FTSE 100: buy high and sell higher

Britain’s main index is now down just 50 points from a high of 7,903. Although the general consensus is to buy low and sell high, I still want to buy FTSE 100 stocks as an index heading towards the 8,000 mark.

Set a new record

UK equities are not known for strong growth, but 2023 is set to be a record year for overall returns. Despite a looming recession, the UK’s top constituents are generating revenue from outside the UK. Therefore, analysts estimate the average pre-tax profit will be around £280bn. So, it’s no surprise that the FTSE 100 has been in the green since the New Year, and is close to an all-time high. Here is the reason.

The first one will be the bank. With inflation still high, the Bank of England is expected to continue raising interest rates. As a result, banks such as Lloyds will benefit as profits grow in rate hikes. The second is the reopening of China because it is the world’s largest consumer of commodities. With a large portion of the FTSE 100 companies producing energy and metals, Antofagasta and BP is on investors’ watchlist as oil and metal prices are expected to continue to recover.

Higher dividends

This major catalyst will benefit shareholders in the form of dividend payments. The FTSE 100 is renowned as one of the world’s largest dividend generators. And with many of the biggest dividend payers in the financial and commodity sectors, higher profits are likely to translate into dividends. Thus, analysts expect the regular dividend will also be a record high.

After all, share buybacks worth £55.2bn are due in 2022. In addition, an additional £2.8bn in special dividends are being paid. As a result, analysts now value £79.1bn in dividends to be paid out this year.

This is not surprising given that the average company’s balance sheet has not been in a better position for nearly a decade. Big names such as Anglo American and Glencore has a strong free cash flow and doubles dividend cover. This allows them to cover the yield of lucrative dividends that are quite comfortable, which is why I was attracted to invest in FTSE shares, as an opportunity for me to generate some passive income.

Blue chips are cheap

However, the main reason I buy FTSE 100 shares is because they are relatively cheap. While the index is reaching highs, there are still some big names trading in the bargain. property developer Taylor Wimpey and iron ore giants Rio Tinto suffered last year as the construction and industry activity slowed down locally and internationally.

As a result, this stock is currently trading at a relatively low price-to-earnings (P/E) ratio with a high dividend yield. In addition, they also have a good dividend cover and a strong dividend policy.

So, with house prices holding firm and iron ore prices rising rapidly, there are a number of FTSE 100 stocks I would like to buy if my preferred broker launches UK stocks on the platform.