5 dirt-cheap UK shares I’d buy in April

Roland Head looks at some cheap UK shares with high dividend yields he’s looking for his portfolio ahead of the ISA deadline on 5 April.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Key Points

  • 4 UK shares with dividend yields over 5%
  • A FTSE 100 share that should benefit from rising interest rates

It’s April and the ISA deadline is almost upon us. I’ve been looking for cheap UK shares to buy for my Stocks and Shares ISA this month.

Although we’ve seen a mini rebound, I reckon the recent market shake-out has left behind some potential bargain buys. Here are five UK stocks I’m looking at for my personal share portfolio.

Buy on bad news

FTSE 100 bank Barclays (LSE: BARC) recently took a fall after it revealed an embarrassing £450m mistake. It’s unfortunate for new CEO Venkat, but the expected cost should be easily affordable.

Should you invest £1,000 in Barclays right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Barclays made the list?

See the 6 stocks

For this reason, I don’t see this mishap as a reason to avoid Barclays. With the bank’s share price down by 20% so far this year, it’s is now trading at a discount of nearly 50% to its book value of 294p per share. The stock also boasts a forecast dividend yield of around 4.9%, which should be covered three times by earnings.

One niggling concern for me is that Barclays could have other skeletons still hidden in its cupboards. These might be more troublesome.

However, the bank’s performance has improved in recent years. I’d hope that the risk management background of the group’s new CEO might help eliminate future blunders.

For me, the bottom line is that Barclays financial position looks strong and its shares looks cheap, trading on just six times earnings. I’d buy this stock for my portfolio today.

Solid foundations

Housebuilder Redrow (LSE: RDW) has been hit by this year’s selloff. Redrow’s share price has dropped 25% since the start of the year and the company’s shares are now trading slightly below their book value of 555p.

Although housebuilders could suffer if interest rates rise or the UK sees a recession, there’s no sign of this so far.

In its latest results, Redrow said its order book rose by £200m to £1.5bn during the six months to 2 January. Pre-tax profit for the period rose by 17% to £203m, compared to the same period a year earlier.

One reason I like Redrow more than some of the big housebuilders is the company’s culture of owner management. Founder Steve Morgan still owns 16% of the shares, even though he stepped down from running the business a few years ago.

In my experience, companies that have had owner management often take more care to protect shareholders from big losses and pay reliable dividends.

Redrow’s forecast dividend yield of 5.9% should be covered three times by earnings. I reckon that should be affordable, even if profits dip. With the stock trading on just six times forecast earnings, Redrow is a cheap UK share I’d buy.

A bargain 7% yield?

Shares in post and parcel operator Royal Mail (LSE: RMG) have fallen by more than 30% so far this year. This looks harsh to me. Although Royal Mail is facing pressures from rising fuel and wage costs, the group’s performance over the last year has been very strong, in my view.

One reason for caution might be the end of free Covid-19 testing. Based on comments from the company, I estimate that test kits may have accounted for more than 5% of parcel volumes over the nine months to the end of December. That revenue could soon disappear.

Even so, chairman Keith Williams say that parcel volumes are now around a third higher than before the pandemic.

Looking ahead, City analysts only expect to see profits dip by around 5% over the coming year, before returning to growth. Consensus forecasts suggest a dividend of 23.7p per share this year, giving a yield of nearly 7%.

That seems cheap to me. I’d buy Royal Mail shares now for long-term growth.

Insiders are buying this UK share

One buying signal I like to look for is director buying. These insiders should have a good understanding of the business and of trading conditions.

So far this year, directors at latex glove specialist Synthomer (LSE: SYNT) have spent nearly £700,000 buying the company’s shares. I think this is a good sign they expect a return to normal after the disruption of the pandemic.

Synthomer is in a slightly odd situation, as demand for its core product surged during the pandemic. Demand is now easing, but the company has recently expanded its business through a big acquisition. This is expected to add to earnings over time. Synthomer has also just appointed a new chief executive.

There are a few moving parts here which make it hard to predict the exact outcome this year. However, City brokers expect Synthomer’s 2022 earnings to settle around 40% above the level reported in 2020. If that’s correct, then the shares could be trading on just seven times forecast earnings, with a dividend yield of 5.6%.

I’ve been following this UK share as its share price has fallen. At current levels, I think Synthomer could be a good, cheap share to add to my portfolio.

A stock I already own

When I’m searching for stocks to buy, sometimes I end up looking at shares I already own. One example of this is FTSE 250 financial trading firm IG Group (LSE: IGG).

The worst trading conditions for IG Group are when financial markets go really quiet. When that happens, the group’s big customers trade less, cutting the group’s income.

Fortunately for IG, we haven’t really seen quiet market conditions since before the pandemic. Given recent events, I don’t expect to see them in 2022 either.

For IG, this has meant two years of high trading volumes and record profits. At the same time, chief executive June Felix has been investing in growth and targeting new opportunities.

I’m optimistic about this business, which reported an operating margin of more than 50% last year. Although I expect to see a slowdown at some point, I think this risk is probably already reflected in IG’s share price. The stock looks cheap to me on nine times forecast earnings.

I’m happy to continue holding IG and collecting the 5.4% dividend yield. If I didn’t already own this UK share, I’d certainly be buying today.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Roland Head owns IG Group Holdings. The Motley Fool UK has recommended Barclays, Redrow, and Synthomer. 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.

More on Investing Articles

A pastel colored growing graph with rising rocket.
Investing Articles

Here’s how long it’s taken £1k of Nvidia stock to turn into £10k today!

Our writer explains how money invested in Nvidia stock less than three years ago has grown in value over tenfold…

Read more »

Thoughtful man using his phone while riding on a train and looking through the window
US Stock

3 red flags I’m seeing right now for the S&P 500

Jon Smith points out some concerns he has with the S&P 500 at current levels and picks one stock he's…

Read more »

UK financial background: share prices and stock graph overlaid on an image of the Union Jack
Investing Articles

UK dividend shares are outperforming US tech stocks!

UK dividend shares aren’t just for passive income investors. Over the last 12 months, they’ve been outperforming their US tech…

Read more »

DIVIDEND YIELD text written on a notebook with chart
US Stock

Here’s how much passive income an investor could make with £2k in Meta stock

Jon Smith looks at Meta stock from a different angle to normal, considering it as an option for an investor's…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

1 of my top UK shares is up 15% in a day! Is it still a buy for me?

Celebrus shares are soaring after strong full-year results. At a P/E ratio below 13, is it one of the best…

Read more »

Close-up of children holding a planet at the beach
Investing Articles

£10,000 invested in Jet2 shares 2 years ago is now worth…

Jet2 shares have surged in recent months and finally appear to be pushing towards fair value. Dr James Fox shares…

Read more »

piggy bank, searching with binoculars
Investing Articles

This FTSE 100 blue-chip could rise 26% in 12 months, according to brokers

While this FTSE 100 dividend stock has put investors through the wringer in recent years, some analysts see brighter skies…

Read more »

Businessman hand stacking money coins with virtual percentage icons
Investing Articles

A 3-step passive income strategy to target major wealth

Want to invest in the stock market to build up a passive income stream? There's no fiendlishly complex multi-step mystique…

Read more »