2 cheap FTSE 100 stocks with double-digit dividend yields 

Sometimes, there are great stocks right under our noses, and we can still miss them. Like these two FTSE 100 stocks. They have recently been struggling under the weight of weak forecasts. But if I look at their long-term performance, which is what we at the Motley Fool like to focus on, they are clearly among the best performing stocks around. 

The China factor

I am talking about the metal miners Evraz (LSE: EVR) and Rio Tinto (LSE: RIO). Like the rest of the mining pack in the FTSE 100 index, they have seen deteriorating share price trends in recent months. One trigger for this was a roll-back of fiscal stimulus by the Chinese government. Now, China was the first country as we all know to get impacted by Covid-19. But it was also the first one to start emerging from it. 

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To buoy its economy, the government spent vast amounts of money, which among other things increased demand for metals. The Chinese economy is massive, second in size only to the US. They saw an unexpected boom in metal prices from mid-last year followed by strong performance. And now they are expecting a cooling off in demand, which has negatively impacted investor confidence. 

Taxes and probes impact these FTSE 100 stocks

They have also had challenges at their own individual levels. The Russian miner and steel manufacturer Evraz has seen an increase in tax rates for miners, which could impact its performance. Such increases have happened two times already this year, and a third one is being mulled by the country’s government now. Rio Tinto has recently come under the UK’s Financial Conduct Authority’s scanner for failing to disclose huge increases in the costs of a copper project to investors. 

Long-term share prices show sharp increases

As a result, their share prices have declined, and some correction in their financials moving forward could happen too. But in my opinion, it does not take away from their credentials. The fact is, both of them were doing well earlier. For instance, Evraz has seen its share price triple over the past five years. And Rio Tinto has seen its share price double.

Sustainably high dividends 

Moreover, their dividend yields are not just high right now, they have been sustainably so. First, the current yields. Evraz currently has a yield of almost 13% and Rio Tinto stands at 10.2%. Let me put these in context. The average FTSE 100 dividend yield right now is 3.4%. Over the past five years, Evraz’s dividend yield has been an elevated 11% on average and Rio Tinto also had a good return of 6.2%. 

What I’d do

I have already bought both stocks. But now their prices have corrected recently, they look cheap to me, considering their price-to-earnings ratios. While Evraz is at 7.8 times, Rio Tinto is at 6 times. I think I’ll buy more of them.

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Manika Premsingh owns shares of Evraz and Rio Tinto. 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.

This post was originally published on Motley Fool

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