The FTSE 100 surpasses 7,000 points! Here’s a cheap UK dividend share I think will soar

It’s been a significant week on UK share markets. The FTSE 100 rocketed back through 7,000 points for the first time in 14 months on Friday as market confidence swelled. Meanwhile the FTSE 250 mushroomed to uncharted heights a whisker off 22,600 points. With this psychologically- and technically-important barrier down […]

It’s been a significant week on UK share markets. The FTSE 100 rocketed back through 7,000 points for the first time in 14 months on Friday as market confidence swelled. Meanwhile the FTSE 250 mushroomed to uncharted heights a whisker off 22,600 points.

With this psychologically- and technically-important barrier down I think the FTSE 100 could now head for the stars. Strong US and Chinese economic performance has underpinned this new bull market. And my optimism on further gains is shared by UBS Global Wealth Management’s chief investment officer, Mark Haefele, for one. He comments that, “As the economic reopening accelerates in the coming months, we believe the bull market remains on a solid footing.”

A FTSE 100 stock on my shopping list

Remember, though, that investor confidence remains extremely fragile as the coronavirus emergency worsens in large parts of the globe. UK share prices could reverse sharply if social restrictions and travel bans drag well into 2021. Fresh fights between major economies on trade, along with signs of accelerating inflation, are other reasons why the FTSE 100 could reverse sharply again.

Screen of various price trends, possibly in FTSE 100

That said, I plan to keep buying British companies for my Stocks and Shares ISA. Even if the recent bull market evaporates I’m confident many of the shares on my radar will perform strongly. Vodafone Group (LSE: VOD) is one such large-cap stock I think could thrive in the near term and beyond.

Low PEG ratios + 6% dividend yields!

The clearance of O2 and Virgin Media’s merger in the UK last week creates a possible fly in the ointment for Vodafone Group’s earnings on these shores. It will increase the competitive stresses on the FTSE 100 telecoms giant and could theoretically increase costs. What’s more, Vodafone faces the threat of massive consolidation across its other core European marketplaces too.

I still think Vodafone is an attractive share to buy today though. Firstly, telecoms is a defensive sector and revenues roll dependably in during economic upturns and downturns. This should allow this FTSE 100 firm to thrive even if the global recovery stumbles in 2021.

Secondly, the outlook for communications demand in its Asian, African, and European emerging markets remains white-hot as wealth levels in these regions grow. This provides long-term investors like me with something to look forward to as data demand will likely keep soaring. Aggregated service revenues in Vodafone’s Turkish and Egyptian markets swelled 12.3% year-on-year in the final three months of 2020.

And thirdly, I think Vodafone Group’s share price offers seriously good value right now. City analysts think annual earnings here will explode 30% this fiscal year (to March 2022) and 19% the year after. This results in rock-bottom forward price-to-earnings growth (PEG) ratios below the bargain benchmark of 1 for both years. Furthermore, dividend yields here clock in at around 6% for this fiscal year and next. This is one FTSE 100 firm that offers some spectacular bang for one’s buck.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The post The FTSE 100 surpasses 7,000 points! Here’s a cheap UK dividend share I think will soar appeared first on The Motley Fool UK.

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