I’m taking my once-in-a-decade chance to buy dirt cheap dividend shares

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Wherever I look I see top dividend shares that I’m just bursting to buy. The FTSE 100 is crammed with them and I want to grab all I can.

I’m like a child in a sweet shop. Look – there’s wealth manager M&G, yielding a staggering 9.89% a year. That income could even prove to be sustainable, as management remains committed to rewarding shareholders.

But look over there – Aviva shares currently yield 8.02% and now looks like a great time to take advantage of recent lacklustre performance. No wait – British American Tobacco yields 8.5% and trades at just 6.5 times earnings. Plus it’s one of the most reliable dividend income stocks of all.

I’ve got a sugar rush

I could go on. UK shares have been overlooked by international investors and a heap of them are going cheap at this moment. Many offer me inflation-busting dividend income streams too.

Yields are calculated by dividing the dividend per share by the share price. So when the share price falls, the yield automatically rises (provided that management maintains dividends). This moment may not last forever though. When the FTSE 100 starts to recover, those yields will automatically shrink. It’s baked in.

There are plenty of reasons why FTSE 100 shares are cheap. The UK economy has struggled for years, and the outlook is tough. As interest rates rise savers can get a better-than-previously return on rival asset classes like cash and bonds, with less risk.

London-listed stocks have been overshadowed by the impact of artificial intelligence hype on US tech stocks too. But I think Wall Street now looks too expensive with the S&P 500 trading at more than 30 times earnings. The FTSE 100 looks far better value trading at around 10 times earnings (and I do like a bargain).

There’s no guarantee the FTSE 100 will recover, of course. Some of today’s bargain stocks could turn to be hidden value traps, where earnings, profits, share prices and dividends all decline over time. So I have to keep my sweet tooth in close check and do some due diligence. 

I want to buy them all

It’s not easy though. Not with Taylor Wimpey yielding 7.7% and trading at 6.3 times earnings. Or mining giant Rio Tinto trading at 7.6 times earnings and yielding 7.68%.

I almost forgot to mention one of my favourite FTSE 100 dividend income stocks of all, Lloyds Banking Group. It’s forecast to yield 6.4% this year, but trades at a mere 5.9 times earnings.

I can’t remember last time I saw so many cheap FTSE 100 dividend income shares I was so hungry to buy. It must be a decade at least. And it may be another decade before I see a similar opportunity.

While the stock market looks set to remain volatile, I’m buying with a long-term view. By which I mean 10 years and ideally much longer. That should offer plenty of time for my returns to compound and grow. Where to start? Legal & General Group, maybe? It yields a fabulous 8.48%. Or Vodafone? I’m spoiled for choice.

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