Share prices are sinking across the FTSE 100. I think this presents a brilliant opportunity to pick up some top-quality dividend shares at knock-down prices.
Billionaire Warren Buffett’s advice to “be fearful when others are greedy and be greedy when others are fearful” has helped other investors supercharge their long-term returns. Financial markets have always recovered strongly from previous crises. And those who bought at the bottom of the market have often made life-changing returns.
The following dividend shares have seen their yields leap in recent days. Here’s why I think they are brilliant bargains for long-term investors to buy.
Airtel Africa
Profits at telecoms businesses like Airtel Africa (LSE:AAF) tend to be stable during economic downturns. But this isn’t the only reason why I’m thinking buying this heavily sold FTSE share right now.
Airtel is packed with organic growth potential. As well as providing telecoms services, the company is a major player in Africa’s mobile money industry. Today, penetration is low across these markets and demand is surging as personal income levels soar and populations grow.
In the last financial year, the firm’s customer base surged 9% to a whopping 140m. Meanwhile revenue rose 12% and underlying EBITDA increased 11%. As the firm expands its services into new territories I expect these numbers to keep ticking higher.
Airtel’s has to spend huge amounts of money to keep growing, however. Last year, capital expenditure rose to $748m as it acquired spectrum licences in several of its territories.
But the impact of this on near-term earnings and dividends is something I’d be happy to accept as an investor. I’m confident they will turbocharge shareholder returns over the next decade.
Recent share price weakness has charged Airtel’s forward dividend yield to 4.5%. This beats the FTSE 100 corresponding average of 3.8% by a decent margin. The stock also trades on a price-to-earnings (P/E) ratio of just 7.6 times for this year.
M&G
Dividend yields at M&G (LSE:MNG) have also leapt as the financial services giant’s share price has fallen.
Today this UK blue-chip share carries a huge 10.9% yield for 2023. Its P/E ratio for this year has also toppled to just 10.4 times.
M&G has slumped as worries over the cost-of-living crisis have intensified. As interest rates rise and the economy cools, people will have less money to invest. The danger is that asset managers like M&G could see demand for their services dry up.
Yet the long-term outlook for the FTSE 100 stock remains extremely bright. I don’t think this is reflected by its current rock-bottom valuation.
Investment management is becoming increasingly big business as people search for ever-bigger returns on their money. And M&G, which has been around for 170 years, is well placed to exploit this trend. It is one of the most trusted brands in the industry.
The company currently operates in 28 countries. And it is actively expanding in fast-growing Asian markets to give earnings growth a big boost. I think it’s a brilliant bargain, like Airtel Africa.
