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I hope to take advantage of the fall in stock prices of many FTSE 100 companies. The UK benchmark has taken a beating in the wake of a banking crisis that has claimed stock market victims in both the US and Switzerland so far.
As volatility increases, I’m looking for dividend-hit stocks that could be bargain buys for my passive income portfolio. After all, general market selloffs can present unique opportunities. Macro factors often undermine the valuations of otherwise healthy businesses.
With that in mind, here are two Footsie dividend stocks that look cheap to me today.
legal and general
He legal and general (LSE:LGEN) share price fell 18% over the past year. But just a few days ago, shares were essentially flat on a 12-month basis.
A sharp drop in the asset manager’s shares following the collapse of Silicon Valley Bank means that today’s price could be an attractive entry point for me.
Legal & General currently offers a whopping 8.6% dividend yield, which is considerably higher than the FTSE 100 average. Unusually high yields can sometimes be a worrying sign, but I don’t think that’s the case here. .
In fact, I think these dividend stocks are oversold. Legal & General recently posted a 12.5% increase in full-year operating profit to £2.5bn. Additionally, cash generation of £1.9bn represents an increase of 14%. Crucially, the company’s Solvency Ratio II also increased by 49% to 236%.
The combination of a strong balance sheet and strong cash generation enabled the board to increase the full-year dividend by 5% to 19.37 pence.
Of course, challenging bond market conditions pose risks. Volatility in 2022 hurt the group’s investment portfolio, reducing the value of assets under management by £225bn. A litany of recent bank failures is not helping the situation.
However, the company’s numbers look encouraging overall and I don’t think the share price movement reflects this. If I had some extra money, I would invest in Legal & General stock for a great stream of passive income.
WPP
The largest advertising agency in the world, WPP (LSE:WPP), has also suffered in the last fortnight. The stock price is down 15% in 12 months.
WPP shares are currently yielding a healthy 4.3%.
I think the recent trading action in this stock has created another good example of a mismatch between the company’s fundamentals and its valuation. Consequently, I think that WPP could also be an attractive buy for me at this point in time at current share price levels.
The company’s full-year results show evidence of financial strength. Pre-tax annual profit rose 22% to £1.16bn and the group announced a big increase in final dividend per share, up 31% to 24.4p.
The new accounts helped the company significantly in 2022, with $5.9 billion in net business won. Notable names in the client books now include Amazonaudiobook provider owned by Audible and French food giant danone.
The future orientation is also optimistic. WPP anticipates that it will generate organic revenue growth between 3% and 5% in 2023.
It’s true that the possibility of global recessions could be a big hurdle considering that advertising is a notoriously cyclical industry.
However, the economic environment is already challenging and WPP is showing impressive resilience. In that context, the risk/reward profile looks good to me. If I had cash on hand, I would invest in the company today.
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