6.5%+ yields! Are these cheap, high-dividend FTSE 100 dividend stocks too good to miss?
Picture supply: Getty Photos
I really like a cut price. I additionally love high-yielding dividend shares that may supercharge my passive revenue. Proper now the FTSE 100 is filled with high shares that could possibly be thought of to be buying and selling too cheaply.
NatWest Group (LSE:NWG) and M&G (LSE:MNG) are two Footsie firms which have caught my eye just lately. Each commerce on index-beating price-to-earnings (P/E) ratios and carry blue-chip-beating dividend yields.
These readings might be seen within the under desk.
Ahead P/E ratio | Ahead dividend yield | |
---|---|---|
NatWest Group | 6.2 instances | 6.5% |
M&G | 10.3 instances | 8.9% |
FTSE 100 | 10.5 instances | 3.7% |
However are these shares sensible bargains or probably costly investor traps? And which one (if any) ought to I purchase for my portfolio?
Gorgeous outcomes…
There’s a buzz round NatWest shares at the beginning of 2024. Final month it introduced a better-than-expected pre-tax working revenue of £6.2bn. This was additionally one of the best end result since earlier than the monetary disaster of 2008.
The financial institution’s blowout end result was thanks largely to a sequence of rate of interest hikes that boosted web curiosity margins (or NIMs). This key measure of profitability rose 19 foundation factors in 2023, to three.04%.
However NatWest can also be delicate to broader financial situations. So with the UK financial system within the doldrums (and even shifting into recession), this was an particularly spectacular end result.
Hopes that revenues and income might choose up from right here have additionally risen following information that the financial system grew 0.2% in January. Analyst Danni Hewson of AJ Bell notes that “there’s been a lot of speak about ‘inexperienced shoots’ and an financial system that’s turning a nook.”
… however threats linger
However for the second, I haven’t seen sufficient to encourage me to put money into NatWest shares simply but. A chronic interval of poor mortgage progress stays on the playing cards that might weigh on the financial institution’s share worth.
Hewson added that “0.2% is hardly a quantity to get enthusiastic about, it’s only a continuation of the pattern that we’ve seen over the previous couple of years… an financial system bumping alongside the underside, flatlining and stagnating.”
Reality be advised, NatWest’s share worth stays 8% cheaper than it was a yr in the past. It’s additionally unchanged over the previous 5 years. And it’s not straightforward to see the corporate breaking out of this long-term pattern given the massive structural challenges going through the UK financial system.
With the financial institution enduring rising aggressive pressures, this can be a share I’m joyful to disregard.
A greater purchase?
In fact no share is with out danger. And M&G has issues of its personal to deal with. It’s additionally susceptible to continued weak spot in client spending energy. Income might additionally undergo if monetary markets droop once more.
However I’m nonetheless backing the funding supervisor to develop its share worth and pay strong dividends in 2024 and past. That is because of huge demographic modifications because the UK aged inhabitants steadily grows and the significance of economic planning will increase.
M&G is taking steps to successfully harness this chance by doubling-down on its asset administration and wealth operations and investing in know-how. With a Solvency II capital ratio of 199%, the corporate has appreciable monetary power to proceed investing for progress alongside paying giant dividends.
Overlook NatWest. I’d a lot slightly purchase big-yielding M&G shares for my portfolio once I subsequent have money to speculate.