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The UK remains a good hunting ground for dividend stocks, in my opinion. What’s more, some of these are still on sale at very low prices.
These are the only two that caught my eye as we hit the end of January.
Unfavorable sector
The housing market has taken a big hit in recent months as persistently high interest rates, combined with the cost of living crisis, have dampened demand from buyers. Of course, this is not good news for UK housebuilders.
Among those affected already FTSE 100 member Barratt’s Development (LSE: BDEV). Stock price history in 2022
On a positive note, the last few months have been a recovery, sort of. The stock is up nearly 12% (as I type) on the year-to-date alone.
Despite this, the shares still look cheap at seven times the forecast earnings for the current financial year (until the end of June). Even the big drop in earnings growth predicted by analysts in FY2024 would still leave the stock changing hands at below 12 times earnings.
So now is the time for me to buy?
great yield
Well, nobody knows. Much depends on economic data in 2023.
But my lack of a crystal ball doesn’t stop me from picking out a few things I’d like to share here. Barratt is a big player in a sector which, when cyclical, has long-term prospects due to the housing shortage in the UK. Its finances are stronger than ever. 2007, this is not.
But it’s the dividends that I love the most. Although it cannot be guaranteed, Barratt Developments is currently yielding a monster 7.4%.
Overall, I would feel comfortable starting to build a position here if I have cash.
Another low dividend stock
A second income stock that looks great Value is Renewable infrastructure (LSE: TRIG). As the name suggests, the FTSE 250 Members invest in a portfolio of assets in the UK and European renewable energy space. These include onshore and offshore wind farms, solar parks and battery storage sites.
The electricity generated from this is then sold, generating revenue for the company and, ultimately, dividends for the owners. Of course, it should be remembered that we have no control over the price of electricity.
Regular hiker
One thing I like is that the income stream is pretty stable. As evidence of this, the £3.2bn cap has established a solid record of increasing its dividend every year. That’s even though it’s only been registered since 2013.
Of course, this increase is not huge – only a few percent, at most. But consistency is key.
As I type, Renewable Infrastructure is down to yield 5.4% in FY23. However, this is only an estimate. It is also worth highlighting that Electricity Generator Retribution (windfall tax) will impact income for the next two years.
At a price-to-earnings ratio (P/E) of nine, the price is also slightly higher than Barratts. Even so, the additional diversification I would get if I bought both instead of just one might be worth it.
Again, I would consider taking stock here if I had the funds to do so.
The full year numbers for 2022 are announced in mid-February.
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