The recent stock market volatility may have provided me with an opportunity to buy my favourite dividend shares at a discount. But as share prices snap back, is it too late for me to buy?
With the Bank of England stepping in to restore orderly financial conditions, a deeper crisis may have been averted.
Cheap dividend shares
That could bode well for long-term savings and retirement business Phoenix Group (LSE:PHNX).
Passive income stocks: our picks
Do you like the idea of dividend income?
The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?
If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…
Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.
What’s more, today we’re giving away one of these stock picks, absolutely free!
Yes, the economic environment remains uncertain. Any further disruption to financial conditions could negatively impact Phoenix in the near term.
But due to the recent drop in the share price, it offers a whopping 10% dividend yield. I don’t think this opportunity will last much longer, so I’m keen to buy it soon if funds allow.
Just two weeks ago, it was yielding ‘only’ 8%. That helped to make it one of the best dividend shares in the FTSE 100. Now, the opportunity is even better, in my opinion.
Dividend shares aren’t just about the yield, though. I prefer those that offer sustainable, affordable and reliable dividends. I reckon Phoenix Group ticks those boxes too. Its dividend cover of 1.8 times, and 13 years of consecutive payments looks impressive.
Looking ahead
Next, I’d consider housebuilder Taylor Wimpey (LSE:TW.). But why would I even think about buying shares in this sector when the outlook looks so dire?
This industry could face challenges with a potentially weaker UK housing market. Interest rates are rising, and mortgages are becoming more expensive as a result. The cost-of-living squeeze could also put additional pressure on affordability.
So far, house prices have proved resilient. But I think that could be about to change, and I’d expect a more challenging period ahead.
That said, Taylor Wimpey’s share price has already fallen by 33% over the past year. And its price-to-earnings ratio has fallen from 9 times to 5 times so far this year, which makes it remarkably cheap. It could be argued that a weaker housing market outlook is already priced into the shares.
Its chunky 10% yield looks appealing to me. If I had some spare cash, I’d buy these dividend shares today for the passive income they could provide.
Stable passive income
Lastly, I’d pull the trigger on Legal & General Group (LSE:LGEN). It offers an appealing 9% yield. This insurance business is well-established. Impressively, it has been distributing regular dividends for over 30 years. This is just the kind of reliability I like to see in the best dividend shares.
The financial services firm reported that market volatility had limited economic impact on the company. That could make recent share price falls an opportunity, in my opinion.
CEO Nigel Wilson commented, “Our businesses are resilient, and we are on track to deliver good growth in key financial metrics for 2022.”
I have to bear in mind that share price growth has been limited over the past few years. And a weaker economy could limit the significant growth seen in the past.
That said, its solid dividend yield should make up for it. With growing earnings, a sensible balance sheet and a well-covered dividend, I’d certainly buy these dividend shares if I had some extra cash.
