2 dirt-cheap dividend stocks to consider in March with 7% yields!
Even as stock markets rally, it’s possible to dig out top quality dividend stocks at rock-bottom prices. As well as enjoying enormous dividend yields, with careful selection investors can find great shares that look like bargains based on other popular metrics.
Take AEW REIT (LSE:AEWU) and Admiral Group (LSE:ADM). As well as having yields of 7% or above, these passive income heroes have other qualities that make them great value picks to consider
Want to know why they could turbocharge passive income? Read on.
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.
Top trust
Real estate investment trusts (REITs) are designed to provide a larger and more reliable income stream than most other dividend shares. At least 90% of their rental earnings must be paid out each year, in exchange for juicy tax breaks.
Companies like AEW REIT enjoy a steady stream of rental income they can use to fund shareholder payouts. In this case, dividends are paid four times a year. The question is, can the business continue doing so given tough conditions in the broader economy?
After all, the trust is exposed to highly cyclical sectors like industrials and retail. On balance, though, I’m confident in its future dividend prospects. It has 132 tenants on its books, which guards group profits from widescale rent collection and/or occupancy issues.
What’s more, the weighted average unexpired lease term (or WAULT) until expiry sits at 5.6 years. This provides solid near-term earnings (and by extension dividend) visibility.
But what makes AEW REIT such an attractive value stock today? It doesn’t only provide plenty of bang for one’s buck with its 7.5% forward dividend yield. It trades at a handy 5% discount to its net asset value (NAV) per share.
FTSE 100 dividend star
At 7%, the dividend yield on Admiral’s shares is the third-highest on the FTSE 100. Can it meet City analysts’ lofty income expectations? I think so.
Unlike many high-yielding financial services shares, Admiral operates in the stable general insurance market. Consumer spending here remains largely unchanged across the economic cycle, providing dependable premium income it can distribute through dividends.
This company’s ace in the hole, however, is its dominant position in the motor insurance market. In the UK, it insures more cars than any other and has a 14% market share. It also has positions in overseas markets. This is important, as motor coverage is a legal requirement, providing earnings with additional protection.
Admiral’s cash-rich balance sheet also provides future dividends with support. According to latest financials, its Solvency II capital ratio was 194%, well above regulatory requirements.
There’s no such thing as a risk-free dividend share. In this case, dividends could fall short of forecasts if costs spike again, putting margins under strain. Admiral also has significant competitive pressures to navigate to keep growing earnings and payouts.
But on balance, I think it’s a solid dividend stock to consider today. It also trades cheaply right now. Its forward price-to-earnings (P/E) ratio of 12.3 times is way below the 10-year average of 17-18.
The post 2 dirt-cheap dividend stocks to consider in March with 7% yields! appeared first on The Motley Fool UK.
Should you invest £1,000 in Admiral Group plc right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Admiral Group plc made the list?
More reading
- These 5 income stocks could turn a £20k ISA into a £1,680 passive income!
- A once-in-a-decade chance to buy 3 cheap stocks with fabulous yields?
- I asked ChatGPT if I should invest £20k in an ISA this year or a SIPP and it saidâ¦
- How to create passive income within an ISA in 3 easy steps
- Here are the dividend stocks with the highest yields from the FTSE 100 and the S&P 500
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral Group Plc. 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.
