2 ‘no-brainer’ FTSE 100 stocks I’d buy on the dip

The FTSE 100 has fallen recently to around 7,000 points. Here are two FTSE 100 stocks I’m buying now to capitalise on this slight dip.

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After hitting post-pandemic highs in August this year, the FTSE 100 has corrected slightly in recent days. This has seen it fall to around 7,000 points. But I feel that this slight correction gives me the opportunity to pick some FTSE 100 stocks on the cheap. Here are two companies I’m particularly interested in buying more of right now.

Packaging company

Over the past month, Mondi (LSE: MNDI) has fallen around 10%, currently priced at 1,880p. But I think this is a great time to buy the packaging company on the dip. Here’s why.

Firstly, the company’s half-year trading update was positive. In fact, it reported revenues of over €3.6bn, an increase of 5% from the same period last year. It also generated operating profits of €503m, which although marginally lower than the same period last year, represents a strong performance.

This good performance also enabled the company to declare an interim dividend of 20 cents, an increase of over 5% from last year. As such, Mondi has a full-year dividend yield of nearly 3%. Although this is by no means incredible in comparison to other FTSE 100 stocks, it’s still an appealing aspect of the company.

Furthermore, the dividend is extremely sustainable, and covered over two times by earnings. This allows plenty of money for investment, and Mondi is doing just that. This has included a €125m investment into its mill in Kuopio, which will increase its capacity by 55,000 tonnes per annum. It’s said that this has been done to “meet growing consumer demand”. As such, I feel that profits will be able to increase over the next few years.

As such, even though rising input costs and planned maintenance factory closures are headwinds moving forwards, I think the outlook remains positive. That’s why I may add more Mondi shares to my portfolio.

A defensive FTSE 100 stock 

BAE Systems (LSE: BA) is the other FTSE 100 stock I think is a ’no-brainer’ buy. The defence specialist has proved extremely resilient during the pandemic, and while other companies recorded huge losses last year, BAE was able to see its operating profits rise 2% in the period.

The company’s strong performance has continued this year. In fact, in its half-year results, operating profits were 60% higher than the same period last year at £1.3bn. As such, operating profits for 2021 are expected to be far higher than last year. Underlying EBIT, a key measure of profitability, is also expected to increase around 7%. This has enabled the firm to increase the dividend by 5%, giving it a strong yield of 4.5%. It has also initiated a share buyback programme of up to £500m.

Accordingly, I feel like BAE can overcome the challenges that it faces, namely the fact the US defence budget increased just 1.6% this year, far lower than inflation. A price-to-earnings ratio of around 12 also shows that the firm is not overpriced, especially as it’s not currently seeing falling profits. Therefore, this is another FTSE 100 stock that I may add more of to my portfolio.

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.

Stuart Blair owns shares in BAE Systems and Mondi. 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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