6.5%+ yields! Are these cheap, high-dividend FTSE 100 dividend stocks too good to miss?

I love a bargain. I also love high-yielding dividend stocks that can supercharge my passive income. Right now the FTSE 100 is packed with top shares that could be considered to be trading too cheaply.

NatWest Group (LSE:NWG) and M&G (LSE:MNG) are two Footsie companies that have caught my eye recently. Both trade on index-beating price-to-earnings (P/E) ratios and carry blue-chip-beating dividend yields.

These readings can be seen in the below table.

Forward P/E ratio Forward dividend yield
 NatWest Group  6.2 times  6.5%
 M&G  10.3 times  8.9%
 FTSE 100  10.5 times  3.7%

But are these stocks brilliant bargains or potentially expensive investor traps? And which one (if any) should I buy for my portfolio?

Stunning results…

There’s a buzz around NatWest shares at the start of 2024. Last month it announced a better-than-expected pre-tax operating profit of £6.2bn. This was also the best result since before the financial crisis of 2008.

The bank’s blowout result was thanks in large part to a series of interest rate hikes that boosted net interest margins (or NIMs). This key measure of profitability rose 19 basis points in 2023, to 3.04%.

But NatWest is also sensitive to broader economic conditions. So with the UK economy in the doldrums (and even moving into recession), this was an especially impressive result.

Hopes that revenues and profits could pick up from here have also risen following news that the economy grew 0.2% in January. Analyst Danni Hewson of AJ Bell notes that “there’s been lots of talk about ‘green shoots’ and an economy that’s turning a corner.”

… but threats linger

But for the moment, I haven’t seen enough to encourage me to invest in NatWest shares just yet. A prolonged period of poor loan growth remains on the cards that could weigh on the bank’s share price.

Hewson added that “0.2% is hardly a number to get excited about, it’s just a continuation of the trend that we’ve seen over the past couple of years… an economy bumping along the bottom, flatlining and stagnating.”

Truth be told, NatWest’s share price remains 8% cheaper than it was a year ago. It’s also unchanged over the past five years. And it’s not easy to see the company breaking out of this long-term trend given the huge structural challenges facing the UK economy.

With the bank enduring increasing competitive pressures, this is a share I’m happy to ignore.

A better buy?

Of course no share is without risk. And M&G has problems of its own to contend with. It’s also vulnerable to continued weakness in consumer spending power. Profits could also suffer if financial markets slump again.

But I’m still backing the investment manager to grow its share price and pay solid dividends in 2024 and beyond. This is thanks to enormous demographic changes as the UK elderly population steadily grows and the importance of financial planning increases.

M&G is taking steps to effectively harness this opportunity by doubling-down on its asset management and wealth operations and investing in technology. With a Solvency II capital ratio of 199%, the company has considerable financial strength to continue investing for growth alongside paying large dividends.

Forget NatWest. I’d much rather buy big-yielding M&G shares for my portfolio when I next have cash to invest.

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