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FTSE 100 dividend shares are really delivering right now. I’ve spotted three that are not only flying, but still look ridiculously cheap.
Each has posted stunning gains over the past year, yet continue to boast low price-to-earnings (P/E) ratios and juicy yields. So let’s take a closer look.
Look at British American Tobacco’s yield!
British American Tobacco (LSE: BATS) shares have had a storming run, rising 40% over the past 12 months.
Despite that, they still trade on a P/E of just nine. That’s seriously low for a £72bn global business with powerful brands and steady demand.
What stands out for me, though, is the income. The shares currently offer a trailing yield of 7.1%. That reflects a well-covered payout, with the group targeting 65% of earnings to be returned to shareholders.
2024 results showed profit from operations up 1.4% to £27.3bn. Cost savings are feeding through, and the business is building strength in non-combustibles like vapes and nicotine pouches.
There are huge risks, of course. Smoking remains lethal and subject to constant regulatory attack. And while smokeless rivals are gaining ground, fresh health risks may trigger a backlash. It’s the only sector I shun, but can see why other investors would consider buying this long-established dividend growth stock.
NatWest is back on form
NatWest Group (LSE: NWG) has beaten British American Tobacco to grow a staggering 56% over the last year. Yet it also looks super-cheap trading on a P/E of just nine.
The trailing yield isn’t quite as fabulous as the tobacco giant’s bumper payout, but it’s still pretty attractive at 4.55%.
2024 pre-tax operating profit rose 0.3% to £6.2bn, beating expectations. On 2 May, we learned that Q1 profits were up 36% to £1.8bn, due to higher margins on deposits and increased mortgage lending.
Competition in UK banking is intense and net interest margins could narrow if interest rates fall quickly. But with the government’s remaining stake whittled down to just 2%, I thinks NatWest is another dividend growth stock to consider.
BT Group is growing again
BT Group (LSE: BT.A) shares have surged 60% over the past year, outpacing both of the above. Yet again, the P/E is a lowly 9.2, while the trailing yield is just shy of 5%.
Investors seem to be waking up to BT’s transformation. The company has cut costs aggressively, has been rolling out full fibre at speed, and simplifying its business structure.
Still, there’s work to do. Net debt of £20bn still exceeds its £16.5bn market cap. Its Openreach full-fibre broadband rollout may struggle to hold on to customers amid competitive pressure from newer, nimbler rivals. BT still has that top-heavy pension scheme.
I think it’s the riskiest of the three stocks I’ve listed here. Yet all three look well worth considering for investors who fancy a splash of growth with their dividends. Or is it the other way round?
