Legal & General Group plc isn't the only FTSE 100 value stock I'd buy today

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Legal & General

Hunting for value in the FTSE 100 isn't easy at the moment. Although some good quality companies trade on modest valuations, they're often cyclical business such as housebuilders, which are currently reporting record earnings.

Today I'm going to look at two heavyweight dividend stocks which I believe offer genuine value for long-term investors.

A buying opportunity

Shares of the world's largest advertising group, WPP (LSE: WPP), fell by 10% this morning after the company reported a slowdown in like-for-like sales and a weaker outlook for client spending.

The group's reported revenue rose by 13% to £7.4bn during the first half. However, this figure was flattered by acquisitions and currency effects. If we ignore exchange rate changes, then revenue only rose by 1.9%. And if we strip out acquisitions, like-for-like (LFL) revenue actually fell by 0.3%.

It's a similar story for headline pre-tax profit, which rose by 15% to £793m, but was only 1.8% higher on a constant currency basis.

These figures might have been fine, except that WPP also revealed that LFL revenue fell by 4.1% in July. The company said that revenue was lower than last year in all regions, except the UK, Latin American and Central & Eastern Europe. That means sales are falling in the company's biggest market, North America.

WPP stock has now fallen by 22% so far this year. Today's results won't help. The company's full-year guidance is now for LFL revenue growth of just zero to 1%. Given this, why would I consider buying what appears to be a falling knife?

Long view

There are two reasons. The first is that this is a market-leading business with a long-term outlook. WPP's continual small acquisitions have enabled the group to progressively ramp up its exposure to digital marketing, which now accounts for 41% of revenue.

The second reason is that although the shares could have further to fall, I think a fair amount of bad news is already in the price. After today's fall, the stock trades on a forecast P/E of about 11, with a prospective yield of 4.5%. I reckon that could be a good entry point for a long-term holding.

A super income play

Legal & General Group (LSE: LGEN) has increased its profits by an average of 11.5% per year since 2011. And that's not just an optimistic 'adjusted' figure. It's real profit. The company has defied gloomy predictions that changes to the pension system would hammer its profits.

Instead, Legal & General has used its size to become a market leader in the new business of de-risking corporate pensions by taking over their liabilities. The group is also growing its investment management arm and its capital businesses, which invests in property and infrastructure.

The group's overall return on equity rose from 17.7% to 19.6% in 2016, and cash generation has been consistently good. Shareholders have been rewarded with dividend growth averaging 17% per year since 2011.

Legal & General shares currently traded on a forecast P/E of 11 with a forecast yield of 5.8%. Although profits could be hit by a UK recession or property crash, I'd expect this to be a short-term disruption rather than a long-term problem. In my view, these shares remain a solid income buy.

5 value shares I'd buy today

If you're building a portfolio of dividend-focused value stocks, then I believe you will want to consider the companies featured in our latest investing report.

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Roland Head 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