2 dividend stocks that are dirt-cheap right now

Scouring the market for cheap dividend stocks, out writer thinks he’s found two great opportunities that he’d buy as part of a diversified portfolio.

| More on:

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.

Solar panels fields on the green hills

Image source: Getty Images

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.

The UK remains a wonderful hunting ground for dividend stocks, in my opinion. What’s more, some of these are still trading at very low prices.

Here are just two that grab my attention as we come to the end of January.

Out-of-favour sector

The housing market has taken a big knock in recent months as galloping interest rates, combined with a cost-of-living crisis, have quelled demand from buyers. Naturally, this hasn’t been great news for the UK’s housebuilders.

Should you invest £1,000 in Barratt Developments 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 Barratt Developments made the list?

See the 6 stocks

Among those affected has been FTSE 100 member Barratt Developments (LSE: BDEV). Its share price was on a downward trajectory for much of 2022.

On a positive note, the last few months have seen a recovery, of sorts. The stock is up almost 12% (as I type) in the year-to-date alone.

Despite this, the shares still look cheap at under seven times forecast earnings for the current financial year (to the end of June). Even a huge drop in earnings growth predicted by analysts in FY2024 would still leave the stock changing hands at under 12 times earnings.

So is now the time for me to buy?

Big yield

Well, nobody knows for sure. A lot depends on just how bad the economic data is over 2023.

But a lack of a crystal ball doesn’t stop me from picking out a few things I like here. Barratt is a huge player in a sector that, while cyclical, has great long-term prospects due to the ongoing housing shortage in the UK. Its finances are a lot stronger than they used to be too. 2007, this is not.

But it’s the dividends I like the most. Even though it can’t be guaranteed, Barratt Developments currently yields a monster 7.4%.

Overall, I’d feel comfortable starting to build a position here if I had the cash.

Another cheap dividend stock

A second income stock that looks great value is Renewables Infrastructure (LSE: TRIG). As its name suggests, the FTSE 250 member invests in a portfolio of assets in the renewable energy space across the UK and Europe. These include onshore and offshore wind farms, solar parks and battery storage sites.

The electricity generated from these is then sold, generating revenue for the company and, ultimately, dividends for its owners. Naturally, it must be remembered that it has no control over power prices.

Created with Highcharts 11.4.3Renewables Infrastructure Group PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Regular hiker

One of the things I like here is that the income stream is fairly stable. As evidence of this, the £3.2bn-cap has already put together a solid record of increasing dividends every year. That’s despite it only being listed since 2013.

Sure, these hikes haven’t been massive — only a couple of percent, at most. But consistency is key.

As I type, Renewables Infrastructure is down to yield 5.4% in FY23. However, this is only an estimate. It’s also worth highlighting that the Electricity Generator Levy (windfall tax) will impact income for the next two years.

At a price-to-earnings (P/E) ratio of nine, the price is also slightly higher than Barratts. Even so, the added diversification I’ll get if I were to buy both rather than just one is arguably worth the extra cost.

Again, I’d consider snapping up a stake here if I had the funds to do so.

Full-year numbers for 2022 are announced in mid-February.

Should you invest £1,000 in Barratt Developments 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 Barratt Developments made the list?

See the 6 stocks

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.

Paul Summers 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.

More on Investing Articles

Emma Raducanu for Vodafone billboard animation at Piccadilly Circus, London
Investing Articles

UK shares: 2 opportunities and 2 traps to avoid

Our writer's been hunting for bargain UK shares to buy amid unpredictable markets. Here's what's helping him assess opportunities.

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

FTSE 250 stocks are rising — here are 2 that could benefit from the recovery

FTSE 250 stocks are gaining momentum. Here's why OSB Group and Currys could offer long-term value and income as the…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

The Blue Whale Growth fund just snapped up this high-quality S&P 500 stock

One of the UK’s best-performing fund managers just bought a new growth stock for his portfolio and Edward Sheldon thinks…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

2 FTSE 100 stocks I believe could outperform over the next decade!

Looking for the best FTSE 100 stocks to buy for long-term returns? Royston Wild chooses two that he thinks could…

Read more »

Shot of an young mixed-race woman using her cellphone while out cycling through the city
Investing Articles

The bond market: a great opportunity to lock in passive income?

Many will be aware that bond yields are currently high, but what's the easiest way to get exposure? Dr Fox…

Read more »

Warhammer World gathering
Investing Articles

Are UK growth stocks finally back in fashion? Here are 2 to watch

With interest rates peaking and investor sentiment shifting, it could be time to revisit growth shares and consider their potential…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Rolls-Royce shares hit record highs at a £77bn valuation — is it too late to buy?

Rolls-Royce shares have reached unprecedented levels. But is there still value for new investors in the FTSE 100 engineering giant?

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

In case there’s a sudden stock market crash, here’s what I’m doing now

Christopher Ruane is spending time getting ready for the next stock market crash, rather than trying to predict when it's…

Read more »