Cheap shares: a once-in-a-decade chance to earn massive passive income

Buying cheap shares in an income-producing business is a great way to secure a second income. Now, some FTSE 100 dividend stocks look like a bargain buy to me.

Stock market bears will insist that oversold conditions last long. However, history shows that, over the long term, brave investors have been well rewarded by investing in undervalued companies with future returns.

So, that’s why I think today is a rare opportunity to buy low dividend stocks for passive income.

Share on sale

First, it is important to note that past performance does not guarantee future results. There are a number of macro challenges that could disrupt stock market growth, from climate change to global conflict.

However, history is a useful guide. Ultimately, investors cannot be trusted when making predictions about stock price growth.

In this regard, I am very happy that the FTSE 100 has a reliable track record of consistently underperforming all the time, despite significant downside during the crisis. Indeed, the index crossed 8,000 points for the first time last month.

That said, I’m looking beyond the index. For me, there is a real opportunity – a cheap stock that has the potential to rally.

Glencore is a good example. Footsie’s mining business and commodity trader currently has a price-to-earnings (P/E) ratio of just 4.4. That is really less. Over the past 13 years, the stock has had an average P/E ratio of 17.5, and at one point it was over 47.3!

There is a risk that today’s figures can flatter the company. After all, there are question marks over the sustainability of the company’s coal profits. However, with a dividend yield of 9.83%, Glencore shares look like a good investment opportunity to me if I have some cash to spare.

High dividend yield

That takes me to the topic of passive income from dividends. Glencore is not the only bumper deal among FTSE 100 stocks.

For example, house builders persimmon is another stock trading with a low P/E ratio as measured by its 10-year average. Today, the company’s P/E ratio is 7.33 compared to an average of 11.54 over the past decade.

What’s more, the historical dividend yield is huge at over 13.3%. The forward estimate is lower, but still impressive, at 5.9% for 2023.

A slowdown in the housing market is a risk the company faces in the coming months. But I am confident about the long-term prospects. This is because the UK is short on housing supply. I can’t see demand for the company’s services evaporating anytime soon.

In the last month, Persimmon’s share price changed to -44%. Again, if I had the money, I think now might be a good time to buy the company’s stock.

My passive income portfolio

Just imagine if I get 7% return on my investment. Of course, dividends are not guaranteed and may be cut or suspended. However, I believe it is possible to achieve a 7% return with a diversified high yield portfolio.

If I used the full £20,000 Stocks and Shares ISA allowance, that would be an annual dividend income of £1,400.

This really could be a once in a decade chance for me to load up on cheap stocks for passive income.