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2 cheap FTSE 100 shares yielding 7% or more! I’m buying

Cheap FTSE 100 shares that pay high, secure yields are not exactly ten-a-penny. We call them ‘dividend heroes’ for a reason.

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So I’d like to look at two cheap FTSE 100 shares yielding 7% or more that I think should be in your portfolio.

A rare commodity

Mining conglomerate BHP (LSE:BHP) is making huge strides from elevated 2020 commodity prices.

Shares come at a price-to-earnings ratio of 9.7. That’s well under the market average, which is enough to earn them the title of cheap FTSE 100 shares. But there’s more here than simple value.

The diversity of this Anglo-Australian giant is the key to its future growth. For example, while natural gas prices are cratering, other areas of its mining business are soaring.

Let’s look at uranium. This scarce metal is a key element used to fuel the world’s 450 nuclear power plants. Its use will only increase as countries seek efficient ways to reduce fossil fuel consumption while keeping the lights on.

Uranium is in a massive supply deficit right now, which has driven prices to four year highs, and at record speed.

Olympic Dam is the largest single uranium deposit in the world and also the fourth-largest copper deposit. Owned by? BHP.

The company’s $3bn expansion here took another step closer last month. The South Australian government declared it a “major development proposal” and in May 2020 issued new guidelines to advance the proposal.

The Olympic Dam plan would increase copper production by a whopping 75% to 350,000 tonnes a year. Copper, by the way, has surpassed its pre-Covid-19 prices and is marching back to January levels now.

BHP pays a 7% yield to its shareholders, which I like immensely. Dividend cover is a reasonable 1.3 and while I wouldn’t mind a little more leeway, I can see BHP growing its earnings from the areas above.

More cheap FTSE 100 shares

My second pick for cheap FTSE 100 shares is Legal & General (LSE:LGEN). Unlike many of its peers, LGEN decided to pay a £753m dividend to long-term holders just prior to the crash.

And yet its capital solvency position is a robust 184%. Market regulators require a minimum 100%, but prefer at least 130%.

CEO Nigel Wilson has a keen eye for growth. This is evidenced by his team tapping the debt market at a time when interest rates are near all-time lows. So repayment will be relatively affordable.

This debt issuance also positions us strongly for the recovery phase…[and] our operational performance is resilient, supported by a strong new business pipeline“, Wilson says.

For investors seeking cheap FTSE 100 shares, this bodes very well.

Dividend cover is higher than at BHP, at 1.7 times earnings. A P/E ratio of 6.9 also beats BHP. And the shares yield over 8% for your portfolio. I think the market is unfairly sleeping on LGEN as share prices have been held relatively low.

Despite the Covid-19 crisis, “our asset portfolio continues to perform well in absolute and relative terms“, Wilson adds.

With these two cheap FTSE 100 shares, you get value, growth, and income all in one package. I like that a lot.

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Tom Rodgers owns shares in Legal & General. 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.