I’m searching for the best FTSE 100 shares to buy to boost my dividend income. Do the large dividend yields at these London Stock Exchange giants make them screaming buys?
Each of these UK shares carries a yield above the 4% FTSE index average.
The ugly duckling
Housebuilder Barratt Developments (LSE: BDEV) didn’t get any love from the market last week. That’s even though the firm released yet another set of excellent trading numbers.
Barratt’s share price slipped despite the business raising forecasts for the financial year ended June. It said that demand for its new-builds remained strong throughout the year and across the country too.
Completions are now back to pre-pandemic levels, it said. And the FTSE 100 firm predicted it will grow annual completions between 3% and 5%, despite the threat posed by rising interest rates.
9.8% dividend yields
Barratt is one of several UK housebuilding shares to hike profit forecasts. Yet the ultra-low valuations of almost all of these stocks doesn’t seem to reflect this reality.
Barratt trades on a forward P/E ratio of just 6 times, for example. I think companies like this should remain impressive profit makers beyond the short term too. Demand for new homes is red hot and should remain so for years, due to failing housebuilding policy.
I own this share in my portfolio and am considering adding to my holdings. And especially as the forward dividend yield here currently sits at an enormous 9.8%.
A beaten-down bank
I won’t buy Barclays (LSE: BARC) shares though. That’s even though it also provides tremendous all-round value for money, at least on paper.
The banking stock trades on a forward P/E ratio of just 5 times today. On top of this its dividend yields sit at 5.2% for 2022 and at an even more impressive 6.1% for 2023.
I’m not dip-buying Barclays because its operations are particularly economically sensitive. On the plus side, conditions in the bank’s US marketplace continue to hold up robustly. But the firm faces a wave of loan impairments and a sharp deterioration in revenues as the United Kingdom economy sinks.
Looking East?
Moreover, I’m inclined to swerve past Barclays as I worry about the outlook for the British economy in the medium-to-long term. The Organisation for Economic Cooperation and Development (OECD) thinks the United Kingdom will register zero GPD growth in 2023, due to high inflation. Conditions could remain tough beyond that too as the economy adjusts to post-Brexit rules.
However, I could be minded to buy the FTSE 100 bank if rumours on international expansion prove correct. News was leaked to Reuters last week that Barclays is searching for a partner to enter China’s $4.3trn asset management industry.
The bank pulled out of Asia and Africa several years ago to focus on its core Western market. A subsequent return to fast-growing China could help supercharge long-term profits.
I’ll be keeping tabs on developments here with a view to possibly buying Barclays. And particularly if it continues to trade at rock-bottom prices.