Many FTSE 100 stocks are soaring right now as worries over a potential banking crisis recede. The UK’s premier share index is now on course for its best trading day so far in 2023.
The FTSE index is currently up 1.7% at 7,530 points. Yet many blue-chip companies continue to trade at a meaty discount to levels recorded just a week ago.
This gives lovers of value stocks like me a chance to nip in and grab a bargain or two.
The benefits of dip buying
Of course market confidence remains extremely fragile. News of fresh banking sector stress could easily send the FTSE 100 lower again.
But I believe dips like we’ve seen over the past week shouldn’t be ignored. During any period of investor nervousness, great stocks are heavily sold alongside more vulnerable shares. So in effect individuals can buy these terrific companies on sale.
It can be easy for new investors to get swept up in the selling panic. We’ve all been there. This is where taking a long-term view of things becomes so important.
Quality stocks that are oversold during periods of market volatility often rebound strongly. This can supercharge a share pickers’ eventual returns if they are brave enough to buy during dips.
3 FTSE 100 stocks on my radar
With this in mind, here are three top FTSE 100 bargains I’m thinking of buying for my own portfolio.
Vodafone Group
Telecoms titan Vodafone Group looks set to thrive as the digital revolution clicks through the gears.
I’m aware that its huge investment in 5G and broadband could reduce the amount of cash it has to spend on dividends. However, as a potential investor, I find the company’s growth strategy highly appealing. It could help Vodafone move ahead of the competition and deliver supreme returns over the next decade.
Today Vodafone shares trade on a forward price-to-earnings growth (PEG) ratio of 0.9. They also sport a chunky 8.5% dividend yield.
Rio Tinto
I’m considering adding to my existing Rio Tinto holdings following recent weakness. The mega miner trades on a forward price-to-earnings (P/E) ratio of 9.2 times and carries a meaty 6.8% dividend yield.
Okay, demand for its core commodities like iron ore and copper remains uncertain in 2023. The ongoing Covid-19 crisis in China means raw materials consumption there might remain weak.
Yet from a long-term perspective I expect profits to soar. Themes like the green energy transition and rising urbanisation should supercharge sales for its metals. The electric car boom alone could well take Rio’s earnings to the next level, as the graph below suggests.
Image: Precedence Research
Aviva
Financial services business Aviva also has brilliant earnings possibilities as the UK’s elderly population grows. I’m expecting sales of its pensions, annuities, care plans, and other retirement products to experience strong and sustained growth.
On the downside, the FTSE company operates in a highly competitive industry. Yet I believe its exceptional brand strength limits the risk this poses to profits.
Aviva’s share price currently carries an 8% forward dividend yield and low P/E ratio of 8.1 times.
The post FTSE 100 stocks are rallying! 3 cheap dividend shares I’d buy right now appeared first on The Motley Fool UK.
Our best passive income stock ideas
Do you like the idea of dividend income?
The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?
If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…
Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.
What’s more, today we’re giving away one of these stock picks, absolutely free!
Get your free passive income stock pick
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
If I’d invested £1,000 in Ocado shares 1 year ago, here’s how much I’d have now!
As HSBC shares slide, should I jump in and buy?
How to earn passive income in a Stocks and Shares ISA
Start earning passive income with just £100 a month
Is the Oxford Nanopore share price dip a buying opportunity?
Royston Wild has positions in Rio Tinto Group. The Motley Fool UK has recommended Vodafone Group Public. 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.