These could be the best FTSE 100 shares to invest in

These FTSE 100 shares all have dividend yields in excess of 5%, relatively low P/E ratios and have at least 5% dividend growth. So, they combine a good dividend with value, which in turn might make them very good investments for me.

Rio Tinto (LSE: RIO) is a well-known mining company. It’s is a major iron ore miner, so from that respect is tied to steel production and in turn, to some extent, Chinese economic growth. But it is also more than an iron ore miner.

It digs for copper, aluminium, silver, gold, bauxite and diamonds too. At the end of last year, on 21 December, the miner announced it had entered into a binding agreement to acquire the Rincon lithium project for $825m. It says Rincon is one of the largest undeveloped lithium brine projects in the world. This should position it well for expanding electric vehicle manufacturing.

The challenge is for Rio Tinto to keep producing when the prices of commodities fall. It also has to watch for ESG issues, especially on the environmental front (that’s the ‘E’ in ESG). 

Overall with a P/E of 10 and a dividend yield of 9%, there’s a lot I like about this FTSE 100 share.

Two good value FTSE 100 stocks that provide income

Housebuilder Persimmon (LSE: PSN) and insurer Admiral (LSE: ADM) are two other FTSE 100 shares I think could reward me long term. The former has a dividend yield of 10% and a P/E of 11, while Admiral has a dividend yield of 5% and a P/E of 18.

While Persimmon’s business could be hurt by higher interest rates, for now, house prices keep rising. That said, demand may weaken as support schemes like Help to Buy end. But if higher interest rates do dent the housing market, the government may step in to help first-time buyers again in future.

Persimmon is a high-margin, high-return-on-capital business, it has a 24% operating margin and a return on capital employed (ROCE) of 25%. If one looks at Barratt Developments for comparison, it’s 18% and 13%, respectively. That’s quite a difference. I think it comes down to Persimmon’s focus on family homes outside the capital and its better supply chain – for example, it owns its own a timber frame, wall panel and roof cassette manufacturing facility and has built its own brickworks and tileworks facilities. It may also just buy land for future development at better prices.

The third of my FTSE 100 shares

Lastly, just a quick word on Admiral. It’s a steady business. Insurance is needed even when inflation is high so it should do ok whatever the economic backdrop is. On top of that, Admiral has a good brand. But insurance is also a competitive industry where the main differentiator is price. That makes it hard to raise prices. The industry also has to adapt to new rules on not offering cheaper prices to new customers over loyal ones. 

When I look at the fundamentals, Rio Tinto, Persimmon and Admiral are up there among the very best FTSE 100 companies to invest in right now. Rio Tinto and Admiral — as an extra bonus — should also do fairly well in this inflationary environment. 

I’d buy all three for my portfolio.