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2 FTSE 100 shares with 6% dividend yields! I’d buy these cheap UK shares in an ISA today

Royston Wild
·3-min read
The UK national flag in front of Canary Wharf skyscrapers where professionals trade shares for a living.
The UK national flag in front of Canary Wharf skyscrapers where professionals trade shares for a living.

Are you on the hunt for dirt-cheap dividend shares? Well these FTSE 100 stocks offer plenty for savvy investors to get stuck into. Let me explain why I’d happily buy these UK shares for my Stocks and Shares ISA.

7.5% dividend yields!

Vodafone Group’s (LSE: VOD) one FTSE 100 dividend hero that has really caught my eye. It offers a mighty 7.5% forward dividend yield at today’s prices. And the telecoms titan is in good shape to make good on current dividend forecasts thanks to its stunning cash generation and the cash boost from the sale of its towers business.

But Vodafone’s not all about income as it also offers plenty for growth investors to sink their teeth into. The acquisition of Liberty Global’s assets in Europe significantly bolsters the UK share’s multi-play offering in its largest market and consequently its cross-selling possibilities. The rollout of 5G across the globe will also present some great revenue-creating opportunities.

Finally, the telecoms giant can expect sales in its emerging regions to light up as data demand explodes. City analysts expect earnings at Vodafone to balloon 26% in the current year to January 2021. And they reckon they will increase 43% in fiscal 2022. Forget about the threat of a painful and prolonged economic downturn. This FTSE 100 stock remains in great shape to deliver mighty profits growth over the short-to-medium term. And a forward price-to-earnings growth (PEG) ratio of 0.7 makes it dirt cheap considering the UK share’s exceptional earnings outlook, I feel.

A stock price graph showing growth over time, possibly in FTSE 100
A stock price graph showing growth over time, possibly in FTSE 100

Another cheap UK share with BIG dividends

Gold digger Polymetal International (LSE: POLY) is another FTSE 100 stock that offers terrific value for money, I believe. Firstly, like Vodafone it offers a stunning forward dividend yield, in this case a shade off 6%. It also looks terrific in relation to its short-term earnings forecasts. Today this UK share trades on a PEG multiple of 0.1.

It’s no wonder that City analysts expect Polymetal’s earnings to rip 81% higher in 2020. The Covid-19 crisis has lit a fire under gold prices this year, the yellow metal hitting all-time highs above $2,050 per ounce in recent months. Gold has fallen back more recently but the number crunchers don’t expect safe-haven buying to stop just yet. It’s why broker consensus suggests Polymetal’s earnings will rise another 27% year-on-year in 2021.

It’s not just the huge economic ramifications of Covid-19 that will keep investment demand for gold chugging along. You’ve also got persistent trade tensions rumbling on in the background. Low interest rates and frantic money pumping by central banks is also stoking inflationary fears. There’s the possibility of an economically-catastrophic Brexit to consider too when pondering the chances of fresh gold price gains.

I’d rather invest in Polymetal International to ride this trend than buy gold itself or a gold-backed product like an ETF. This is because getting exposure to gold via UK shares provides investors with the added benefit of receiving dividends. And my, that predicted 2020 dividend for Polymetal is dynamite.

The post 2 FTSE 100 shares with 6% dividend yields! I’d buy these cheap UK shares in an ISA today appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Motley Fool UK 2020