Here’s why I’m bullish on the shares!

What they do

Taylor Wimpey is one of the UK’s largest house builders. It has struggled in recent months due to economic shocks that have hurt house-building numbers. One of the biggest issues it has faced is higher-than-expected inflation.

Lloyds is the UK’s largest mortgage lender. Higher interest rates have been a double-edged sword for the business, providing increased income levels, but the chance of more defaults too.

Reckitt is one of the largest cleaning and healthcare businesses in the world. It possesses excellent brand power, as well as wide coverage.

The bear case broken down

For Taylor Wimpey, continued economic issues are a worry, as they’re impacting the housing market. For example, mortgage rates are higher due to interest rates, making buying much harder for consumers. With less sales, performance and returns are impacted. Plus, higher inflation is making building homes costlier. If this continues for a sustained period, I’m worried returns could be impacted.

For Lloyds, as well as continued volatility, I’m more concerned about a recent issue potentially hurting investment viability. I’m referring to an investigation by the Financial Conduct Authority (FCA) into motor finance practices and mis-selling. The business has already set aside money for potential fines, but this could dent sentiment, as well as returns.

Finally, Reckitt’s biggest issue for me is two fold. Firstly, inflationary issues could hurt margin levels and profits. Next, as many of its products are considered premium, consumers with tighter budgets could turn to non-brand essentials, as well as discount supermarkets for their goods. In turn, this could hurt performance and returns.

My bull case

Starting with Taylor Wimpey again, I reckon returns could keep flowing in due to its excellent market position, as well as the housing imbalance in the UK. With demand outstripping supply, there’s an opportunity for the business to plug this gap, and grow performance and returns.

The shares look decent value for money on a price-to-earnings ratio of 13, and offer a dividend yield of over 7%. However, I’m conscious that dividends are never guaranteed.

Moving on to Lloyds shares, its position as the UK’s leading mortgage provider is enviable. Similar to Taylor Wimpey, it could capitalise on the housing imbalance as people look to secure their dream homes.

Lloyds shares look dirt-cheap to me, on a P/E ratio of just six, and offer a dividend yield of 5.4%.

Finally, despite recent problems, including legal and accounting issues, it’s hard for me to ignore the firm’s brand power, track record, and wide presence. I reckon it’s a great example of a business that will rebound from its current dip, and soar once more, as well as providing consistent returns and growth.

The shares are reasonably priced, trading on a P/E ratio of just 13. Furthermore, the dividend yield on offer of 4.5% is attractive.

The post 3 FTSE 100 shares I’d love to buy for powerful passive income! appeared first on The Motley Fool UK.