So far, August has been a cruel month for shareholders of FTSE 100 companies.
At end-July, the Footsie closed a whisker below 7,700 points. As I write on Friday afternoon, the UK’s blue-chip stock index stands at 7,231.29. In other words, the FTSE 100 has lost around 6.1% of its value — or roughly £128bn — in 14 trading days. Yikes.
I’ve been buying cheap FTSE 100 stocks
Unfortunately, I appear to be the ‘Master of Mistiming’ this month, as I my wife and I bought a slew of cheap UK shares just as the London market lurched lower.
Then again, history has taught me that it’s practically impossible to time entry points perfectly. Also, our latest purchases were made to generate extra passive income for us over the next 10+ years. Hence, it’s a wee bit early to panic just yet.
For the record, we have added 10 new shares to our family portfolio, taking the number of holdings in this particular pot to 27. In total, these consist of seven US shares (mostly mega-tech stocks), 15 FTSE 100 stocks, and five FTSE 250 holdings.
Four new income shares
Of the eight FTSE 100 shares we added to our portfolio, we bought four for future capital growth and the other four for dividend income. Here are our four new income stocks:
|Company||Sector||Dividend yield||One-year change||Five-year change|
|Phoenix Group Holdings||Financial||10.0%||-23.6%||-29.1%|
My first point would be that these stocks come from two sectors beaten down in 2023, namely, finance and mining. But perhaps these companies are ‘fallen angels’ — otherwise sound companies going through a temporarily tough period?
Second, all four stocks have lost value over the past 12 months — something that I’m often drawn to as a veteran value investor. Also, while both financial stocks have lost ground over the last five years, the two mining shares have actually beaten the FTSE 100 (-4.6%) over this period.
Show me the money!
I can think of two simple reasons why these stocks have fallen lately. First, financial shares have suffered as stock and bond prices have tumbled over the past two weeks. Second, mining stocks have been hit by falling commodity prices as China’s economic growth slows.
However, as I said earlier, I’m a long-run investor with a horizon stretching for decades (assuming I live that long, that is). And this mini-portfolio of four dividend shares generates a market-beating average income of almost 8.8% a year. That’s more than twice the FTSE 100’s yearly cash yield of 4.1%, which suits me just fine!