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I’m looking for extra high-yield dividend shares on the FTSE 100 to beef up my passive revenue portfolio. However the yield alone isn’t all the things — I’m additionally in search of ones with rock-bottom price-to-earnings (P/E) ratios. Undervalued shares with excessive yields supply the proper mixture of progress and worth.
Taylor Wimpey (LSE: TW.) and Schroders (LSE: SDR) have caught my consideration. They’ll most likely be among the many prime 10 dividend-paying shares on the FTSE 100 quickly since Vodafone and Burberry will lower dividends from subsequent yr.
However are they each value shopping for?
Yield-wise, they’re nearly similar, each round 6.2%. Taylor paid a 9.58p dividend per share final yr, up from 9.4p in 2022. It was diminished in 2019 to three.84p however has in any other case been rising steadily since 2011. Earlier than 2008, the housebuilder paid a 15.75p dividend however was pressured to chop it utterly for 3 years.
Schroders’ dividend was 21.5p final yr with no change from the earlier yr. It didn’t lower or scale back dividends throughout the 2008 monetary disaster or Covid (though progress did pause). General, the asset supervisor has a stable 15-year dividend progress price of 9.61%.
From this information, I can see that Schroders is a extra dependable dividend payer whereas Taylor Wimpey recovers quickly after cuts.
Worth-busters
On the subject of worth, the winner’s clear. Primarily based on future money circulation estimates, Taylor is undervalued by solely 11%. It additionally has a excessive P/E ratio of twenty-two.2, greater than each the UK market and {industry} common.
Schroders’ P/E ratio of 14.4 is much extra engaging, beneath each the UK market and its {industry} common. What’s extra, future money circulation estimates put Schroders’ share value at 40% beneath honest worth.
Value progress
Dividends apart, will both of the shares web me vital returns?
Right here I see an enormous discrepancy. Taylor climbed 34% between August 2023 and August 2024, whereas Schroders fell 20%!
On one hand, that doesn’t look nice for the asset supervisor — but it surely may imply the present value has extra room to develop. The housing big, then again, is close to its highest value in three years.
However what actually makes a distinction right here is industry-specific danger. Wanting again 20 years, Taylor’s down nearly 18% as a result of the inventory was decimated by the housing disaster in 2008. Schroders barely registered the crash and subsequently grew 238% within the twenty years previous August 2024.
Future prospects
As a housebuilder, it’s extra prone to UK rate of interest modifications and native financial points. The brand new Labour authorities’s housebuilding plans are prone to hold it in excessive demand. However an financial upset may ship it tumbling once more.
Schroders is extra tied to world monetary markets and fewer liable to native volatility. Whereas progress of late has been damaging, it’s extra constant over lengthy durations. Nonetheless, this does imply it may endure losses even when the UK financial system’s doing properly.
General, I feel the dependable funds and a secure value make Schroders a better option than Taylor Wimpey for me for passive revenue. So I plan to purchase it for my dividend portfolio once I subsequent have money to speculate.
