The stock market dip feels like a brilliant opportunity to add great value dividend-paying FTSE 100 companies to my Stocks and Shares ISA. Plenty of my favourite stocks are suddenly cheaper, and their yields look more compelling too.
Here are five great income stocks I’d happily consider buying today and holding for years when I have the cash. All yield 5% and in some cases a fair bit more, and have bags of comeback potential.
FTSE 100 income heroes
Family-controlled fund manager Schroders (LSE: SDR) baffles me. It’s looked like an unmissable bargain buy for years. But investors who dived in will probably have regretted it. Its shares are down 14.53% over one year and 28.28% over five.
It’s been hit by the turmoil of the last few years. This has rattled stock markets and hit customer inflows and net assets under management. It looks decent value as a result, trading at 12.6 times forward earnings, although not dirt cheap. But its 5.71% trailing yield is difficult to resist. That’s forecast to climb to 5.9% in 2024, covered 1.5 times by earnings.
Shareholder payouts have been fairly solid over the last decade, but dividend per share growth appears to have stalled lately. Let’s see what the charts say.
Chart by TradingView
I’d expect Schroders to revive when interest rates fall, the economy rebounds and investors get their mojo back. Let’s hope that this time it really does live up to its potential.
The commercial property sector has had a tough few years but I expect it to come tearing back when interest rates fall and economic optimism rises. Land Securities Group announced last month that it had almost halved first-half losses. But its shares have yet to recover. They look good value and so does the yield, as my table shows.
| Stock | Price-to-earnings ratio | Dividend yield |
| Land Securities Group | 12.5x | 6.33 |
| NatWest Group | 6.4x | 5.41% |
| Rio Tinto | 9.1x | 6.57% |
| Sainsbury’s | 11.99x | 5.01% |
| Schroders | 15.3x | 5.71% |
The NatWest Group share price is up a blockbuster 30% over the last year. Trading at just 6.4 times trailing earnings, it looks like there’s room for more and the yield is a meaty 5.41%. Falling interest rates may squeeze net interest margins. But they may help the banks in other ways, say, by reviving the mortgage market and cutting debt impairments.
Dividend stars
Mining giant Rio Tinto has been hit by the slowing Chinese economy. It’s another stock that could get a tonic when interest rates are cut. Its shares are up just 2.29% over 12 months, trailing the FTSE average return of 8.98%. This offers scope for recovery and the low valuation and high yield look tempting to me.
Grocery chain Sainsbury’s is another with a solid yield and undemanding valuation. Its shares have barely shifted over the last year.
I think there’s bags of comeback potential here, although it needs to go some to make ground on sector leader Tesco. I like out of favour shares, and it’s about time the market shows these some much-needed love. Hopefully, they’ll spring into life after I add them to my Stocks and Shares ISA, rather than before.
