The FTSE 100 is rising strongly as fears surrounding the Covid-19 crisis erode. It’s too early to say that a sustained recovery in investor sentiment is in the works. But I still believe now is a great time to go shopping as many UK shares still offer brilliant value.
These two FTSE 100 dividend stocks look brilliantly cheap today. Should I buy them for my stocks portfolio this new year?
A cheap but risky FTSE 100 stock
Dividend yields at Land Securities (LSE: LAND) can be described as pretty bulky at current levels. For the years to March 2022 and 2023, these sit at 4.5% and 4.9% respectively. Shareholder rewards are tipped to steadily recover along with profits as shoppers and office workers return en masse following earlier Covid-19 lockdowns.
But these big dividend yields aren’t enough to tempt me. As a long-term investor, I’m worried about what the stunning rise of homeworking and e-commerce will mean for UK property shares like this.
Data from the Valuation Office Agency showed the amount of office space in England slip 2% in the year to March 2021. That’s 18m sq ft that was no longer needed, or the equivalent of 35 Gherkin buildings in the City of London.
The trend is expected to have continued since last spring and will remain as businesses try to cut costs, worker expectations change following the pandemic, and technological improvements allow firms to remain connected with their employees and customers without the need to be in the office.
As I say, Land Securities shares look cheap. The the business trades on a forward price-to-earnings growth (PEG) ratio of 0.5. Still, it’s my opinion that this low valuation reflects the steady decline of commercial property and physical retail. I’d much rather buy other cheap FTSE 100 shares right now.
9% dividend yields!
Rio Tinto (LSE: RIO) is one of these low-cost blue-chips I’d rather buy. The mining giant trades on a price-to-earnings (P/E) ratio of 7.8 times for 2022, well short the bargain-benchmark of 10 times and below. But it’s in the dividend arena where the business really looks too cheap to miss. Its yield for this year sits at a titanic 9%.
I’m not going to pretend that this FTSE 100 share also doesn’t come without risk. The threat of sinking commodities demand from China is very real as the country’s property sector teeters. Any failure of heavily-indebted real estate firm Evergrande could send an economic shockwave across the nation.
However, this is a risk I’d be prepared to stomach. And that’s not just because of the exceptional value Rio Tinto offers up right now. I think the long-term demand outlook for its commodities appears highly promising.
I believe interest in its copper, aluminium and lithium will grow as electric vehicle production shifts through the gears. Infrastructure upgrades in developed regions and strong economic growth in emerging nations should supercharge demand for its iron ore too.