Lately, my wife and I have been buying cheap UK shares. Why? Before Russia’s invasion of Ukraine, the London market was riding high. But then it plunged, rebounded and slid again in the summer lull. While the FTSE 100 is up 5% over one year, the FTSE 250 has lost 15.1% in 12 months. Hence, we recently bought these three cheap FTSE 250 shares for their market-beating dividends.
A FTSE 250 share
Direct Line Insurance Group, a leading provider of motor insurance, has branched out into selling business, life, pet, and travel insurance too. As well as Direct Line with its familiar red telephone, the group operates brands including Churchill, Green Flag, NIG, and Privilege. But red-hot inflation and regulatory changes to insurance premiums are harming Direct Line’s profits. Here’s how this FTSE 350 share has performed:
This stock has lost a third of its value in 12 months. Here are Direct Line’s fundamentals following these falls:
Even though its near-11% dividend yield isn’t fully covered by earnings, I expect Direct Line to rebound in 2023-24. Thus, we bought this FTSE 250 stock to add dividends to our passive income.
ITV (LSE: ITV) is the UK’s leading commercial terrestrial broadcaster and a leading producer of TV programmes and other media. Indeed, it creates, produces and distributes content around the globe. But weaker results have hit its share price hard, as shown below:
With this FTSE 250 stock down almost two-fifths in the past half-year, ITV’s share fundamentals look very undemanding to me, as below:
To me, ITV looks like a classic value stock, offering a 7% cash yield, covered more than twice by earnings. But rising inflation, higher interest rates and a slowing economy may hit UK company earnings in 2022-23. Even so, I still think ITV might be a bargain buy.
And income stock
Royal Mail (LSE: RMG) provides the UK’s universal postal service. However, this division is currently loss-making, so most of Royal Mail’s earnings come from GLS, its highly profitable Amsterdam-based overseas division. Also, Royal Mail workers who are members of the Communication Workers Union have voted to strike over pay and conditions. As a result, this share has slumped, as follows:
Having crashed by almost half in 2022, Royal Mail shares now seem lowly rated to me, based on these modest fundamentals:
While things don’t look good for Royal Mail presently, its juicy dividend is very well-covered. And so we bought this cheap FTSE 250 stock as a long-term hold!
Mark Rogers, Motley Fool UK’s Director of Investing, has just revealed what he believes could be the 6 best stocks for investors to buy right now!
Want to see if ITV made the list?
Get started with Motley Fool Share Advisor today to receive the low-down on all 6 stocks, a fully stocked treasure-trove of industry reports, two brand-new stock recommendations every month, and much more.
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
- Am I crazy for buying Royal Mail shares?
- High-dividend stocks! Should I buy Royal Mail’s shares for its 7.3% yield?
- 2 income shares I recently bought for a 9% average dividend yield
- What’s going on with the Royal Mail share price?
- 2 cheap shares I bought for dividend income
Cliffdarcy has an economic interest in Direct Line Insurance Group, ITV, and Royal Mail shares. The Motley Fool UK has recommended ITV. 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.