Hunting for income shares to buy after the market dip? Then remember this
Income shares have suddenly become a lot more interesting after the recent market turbulence. While some investors remain nervous, this could be a golden moment to go hunting for quality dividend stocks at cut prices.
Thereâs still plenty of uncertainty out there. Donald Trumpâs decision to pause new trade tariffs for 90 days has calmed things slightly, while hopes of a UK-US trade deal soon have lifted spirits. But things remain fragile, and investors are understandably cautious.
Still, for those focused on long-term income, stock market volatility has a silver lining. With share prices down, yields are looking much healthier. Today may be an attractive entry point for long-term, income-focused investors.
FTSE 100 dividends look tempting today
Right now, a whole heap of FTSE 100 companies are throwing off generous dividends. Mining giant Rio Tinto (LSE: RIO), for instance, currently yields a bumper 7.05%.
Oil and gas heavyweight BP and Asia-focused banking group HSBC Holdings are both yielding around 6.3%. These are big-name businesses with global reach, and those kinds of payouts are hard to ignore. BP and HSBC have also been generous with share buybacks.
Dividends and buybacks are never guaranteed, and high yields often come with heightened risk. But even so, these figures show the sort of income potential available thanks to the recent market wobble.
Rio Tinto has long been a reliable income stock, and the recent market weakness may have opened up a chance to buy it on the cheap.
The minerâs share price has tumbled 10% in the past month and is down 18% over the last year, despite picking up last week after Trumpâs pause.
That reflects weaker Chinese demand as the country’s property market and economy struggles, along with wider uncertainty over trade tariffs.
Rio Tinto has recovery potential
Rio’s latest trading update didnât help. Production at its flagship Pilbara iron ore operation in Australia fell 19% in Q1 and shipments dropped 17%.
Four cyclones disrupted output, costing an estimated 13m tonnes of shipments. Fixing the damage will require an extra A$150m investment. Itâs a sharp reminder of how exposed miners are to unpredictable events.
Yet Rio insists its major projects are on track and maintains full-year guidance, albeit at the lower end. Its current price-to-earnings ratio of 8.75 suggests value, but risks remain. Any further global economic wobble could bite hard.
Rioâs story sums up the state of play in markets right now. A mix of value, risk and huge long-term potential.
Investing always involves uncertainty. Whether itâs mining stocks like Rio, or income giants like BP and HSBC, future returns are never guaranteed.
Even the best companies face shocks, whether recessions, regulatory changes, extreme weather or extreme politics.
But thatâs precisely why moments like this can offer opportunity. History suggests that buying shares when sentiment is low and prices are down often delivers stronger long-term returns.
For income investors willing to ride out short-term volatility, this might just be one of those times to consider Rio Tinto and other income stocks.
The post Hunting for income shares to buy after the market dip? Then remember this appeared first on The Motley Fool UK.
But hereâs another bargain investment that looks absurdly dirt-cheap:
Like buying £1 for 31p
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
More reading
- These 5 stocks could earn £1,600 of annual passive income in a £20,000 ISA
- 3 FTSE 100 dividend stocks to consider buying while they’re on sale
- 1 beaten down dividend stock investors could consider for passive income
HSBC Holdings is an advertising partner of Motley Fool Money. Harvey Jones has positions in Bp P.l.c. The Motley Fool UK has recommended HSBC Holdings. 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.
