I love buying cheap FTSE 100 stocks. Who doesn’t fancy a bargain? I also love dividend-paying stocks with high yields. Put them together and what have you got? Well, let’s see.
I’ve been trawling the UK’s blue-chip index for companies that look good value and yield at least 5% a year. These three jumped out and now may be a brilliant time to consider buying them, because if their shares rise so will their valuations, while those yields will come down.
NatWest shares soar
Today, NatWest Group (LSE: NWG) combines a bumper 5.3% trailing dividend yield with a lowly P/E ratio of just 9.1. A high yield and low valuation can be a sign that their stock is struggling, but that’s not the case here.
The NatWest share price is up a hefty 40% over the last year, and a fabulous 220% over five. All dividends are on top of that.
Higher interest rates have given the big banks an opportunity to widen net interest margins, the difference between what they pay savers and charge borrowers. Profits are surging as a result. In the case of NatWest they’re up 24% to £7.7bn in full-year 2025. However, growth may slow with interest rates likely to fall.
Also, NatWest is heavily focused on the UK, and the domestic economy isn’t exactly thriving. But given the income and entry price, I still think it’s well worth considering with a long-term view.
LandSec has recovery potential
High interest rates haven’t been as helpful for real estate investment trust (REIT) Land Securities Group (LSE: LAND). LandSec is one of the UK’s largest commercial property owners and developers, with a diversified portfolio of offices and shopping centres. Unfortunately, it’s been hit by the working from home trend, online shopping and the cost-of-living crisis.
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Rising inflation and interest rates then pushed up the cost of capital, while economic concerns have knocked gains from property disposals.
The Landsec share price has had a volatile five years, climbing just 8.5% in that time, but there are signs of recovery as it’s up 16.7% in the last year.
With interest rates expected to fall, the outlook is getting brighter and while Landsec isn’t as cheap as NatWest, a P/E of 13.2 isn’t bad. The trailing yield of 6.1% is rather good. There are still risks, but the rewards may start to flow and I think Landsec is also worth considering for income seekers, with a minimum 10-year view.
Admiral rate of income
Motor insurer Admiral Group (LSE: ADM) combines a stunning trailing yield of 6.67% with an inexpensive P/E of 13.3. Its shares were flying last summer, with first-half interim result showing pre-tax profits up 69% to £521m, driven by strong performances in its UK motor, household and Admiral Money operations.
Since then, the stock has been somewhat volatile. It spiked about 3,600p last year, but has since fallen 20% to 2,865p. Over 12 months, it’s up a modest 4%. However, this could offer new investors an opportunity to bag that income at a decent price.
Admiral has been hit by a slew of broker downgrades, as tough motor insurance competition and continued high claims inflation threatens margins. This is a cyclical sector, so share price ups and downs are to be expected. But it’s still worth considering. The shares may be bumpy in the short term but with luck, the dividends should compensate.
