These 2 UK shares priced at under £1 offer huge 10%+ dividends

RWS Holdings (LSE: RWS) is a UK share with a £329m market-cap and an 88.5p share price. And its dividend yield is forecast at a whopping 14%.

That can mean the market expects trouble. And looking back over the past five years, we see RWS down a painful 85%. Is this a recovery opportunity, and can the dividend hold up? Let’s take a look.

AI competitive

RWS is in the language translation and support business. That should be sewn up by computers and artificial intelligence (AI), we might think. But there’s a specialisation here in legal, financial, and drug trial documentation. You can’t just take whatever your AI chatbot says and hope for the best — not if you don’t want a whole load of legal risk.

RWS is getting in on AI developments too. And I see a solid opportunity for a combination of its experience and expertise alongside AI automated tools.

But short-term demand has been weak, and RWS posted a 60% drop in first-half adjusted earnings per share in June. The company kept is interim dividend at 2.45p suggesting confidence. And CEO Ben Faes sounded convinced that a technology-led approach will pay off.

My big problem is forecasts show earnings failing to cover the dividend in the next couple of years. So there has to be a chance of a cut. I like the long-term dividend prospects for RWS, but I think investors should consider holding back to see how the next 12-24 months go.

Fund management

The forecast dividend yield at my second pick, AIM-listed Premier Miton Group (LSE: PMI), stands bang on 10%. This also looks like something of a recovery candidate after a several years of profit weakness — and a five-year share price fall of 38%, to 60.3p.

Premier Miton is in the investment management business, which can be very cyclical. And we already see forecasts indicating strong earnings per share (EPS) growth after a low point this year. They see a 3.5-fold EPS rise between 2024 and 2027.

But the same problem raises its head. Those forecast earnings again won’t cover the predicted dividend — expected to remain constant at 6p per share. At least in this case, the company has net cash on its books — £31.2m at 31 March, and forecast to continue about the same.

Keep up the payments?

So I see a good chance the company can afford to keep its dividend going while it awaits the hoped-for uptick in the investment business. That is, unless the board changes its cash-allocation priorities.

And there’s one other risk. Premier Miton is only small, with a market-cap of just £95m. So I see it at a disadvantage to the bigger players in the business. They have the clout to see it through tough times with less pain. And I reckon they’re more likely to retain investor confidence, and win them back, than the small fish in the pond.

Still, I see a strong chance 2025 could mark the turning point. And I rate this one to consider for a longer-term recovery. Eyes peeled for the final dividend.

The post These 2 UK shares priced at under £1 offer huge 10%+ dividends appeared first on The Motley Fool UK.

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Alan Oscroft has no position in any of the shares mentioned. 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.

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