4.6% and 9.7% yields! Should I buy these cheap FTSE 100 dividend shares?

I am looking for the best dividend stocks to buy for my portfolio. This is possible FTSE 100 stock so good to miss the current price?

persimmon

persimmon (LSE:PSN) is an income stock I already own. And I will be watching for reasons to increase my holdings in 2023.

You can see, the dividend yield of 9.7% for this year is one of the dividend yield FTSE 100the biggest. Currently, the homebuilder is also trading at a fundamental price-to-earnings (P/E) ratio of 9.1 times.

It’s a price that reflects the big challenges facing homebuilders this year. The latest Nationwide data showed average house prices fell for a fourth straight month in December, the worst result since the 2008 financial crisis.

Things could be very difficult in 2023 as unemployment will rise and interest rates will rise. However, there are also reasons for optimism as we move into the New Year. In fact, I think Persimmon and its peers’ share prices could recover strongly in the coming months.

For one, the balance of supply and demand in the housing market remains tight. This could help house prices remain stronger than expected.

Furthermore, a shortage of raw materials that has caused construction costs and building activity could also fall sharply in 2023. Last summer Persimmon had to withdraw its production forecast for a year due to supply chain problems.

For the moment I like to sit on the sidelines. But I will continue to watch closely for signals to buy this low dividend stock.

Tesco

At Tesco (LSE:TSCO) share price also offers value all on paper. The retail giant trades at a forward P/E ratio of 11.2 times. Dividend yields clock in at 4.6%, higher than the FTSE 100 average of around 3.5%

Tesco could have a bright future as e-commerce heats up. Online wholesale penetration rates remain low compared to the broader retail market. This provides Britain’s largest internet supermarket with excellent growth potential.

But I still believe the company could have significant trouble translating this into impressive profit growth. Competition is increasing in brick-and-mortar stores as well as online.

Aldi and Lidl’s market shares rose to 9.1% and 7.2%, respectively, in the 12 weeks to December 25, according to Kantar Worldpanel. This is up 1.4% and 0.9% the previous year and is driven by continued store expansion.

The increased choice for buyers, inevitably increases the price war in the sector. Morrisons announced a £16m price cut earlier last week. FTSE 100 rival Tesco Sainsbury’s announced that it is investing £50m in prices at the beginning of December as well.

Rising labor, energy and product costs are also putting pressure on the company’s ultra-thin margins. And this could also be a significant long-term problem for Tesco and its peers. So on balance, I would prefer to buy more FTSE 100 shares to increase my passive income.