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A P/E ratio of 8 times and a HUGE 11% yield! This FTSE 100 dividend stock is on my radar today

The recent FTSE 100 washout leaves plenty of shares looking grossly undervalued today. And Persimmon (LSE: PSN) is one such blue-chip that looks quite tasty to me. Right now it sports a forward P/E ratio of 7.9 times, and more spectacularly, it carries a monster 11.2% corresponding dividend yield.

When it comes to risk and reward, this is one Footsie share that — at least in the long term — provides plenty of upside, in my opinion. Its share price has dived 35% though there’s plenty of value to be had here. You might not be tempted to buy right now as the stock market carnage continues. But it is a share that should be on your radar for when market confidence recovers.

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I’ve argued before that housing stocks like this do offer some safe-haven qualities. We all need somewhere to live, even amid the coronavirus outbreak and the threat to the UK economy. Things could change quickly, but most recent data suggests that the domestic homes market is holding up well.

Another sound survey

The Royal Institution of Chartered Surveyors (RICS) is the latest body to comment on the strength of the market in February. This is encouraging given that Covid-19 fears steadily grew during the latter half of the month.

RICS said on Thursday that a net balance of +20% of respondents to its latest survey saw an increase in the number of buyer enquiries last month. This contributed to a net balance of +29% of contributors reporting a rise in property values in February, up from +18% in the prior month.

This was not all there was to celebrate either. A net balance of +61% of respondents said that they expect more homes to be sold as 2020 progresses. And +22% of those surveyed said that home values should keep rising during the spring.

A bright future

Now admittedly, that RICS survey came with a large asterisk attached. It said that property professionals had shown some concern that the spread of the coronavirus could “adversely affect viewings and the traditional spring house-selling season.”

We are clearly in uncharted territory here concerning the coronavirus. However, I think that recent Bank of England rate cuts could help encourage first-time buyers to continue their search in large numbers. The huge half a percentage point cut to benchmark rates (to 0.25%) this week will likely lead to lenders cutting the rates on their products too, making already-attractive mortgage rates even more irresistible.

So back to Persimmon. This is clearly a share that’s not immune to near-term risk. I would argue, though, that its forward earnings multiple below the bargain benchmark of 10 times reflects this. This Footsie share’s profits outlook over a longer period remains particularly strong, underpinned by Britain’s colossal homes shortage. And I believe that dip buyers need to pay the homebuilder some serious attention.

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Royston Wild has no position in any of the shares mentioned. 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.