2 cheap dividend growth stocks I’d buy as the economy sinks

I’m searching for the best bargains to buy following recent market volatility. Here are two top dividend growth stocks I think could be too cheap to miss.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

pensive bearded business man sitting on chair looking out of the window

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

I’m still searching for the best dividend growth stocks to buy as economic conditions worsen. Fresh trading news from pawnbroker H&T Group (LSE: HAT) today suggests that this could be the share I’ve been looking for.

Pledge loans are loans that are secured against a customer’s high-worth possessions. And H&T saw its pledge loan book rocket to a record £84.2m as of June, up 74% year-on-year as the cost-of-living crisis worsened

Pawnbrokers face competition from financial services businesses like banks and doorstep lenders. But this business is thriving, and lending is now 40% above pre-pandemic levels.

Should you invest £1,000 in Taylor Wimpey 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 Taylor Wimpey made the list?

See the 6 stocks

Splendid all-round value

Created with Highcharts 11.4.3H&t Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

H&T’s share price has slumped in spite of its proven strength in tough times. As a keen dip-buyer, I think this represents a terrific buying opportunity.

In fact this AIM business offers exceptional bang for my buck at the current price around 330p. City forecasters think earnings at the firm will soar 109% in 2022 and rise an extra 27% next year.

Some large dividend increases are predicted as a result. Payouts of 14p and 18p are anticipated for 2022 and 2023, respectively, which produce fat yields of 4.4% and 5.5%.

Finally H&T trades on a forward price-to-earnings (P/E) ratio of just 10 times.

Another top dividend stock

I think buying some solid defence shares is a good idea for investors too. This isn’t just because government spending on weapons remains solid during all points of the economic cycle.

It’s also because arms expenditure is picking up as the geopolitical landscape deteriorates. Prime Minister Boris Johnson’s announcement on Friday that Britain’s defence spending will reach 2.5% of GDP by 2030 illustrates this line of thinking.

I’d buy Babcock International Group (LSE: BAB) shares right now to capitalise on these themes. The FTSE 250 firm sells a broad range of products and services over land, air and sea. These include everything from providing refuelling services for jets to manufacturing electrical systems for boats.

Payouts to return

Created with Highcharts 11.4.3Babcock International Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

I’d buy Babcock today, despite the threat of prolonged supply chain problems denting profits, and particularly because of the excellent value it offers at current prices around 318p per share.

City analysts think the firm’s earnings will soar 19% year-on-year the financial year to March 2023. And they believe annual profits will improve 20% next year as well.

These projections mean Babcock trades on a forward P/E multiple of just 9 times. They also mean the defence giant is tipped to grow the yearly dividend rapidly over the period.

Brokers think the business will pay a 9.8p per share dividend this year after stopping payments due to Covid-19. And they think the annual dividend will reach 14.7p next year. Consequently the yield leaps from a handy 3.1% to an impressive 4.6%.

Should you buy Taylor Wimpey now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild 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.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

3 high-yield dividend shares to consider buying for a retirement portfolio

Dividend shares can provide retirees with regular passive income in their golden years. Our writer picks out three with yields…

Read more »

Investing Articles

Tesla stock has halved. Could it now double – or halve again?

After a wild few months for Tesla stock, Christopher Ruane weighs some pros and cons of the investment case. Could…

Read more »

Investing Articles

Does it make sense to start buying shares as the stock market wobbles?

Does a rocky stock market make for a good or bad time to start buying shares? This writer reckons it…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

£15k of passive income a year? It’s possible with the right dividend strategy!

To figure out how much dividends are needed for a lucrative passive income stream, investors must understand which strategies get…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As US markets wobble, I’m listening to Warren Buffett!

The long career of billionaire investor Warren Buffett has included plenty of market turbulence. Here's what our writer's learnt from…

Read more »

UK money in a Jar on a background
Investing Articles

5 shares yielding over 5% to consider for a SIPP

Christopher Ruane introduces a handful of FTSE 100 and FTSE 250 shares he thinks an income-focussed SIPP investor should consider.

Read more »

Investing Articles

Here’s how an investor could invest a £20k ISA to target £1,500 of passive income per year

Can a £20,000 ISA throw off close to £30 per week on average of passive income when invested in blue-chip…

Read more »

Investing Articles

As gold hits $3,000, this FTSE 100 stock is primed for blast off

As Western institutions scramble to get as much gold as they can lay their hands on, Andrew Mackie believes this…

Read more »