Today I’m trying to decide if I should I buy these FTSE 100 stocks that would pay me dividends right now.
A dirt-cheap FTSE 100 stock
It could be said that food retailers are a safe option for stock investors when times get tough. The essential products they sell mean that earnings remain more stable that other retail firms, or so the theory goes.
Does this mean that I should consider buying J Sainsbury (LSE: SBRY)? Well, on paper, Britain’s second-largest grocery retailer offers plenty of bang for my buck.
Firstly, the 4.9% forward dividend yield beats that of industry rival Tesco by almost a full percentage point. Its price-to-earnings (P/E) ratio of 10.8 times meanwhile sits just outside the bargain watermark of 10 times and below. The Footsie firm seems to offer terrific all-round value, right?
Cheap for a reason?
I like the steps Sainsbury’s is taking to improve its presence in the fast-growing online delivery segment. But in my opinion, it’s less ‘safe’ than it appears and the risks facing the supermarket chain outweigh the potential benefits.
Former FTSE 100 supermarket Morrisons illustrated the dangers facing Britain’s supermarkets. It warned on Monday that the worsening geopolitical environment and increasing inflationary pressures could have a “material adverse effect” on earnings this year. Its anyone guess as to how long this problem will last for.
Sainsburys also faces a significant long-term threat from Aldi, Lidl and US internet giant Amazon. These businesses continue to rapidly expand their store and/or online operations in Britain.
Sainsbury’s shares are cheap today. But I think they’re cheap for a reason and so I will continue to avoid the stock.
A UK share for the inflation age
Gold is a very popular wealth preserver when inflation heads through the roof. The price of the precious metal tends to rise when the value of paper currencies comes under pressure, like today.
For this reason I think Fresnillo (LSE: FRES) could be a top FTSE 100 stock to own right now. Gold prices came within a whisker of hitting new record highs above $2,070 per ounce last month. I think another attempt could be around the corner.
Data from the OECD on Tuesday showed how fast inflationary pressures are growing. Consumer price inflation skipped to 7.7% in February, a 32-year high and up from 7.2% a month earlier.
Gold’s looking good
So things are looking good for gold prices. And by extension so is the revenues outlook for many UK gold mining stocks. I’d rather invest in a company like Fresnillo because gold as an asset just sits in a vault collecting dust and doesn’t provide any income.
Fresnillo on the other hand offers investors the chance to receive dividends. And for 2022 the Mexican miner provides a handy 2.7% dividend yield for 2022.
Gold stocks expose me to the complex world of mining and the dangers that this poses to profits. Nonetheless, the prospect of dividends still makes Fresnillo a more attractive option to me than buying the yellow metal itself.