Should I buy these cheap FTSE 100 stocks for a passive income? – Motley Fool UK

December 12, 2021 by No Comments

Dividend stocks are a great way of generating a decent passive income. And I think 8.9%-yielding Taylor Wimpey (LSE: TW) could be one of the best FTSE 100 stocks to buy to make a lot of cash. It’s why I already own the housebuilder in my Stocks and Shares ISA today.

Make no mistake, the chronic supply and demand imbalance that’s driving property prices to the stars isn’t going to be cured any time soon. Government has talked tough on creating 300,000 new homes a year by the middle of the decade.

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Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

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But signs are growing that it’ll miss this target by some distance. At the same time, a blend of low interest rates and Help to Buy support for first-time buyers is electrifying homebuyer demand.

All this bodes well for Taylor Wimpey’s profit margins looking ahead. Yet it’s my opinion that the builder’s P/E ratio of 8.9 times for 2022 fails to reflect this bright outlook. I’d buy the business even though spiralling building material costs pose a risk to earnings.

8.9% dividend yields!

Imperial Brands (LSE: IMB) also seems to offer terrific value for money. Its 8.9% dividend yield for the financial year ending September 2022 puts it in the top five FTSE 100 biggest yielders. On top of this, the tobacco titan trades on a forward P/E ratio of just 6.4 times.

For my money though, Imperial Brands has the hallmarks of a classic value trap. The business might be able to keep paying big dividends in the short term. But I don’t like its credentials as a way to generate a long-term passive income, given the …….

Source: https://www.fool.co.uk/2021/12/12/should-i-buy-these-cheap-ftse-100-stocks-for-a-passive-income/

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