8.1% and 5.4% yields! Should I buy these cheap FTSE 100 shares?

I don’t have unlimited cash reserves that I can use to buy UK stocks. So I looked for the cheapest one FTSE 100 stocks to buy today.

Should I add these two low dividend stocks to my investment portfolio?

Lloyds Banking Group

At 5.4%, Lloyds Bank (LSE:LLOY) shares offer a comfortable dividend yield north of the 3.9% FTSE 100 average. But despite this, I don’t see business as a good way to increase my income.

The profitability of these companies is highly dependent on broader economic conditions. The idea of ​​debt can increase, as British banks witnessed last year (loan impairment at Lloyds increases to £1.5bn in 2022). It can also be a fierce struggle to increase profits in difficult times.

The problem for this particular bank is twofold. The UK economy is facing a long period of slow GDP growth due to severe structural problems such as labor shortages, weak private and public investment, low productivity and Brexit-related trade disruptions.

And unfortunately Lloyds does not have exposure to foreign climes to compensate for possible weakness ahead. HSBC (LSE:HSBA) and Santanderby comparison, can look to fast-growing Asia and Latin America respectively for turbocharged profits. Barclays investors can expect the company’s US operations to boost below.

I am also mindful that adverse interest rate movements could lead to earnings disappointment for Lloyds.

It is possible that the Bank of England (BoE) may keep tightening its policy to fight persistent inflation. This will boost the margin between the interest charged to borrowers and offered to savers, increasing profits in the process.

But comments from key policymakers in recent weeks cast doubt on additional monetary tightening. Just today BoE rate setter Swati Dhingra called for interest rates to be frozen at the current level of 4%.

This long-term threat means I want to avoid Lloyds shares. Even the lowest price-to-earnings (P/E) ratio of 7.5 times is enough to tempt me to invest.

HSBC Holdings

I believe the HSBC mentioned above would be a better way to invest in the London banking sector. This business certainly offers superior value for money compared to Lloyds’ share price, at least on paper.

The Asian banking giant trades at a forward P/E ratio of 6. and carries an 8.1% dividend yield for 2022. But better value is not the only reason.

It is true that HSBC also faces its own risks. Lower-than-expected interest rates will also hurt profitability from lending activities. On top of this, uncertainty surrounds China’s main market and neighboring regions due to the ongoing Covid-19 crisis.

But as a long-term investor, I would happily absorb the risk. This is because I believe that the ultimate earnings this stock provides could be spectacular as emerging market demand for financial services increases. Penetration of banking products remains very low while the level of personal wealth increases significantly.

HSBC serves 39 million customers by 2022. I expect that number to continue to rise as the banking market balloons and the company invests billions of dollars in expanding it.