Lovely dividends at low prices! 2 top dividend shares to consider
Recent stock market volatility provides a great opportunity for dividend investors. The yields on many top-quality income stocks have leapt to sky-high levels. What’s more, many of these dividend shares can be picked up on rock-bottom earnings multiples.
Take Social Housing REIT (LSE:SOHO) and Legal & General (LSE:LGEN). These UK dividend heroes have seen their dividend yields shoot to 8% and above. Read on to discover what makes them top income shares to consider today.
Top trust for tough times
Social Housing REIT’s shares have slumped on fears over future interest rates. Higher central bank benchmarks can be devastasting for property stocks like these by depressing asset values and consequently profits.
The good news is this real estate investment trust (REIT) now trades at bargain-basement prices. Its shares deal at a whopping 35% discount to its net asset value (NAV) per share. The dividend yield meanwhile has leapt to 8.2%.
Finally, Social Housing’s forward price-to-earnings (P/E) ratio of 10.7 times.
The risks have clearly risen for the company. But on balance, I think it’s a top dividend stock to consider in what’s becoming an increasingly challenging time for UK shares. Thanks to its long contracts with housing associations, it can expect occupancy and rent collection to remain robust, supporting steady income it can distribute to shareholders.
Under REIT rules, at least 90% of the company’s rental profits must be distributed to shareholders. This is in exchange for tasty breaks on corporation tax. This provides better earnings visibility than other property shares that have far greater discretion on dividends.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
9%-plus dividend yield
Legal & General shares are falling hard. It’s not a surprise in the current climate — rising inflation and growth issues can play havoc with financial services demand. The firm’s asset management unit is also in danger should the global stock market crash.
But at current prices, I think the FTSE 100 firm’s worth a serious glance from long-term investors. That’s because its forward dividend yield has jumped back above 9%, to 9.2%. Its P/E ratio has also dropped to a modest 9.9 times.
Earnings could suffer in the near term if consumers cut back. However, I’m confident this won’t impact the company’s plans to keep growing annual dividends by 2%. Its robust Solvency II capital ratio of 210% offers excellent protection.
That strong balance also means the company’s well placed to make share buybacks, helping support the share price. It announced plans to make £1.2bn of share repurchases this year, taking total cash returns (buybacks plus dividends) for shareholders of £5bn between 2025 and 2027.
Over the long term, I believe the Legal & General share price will to surge from current levels. I’m expecting profits to rocket as demographic changes drive demand for its retirement, protection, and wealth products.
The post Lovely dividends at low prices! 2 top dividend shares to consider appeared first on The Motley Fool UK.
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- How much do you need to invest in UK stocks to earn monthly passive income of £1,500?
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- 2 FTSE 100 blue-chips to consider for a Stocks and Shares ISA before 5 April
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Royston Wild has positions in Legal & General Group Plc. 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.
