A recent weakening in UK share prices gives investors a great chance to go bargain shopping. The FTSE 100 alone has long been considered a great hunting ground for value shares by analysts. This recent fall has only enhanced its reputation.
Right now I’m seeking blue-chip companies that trade on low forward price-to-earnings (P/E) ratios. I’m also looking for Footsie shares with high dividend yields. It’s a combination that could deliver healthy capital appreciation when market confidence recovers. In the meantime, there’s a solid passive income.
Here are three of my favourites today.
M&G
Financial services businesses like M&G (LSE:MNG) can deliver underwhelming returns during periods of poor economic growth and higher inflation. Both of these remain risks looking ahead, and particularly as new trade tariffs loom.
But I still believe this company’s long-term outlook remains undimmed, making it a solid stock for patient investors to consider. The rising importance of financial planning, combined with ageing populations in its markets, provides enormous earnings opportunities.
In the meantime, M&G can use its cash-rich balance sheet to continue investing for growth and paying large dividends. As of the end of 2024, its Solvency II capital ratio was 223%, up a whopping 20% from a year earlier.
With a P/E ratio of just 9.3 times and a 9.4% dividend yield, I think M&G shares offer excellent all-round value.
HSBC
HSBC (LSE:HSBA) faces the same macroeconomic threats as M&G. On top of this, it may have to endure a drop in net interest margins if (as expected) global interest rates keep falling.
Yet I believe these threats are reflected in its low P/E ratio of nine times. I’m also encouraged by its continued resilience in tough conditions, as illustrated by its forecast-beating results for the fourth quarter (when pre-tax profit rose 6% to $32.3bn).
I think profits and dividends here could rise strongly as banking product demand heats up in emerging markets. HSBC is steadily winding down its Western operations and prioritising capital in high-growth Asia to capitalise on this opportunity, too.
With a CET1 capital ratio (a measure of solvency) of 14.9%, HSBC also looks in good shape to pay another large dividend. The yield here for 2025 is 5.7%.
Londonmetric Property
Real estate investment trusts (REITs) like Londonmetric Property (LSE:LMP) are designed to provide maximum dividends to investors. In exchange for tax perks, they must pay a minimum of 90% of annual rental profits out in dividends.
As a consequence, the dividend yield on this Footsie share is currently 6.7%.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
That’s not the only thing that’s attracted my eye. With a P/E ratio of 13.8 times, it’s also cheaper based on predicted earnings than peers Tritax Big Box (16.1 times), Warehouse REIT (17.7 times), and Urban Logistics (18 times).
Londonmetric’s assets straddle four main industries: logistics, leisure, convenience retail, and healthcare. This provides earnings resilience across all points of the economic cycle, a key quality for long-term dividend income.
Higher-than-usual interest rates are currently a drag on asset values. But I still think it’s worth a close look at current prices.
This post was originally published on Motley Fool
