I’m searching for the greatest FTSE 100 value stocks to buy right now. I’m looking for ones with above-average dividend yields that could boost my passive income. And I’m seeking companies whose low earnings ratios could pave the way for long-term capital gains.
These UK blue-chip shares have both been popular picks with Hargreaves Lansdown investors during the week to 6 December. Which should I add to investment portfolio when I next have the opportunity?
Rolls-Royce Holdings
Engineer Rolls-Royce (LSE:RR) was the most-bought share bought through Hargreaves Lansdown’s trading platform in that seven-day period. It was responsible for 3.26% of all buy orders.
Investor appetite for the engine builder has jumped again since late November. Back then the firm announced headline-grabbing plans to boost operating profit of £2.5bn-£2.8bn by 2027. This will involve a sharp pick-up in operating margins across the business.
It would also seek to cut up to £500m worth of costs to supercharge profit, it said, and embark on additional asset sales of £1bn-£1.5bn.
But despite further recent price gains, Rolls shares trade on a price-to-earnings growth (PEG) ratio of just 0.9. Any reading below 1 indicates that a stock is undervalued.
I’m not convinced the company is a slam-dunk buy, however. Its recovery following the end of Covid-19 restrictions has been impressive. But growing stress on the global economy casts a shadow over sales and orders across its Civil Aerospace and Power Systems units.
This isn’t a dealbreaker for me on its own. Indeed, the company’s Defence division could lessen any weakness at group level as arms budgets rise.
The problem for me is that the company also has a lot of debt it still has to pay back in the next two years. And declining revenues at its core civil aerospace division in particular could damage its ability to repay its loans. This in turn could scupper its transformation programme as well as any plans it may have to reinstate the dividend.
Legal & General Group
Would Legal & General (LSE:LGEN) be a better buy for my UK shares portfolio today? The financial services firm was the third most bought stock during the seven-day period, responsible for 1.02% of buy orders.
I think the answer is yes. Indeed, I already own this FTSE company in my portfolio. A rock-bottom price-to-earnings (P/E) ratio of 11.9 times and 9.1% dividend yield for 2024 means I’m hoping to add to my holdings before long.
I believe the company could remain under pressure a little longer as the macroeconomic landscape remains challenging. But I’m a long-term investor and believe the Legal & General share price will soar from current levels.
The company has terrific growth potential as the world’s population rapidly ages. In this environment it can expect profits across its retirement, life insurance and wealth products to rise. It is also well placed to capitalise on the booming Pension Risk Transfer (PRT) market.
Just last month Legal & General sealed the £4.8bn full buy-in for the Boots pension scheme. This was Britain’s largest single such transaction by premium size, and the company’s biggest by member numbers (53,000).
I expect the firm to generate huge profits over the next decade as it exploits sales opportunities across Europe and North America.
