Recent market turbulence has thrown up some fantastic bargains, especially in the FTSE 100. With that in mind, here are two of the lead index’s dividend stocks yielding 8% that could be great additions to your income portfolio.
Homebuilder Persimmon (LSE: PSN) has faced much criticism in recent years due to the quality of its homes. The company has been prioritising profits over quality in its drive to ramp-up production. This has severely damaged its reputation.
However, to the company’s credit, it has commissioned an independent review and taken its recommendations on board. Management is now trying to prioritise quality over quantity. As a result, new home legal completions for 2019 declined 4% year-on-year as Persimmon focused on putting customers before volume.
Going forward, if the corporation can keep this initiative going, the outlook for the business appears bright. The UK housing market remains structurally undersupplied and, as one of the largest homebuilders in the country, Persimmon is only likely to see the demand for its new properties grow. That’s as long as the company can keep improving its reputation.
As such, now could be the time to snap up shares in this income giant following recent declines. After these dips, the stock is trading at a price-to-earnings (P/E) ratio of 10.6 and supports a dividend yield of 8.5%. That’s one of the highest dividend yields in the FTSE 100.
Taylor Wimpey (LSE: TW) should also be able to capitalise on the state of the UK housing market over the next three-to-five years. Unlike its larger peer, Persimmon, Taylor hasn’t suffered any reputational damage over the past few years. Instead, the business has been concentrating on doing what it does best – building and selling homes.
Over the past six years, the company has earned around £2.4bn from its operations. Most of the capital has been returned to investors. A large chunk has also been reinvested back into the business. Last year, Taylor distributed £500m in cash to investors and is planning to return £610m in 2020.
At the time of writing, the shares support a dividend yield of 9%. They’re also trading at a P/E of 9.9, which suggests the stock offers a wide margin of safety at current levels.
Another reason why this dividend stock could be a great addition to your income portfolio right now is its cash balance. At the end of its last fiscal period, Taylor had nearly £518m of cash on the balance sheet. That is about 16p per share.
Not only does this cash balance give the group a financial backstop if the economy takes a turn for the worst but, after stripping the cash out from its valuation, the stock looks even cheaper. Shares in the homebuilder are dealing at an ex-cash P/E of 8.8.
The post I’d buy these 2 FTSE 100 dividend stocks yielding 8% right now appeared first on The Motley Fool UK.
Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020