I’m keen to take advantage of today’s super-cheap share prices to add another FTSE 100 dividend stock or two to my portfolio. With around 15 shares on the index yielding at least 6% a year, and some paying income of more than 10%, there’s plenty of choice.
I can’t afford to buy them all, obviously, so I’m sifting through the highest yielders to find where the best opportunities lie.
I have a tiny stake in housebuilder Persimmon, which until recently was yielding almost 20% a year. That was clearly ridiculous and management subsequently cut the dividend by three quarters. Today, it yields just 5.66%.
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Out shopping for income
It’s incredibly cheap though, trading at 4.24 times earnings as a house price crash threatens. I think it’s a little too early in the cycle to buy housebuilders, as we haven’t yet reached the point of maximum pain.
Even if we had, I would prefer Taylor Wimpey, which looks a more solid operation but is also cheap at 5.56 times earnings. Better still, it’s forecast to yield a thumping 9.32% in 2023, and that may even be sustainable (although dividends are never guaranteed).
Telecoms giant Vodafone Group is another that catches the eye, trading at 7.35 times earnings while yielding 10.9%. I’m not putting any faith in its dividend though, as new broom CEO Margherita Della Valle looks to shake up this sprawling operation.
She could save a heap of money by slashing the dividend in half. That’s what I’d do. Although a 5% yield would still be good, Vodafone is a mess than needs sorting and I’m standing clear.
The FTSE 100 dividend stock I’m really keen to buy right now is Anglo-Swiss commodity giant Glencore (LSE: GLEN).
Its shares have been hit by weak market sentiment, dropping 16.4% over the last six months, after China’s post-Covid reopening disappointed. Over 12 months, Glencore is up 15.99%.
Commodity stocks are notoriously volatile, swinging up and down depending on the mood of the markets. They have inevitably been hit by rising interest rates, but as these peak they should recover. We saw that last week, after June’s 3% US inflation figure put a rocket under the FTSE 100. Antofagasta, Anglo American and Glencore all featured among the top 10 climbers.
This is the stock for me
Glencore still looks cheap, trading at just 4.4 times earnings, so there could be more to come. The recovery will no doubt be bumpy, so I’m not expecting instant returns. However, I only buy shares with a minimum 10-year view, and ideally longer.
Glencore is a leading producer of metals like copper, cobalt, zinc, and nickel, all required for the renewables revolution. It’s also a leading producer of company dividends, with a forecast yield of 7.94% this year and 7.04% in 2024.
The big threat is that the Chinese growth story is over and its voracious appetite will calm to more normal levels. Plus interest rates could stay higher for longer, squeezing demand while driving up costs. Glencore also has thin operating margins of just 6%. Yet I hope to add it to my portfolio, as soon as I find the cash.
