Yields of 6.2% and 5.7%! Should I buy these dirt-cheap FTSE 100 dividend shares for 2023?

I am looking for the best FTSE 100 dividend stocks to buy in 2023. Can this popular increase passive income?

J Sainsbury

2022 has been a tumultuous year for UK grocers Sainsbury’s (LSE:SBRY).

The takeover has been hit hard by the demand for food and other essential items. At the same time margins have shrunk as they have slashed prices to tempt shoppers through the door.

The subsequent fall in J Sainsbury’s share price now makes the grocer look very cheap on paper. At 218p per share, it trades on a price-to-earnings (P/E) ratio of 10.5 times. The dividend yield on stock forwards is currently equal to 5.7%.

Fortunately, the cost of living crisis will moderate during the second half of 2023. So shoppers can have more money to spend at Sainsbury’s.

But businesses still have to grapple with the long-term problem of rising competition, the battle is showing little signs of winning. Market share has fallen by 1.7% over the past 10 years as discounters Aldi and Lidl have expanded.

Earlier this month, Sainsbury’s announced plans to invest another £50m in reducing prices. As a potential investor, I would like to see the company do more to defend itself. Profitable price cuts haven’t worked and I think the business is throwing good money after bad.

FTSE 100 companies are also facing staff, energy and product cost inflation that will continue to increase beyond 2023. This low market share carries too many risks for me.

Rio Tinto

Commodity business sentiment has improved in recent weeks. News that China is lifting Covid-19 restrictions means investors are cautiously optimistic about metal and energy demand next year.

Of course, the recent explosion in coronavirus cases could see lawmakers raise the bar. Weak economic conditions outside of China may hurt raw material consumption in 2023. But at the current price of £58.40 per share, I still believe Rio Tinto (LSE:RIO) shares are very attractive.

The FTSE 100 miner trades at a forward P/E ratio of 10.9 times. It also yields a 6.2% dividend for 2023.

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In fact, I have bought Rio Tinto shares for my own portfolio. As a long-term investor, I am excited by the possibility of commodity demand exploding over the next few decades.

Rising adoption of green technology and increasing urbanization in emerging markets are just two trends expected to increase demand for various metals.

Forecasts from consultancy Acumen suggest that copper extraction, for example, will increase at a compound annual growth rate (CAGR) of 4.9% until the end of the decade.

Rio Tinto produces copper along with lithium, aluminum and iron ore. These materials will all be in demand due to electric vehicle (EV) manufacturing, renewable energy production and infrastructure spending.