific trade wars. Of course, the threat of diving homebuyer activity in the event of an economically-damaging EU withdrawal is something stock pickers need to be aware of. But I would argue these risks are heavily baked into the housebuilder’s bargain-basement share price right now.

In fact, I expect trading to remain resolute at Persimmon, given the size of the homes shortfall in the UK, and expect this to remain the case for many years to come. People always need a place to live, after all, and Britain’s expanding population should keep demand for newbuild properties, and thus earnings across this construction sub-sector, trucking broadly higher.

A medical superstar

I also reckon GlaxoSmithKline’s (LSE: GSK) a top-tier buy at the present time. Despite the obvious defensive qualities healthcare stocks carry, this particular medical mammoth hasn’t been immune to the sell-off which kicked off in late July. Recent dips leave it dealing on a forward P/E multiple of just 14.3 times.

For a company whose profits outlook is much more secure than that of the general market in tough times like these, I reckon GlaxoSmithKline should be trading at a hefty premium to the Footsie’s other constituents at present. And especially so given the steady flow of positive news concerning its mammoth product pipeline in recent times. Its impressive pipeline has already delivered some mighty future blockbusters such as Shingrix and Nucala and there appear to be plenty more to come, products that will surely create some stunning returns in the years ahead.

So capitalise on that dirt-cheap valuation, I say, as well as a chubby 4.9% dividend yield and grab a slice of GlaxoSmithKline today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. 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.

More on Investing Articles

Investing Articles

I’d buy 1,784 shares of this FTSE 100 stock to target £350 of monthly passive income

Muhammad Cheema takes a look at how British American Tobacco shares, with a dividend yield of 10.1%, can generate a…

Read more »

White female supervisor working at an oil rig
Investing Articles

1 ex-FTSE 100 stock that I think will get promoted soon

Jon Smith flags up an energy stock that used to be in the FTSE 100 and currently has strong momentum…

Read more »

Shot of a young Black woman doing some paperwork in a modern office
Investing Articles

With an 8% dividend yield, I think this undervalued FTSE stock is a no-brainer buy

With an impressive yield and good track record of payments, Mark David Hartley is considering adding this promising FTSE share…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£9,500 in savings? Here’s how I’d try to turn that into £1,809 a month of passive income

Investing a relatively small amount into high-yielding stocks and reinvesting the dividends paid can generate significant passive income over time.

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

Dividend star Legal & General’s share price is still marked down, so should I buy more?

Legal & General’s share price looks very undervalued against its peers. But it pays an 8%+ dividend yield, and has…

Read more »

Investing Articles

Dividend shares: 1 FTSE 100 stock to consider buying for chunky shareholder income

This company’s ‘clean’ dividend record looks attractive to me and I’d consider buying some of the shares to hold long…

Read more »

Investing Articles

3 of my top FTSE 250 stocks to consider buying before April

Buying undervalued UK shares can be a great way to generate long-term wealth. Here, Royston Wild reveals a handful on…

Read more »

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »