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Stock market rally: should I buy these 3 cheap FTSE 100 shares with BIG dividends on Friday the 13th?

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There are plenty of UK shares on my Stocks and Shares ISA list this Friday the 13th. Should I buy these dirt-cheap FTSE 100 dividend stocks during the current stock market rally though?

Steering clear of this UK share

I’m not tempted to snap up mining colossus Rio Tinto and its big dividend yields today. Even a rocketing iron ore price isn’t enough to tempt me to part with my money.

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Prices of the steelmaking ingredient continue to go gangbusters, thanks in part to production outages in Brazil. Recently, they hit their highest since February 2013. But I’m worried about the long-term outlook for iron ore values as a swathe of new capacity hits the market over the next few years.

The market threatens to be swamped with excess material and this could create a big problem for Rio Tinto. The company sources more than three-quarters of underlying earnings from iron ore. So I’m not interested in the FTSE 100 share’s forward P/E ratio of 9 times, or its 7% dividend yield.

A better FTSE 100 buy

I’d be much happier investing in Polymetal International (LSE: POLY) to get my commodities fix.

Like Rio Tinto, this UK share also trades on a low forward earnings multiple, in this case sitting at 11 times. Its 5.5% dividend yield provides plenty for income seekers to get excited about too.

I think this FTSE 100 mining giant sits on much safer ground though, as I expect gold prices to remain strong through the medium term at least. This is based on expectations that central banks will keep interest rates low into the 2020s. Additional rounds of quanititative easing wouldn’t do bullion values any harm either!

But inflationary concerns aren’t the only probable demand driver for precious metals. Significant macroeconomic and geopolitical issues, like trade wars and Brexit, should also support prices of safe-haven assets looking ahead. The possibility of a prolonged Covid-19 crisis would boost the likes of gold as well.

7.8% dividend yields!

Vodafone Group (LSE: VOD) is one more UK share I’m considering snapping up this Friday the 13th.

This FTSE 100 major also looks cheap from an earnings perspective. City predictions that profits will rise 29% this fiscal year leaves it trading on a forward price-to-earnings growth (PEG) reading of 0.6. Any multiple below 1 is generally considered a bargain. However, Vodafone’s 7.8% forward dividend yield is what really draws the headline.

Vodafone is simply a cash machine (it expects to generate €5bn of free cash before spectrum costs this year alone). This — allied with the defensive nature of its operations — means it should keep paying big dividends despite the uncertain macroeconomic outlook.

But this FTSE 100 stock is much more than a great near-term dividend pick. Ericsson’s Mobility Report expects worldwide mobile data demand to soar to 164 exabytes (EB) per month by 2025. That compares with 33 EB at the end of 2019. And global telecoms giant Vodafone is well-placed to make monster profits this decade on the back of this trend.

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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.

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