A dirt-cheap 5.5%-yielding FTSE 100 dividend stock that I’d buy for 2019

A colourful firework display
A colourful firework display

The fresh waves of volatility currently battering the FTSE 100 again proves that share investing is never a cakewalk.

Stocks of all shapes and sizes, from the colossal multinational miners and oil drillers to the cyclical housebuilders and defensive pharmaceutical groups, have all lurched to the downside again in end-of-year trading.

In the current environment, jam-packed with geopolitical and macroeconomic stresses of a broad variety of shades, it’s not surprising to see investors dump good shares as well as bad in favour of less risky assets. On one hand, this is a great shame. On the other hand though, it’s a great opportunity for savvy investors to pick up a bargain.

A bona-fide bargain

Take easyJet(LSE: EZJ), for example. This fresh selling pressure has caused the Footsie flyer’s market value to shrink back below the £11 per share barrier, and it’s now dealing at a whopping 38% discount to levels seen just six months ago.

More share price volatility may be just around the corner, or it may not. But one thing’s for sure: easyJet’s currently dealing on a dirt-cheap forward P/E ratio of 9.2 times, and stock investors may be missing a tremendous opportunity by not buying in today.

The facts are that the famous Luton-based airline’s profits outlook remains strong over a long-term basis and that, regardless of any share price choppiness in the interim, holding the company for a sensible length of time (say five or 10 years at a minimum) should still allow shareholders to enjoy stunning returns.

Another record-breaking trading statement

November’s full-year trading statement reinforced my bullish take too, easyJet’s airport expansion plans and capacity-boosting measures helping it to fly a record 88.5m passengers in the 12 months to September, up more than 10% year-on-year.

Demand for low-cost continental travel continues to boom and by expanding its footprint, easyJet — which is planning to boost its fleet capacity by an extra 10% in the current fiscal year — is putting itself in the box seat to deliver brilliant profits growth.

The FTSE 100 firm is also doubling-down on cost-stripping measures to bolster the bottom line and mitigate higher fuel- and crew-related expenses. It achieved £107m worth of savings in the last period and has further distance to cover in this respect, such as through increased digitalisation of the business.

Broker consensus suggests that those aforementioned fuel costs will damage profits growth in the short term and they are expecting earnings to flatline this year. But the strength of easyJet’s profits picture later on leads the number crunchers to predict the dividend will rise again to 59.5p per share, up from 58.6p last year. And this results in a chubby 5.5% yield.

That yield, allied with the rock-bottom valuation, makes easyJet one of the best bargains on the FTSE 100 today. I’d be very happy to buy it today and hold it in the New Year and beyond.

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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.