As the tragic Russia-Ukraine conflict continues to intensify, markets around the world have registered huge losses. The FTSE 100 is no exception, and it has recently dropped below 7,000 points. This means the FTSE 100 is now at its lowest level since September 2021. But this does lead me to several opportunities to buy UK shares on the cheap. Here are two that I think are no-brainer buys.
A great FTSE 100 stock for passive income
Legal & General (LSE: LGEN) has established itself as a top dividend payer. Indeed, last year, it paid out a record 17.57p per share, and further dividend growth is expected this year. Such a large dividend equates to a yield of around 7%, cementing the insurance company as one of the top income-focused UK shares.
After excellent first-half results, I’m also confident that the dividend is sustainable. For example, in the first half of the financial year, operating profits were able to rise 14% year on year to reach £1.1bn. This was higher than its pre-pandemic levels. The Solvency Coverage Ratio, which is a key measure of financial stability for insurance companies, also reached 183%, up from 173%. As such, considering that the full-year dividend only cost the company around £1bn, there is no indication that it will be cut.
I also feel L&G will be able to avoid significant disruption from the conflict in Ukraine. For instance, its exposure to Russian securities equals just 0.1% of its assets under management. This means that the effect of the war should be limited for L&G.
There are a couple of risks, however. For instance, the company is heavily linked to the UK economy, and is likely to move in the direction of the general market. This may cause significant amounts of short-term volatility. Second, there is rising competition in the group’s various sectors, and this may strain profits.
Despite this, I think a current price of around 240p is far too cheap, and the risks are already priced in. I’ll continue to add L&G shares to my portfolio on any further weakness.
Another struggling UK share
Although National Express (LSE: NEX) is not part of the FTSE 100, instead being a constituent of the FTSE 250, it has certainly not been immune to the current bear market. Indeed, the shares are currently priced at under 200p, for the first time since September 2020. This is partly due to the rising price of oil, which is soaring due to the conflict. Along with wages, oil is the main cost for the company, and it has the potential to strain profit margins considerably.
Despite this being a risk, I also feel it has been overstated. In fact, National Express has hedged oil from 2022 to 2023, meaning that the rising oil price should not directly affect the company over the next two years. In the long term, I’m also hoping that oil will decrease in price and get closer to ‘normality’.
Further, it seems that the recovery from the pandemic has been extremely strong. For example, in the third quarter, revenue managed to reach 83% of the same period in 2019. I hope for further improvement when the full-year results are released soon. Therefore, this is a UK share that I will continue to add to my portfolio on the dip.
Stuart Blair owns shares in Legal & General and National Express. 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.
