2 juicy dividend stocks to buy at knockdown prices!

Dr. James Fox explores two dividend stocks to buy with the FTSE 100 languishing near 7,000 and ongoing concerns about a recession.

| 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.

Mature black couple enjoying shopping together in UK high street

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.

Dividend stocks form an important part of my portfolio. They provide me with regular income in the form of dividend payments. This passive income source is the holy grail for many investors, particularly those investing over the long run.

UK indexes have fallen over the past two months, particularly after Liz Truss spooked markets with her catastrophic fiscal policy. Both the FTSE 100 and FTSE 250 are down considerably from summer highs. And when share prices fall, dividend yields go up — unless the company reduces dividend payments.

There’s obviously concern that we’re entering a recessionary environment and there will be further negative pressure on stocks. But, for me, these two stocks look well positioned to outperform the market and provide me with passive income.

Should you invest £1,000 in Direct Line 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 Direct Line made the list?

See the 6 stocks

Vistry Group

I think housebuilder stocks have fallen far enough. Vistry (LSE:VTY) grew impressively in 2021, with revenue coming in at £2.3bn, more than double any year before the pandemic.

And this growth has continued in 2022. Adjusted revenues in the six months to 30 June rose nearly 6% to £1.33bn, while total completions improved 5% to 5,409. Adjusted operating profits were ahead 13% at £198.2m.

However, with the economic climate worsening, and interest rates being hiked, the share price has tanked. In fact, Vistry is down 50% over one year. That’s huge, but in line with other housebuilders.

The issue is that analysts contend house prices will remain flat while cost inflation will run at 5%. That’s clearly an issue and it’s likely to impact housebuilders right through 2023.

But in the long run, I’m confident demand will return. And after a bumper two years, housebuilders should have the resources to see these troubled times through. Vistry has a debt to total capital ratio of 12.5% — a lower figure than the previous year’s 14.6% — and a net profit margin of 9%.

The stock, which is also the target for a proposed merger with Countryside Partnerships, also offers an attractive 10% yield. With 2022 still expected to be a record year, I anticipate the yield to remain constant for the time being. I already own Vistry shares, but I’m buying more.

Direct Line

Direct Line (LSE:DLG) posted a 31.8% decline in first-half pre-tax profit in H1 as it took a hit from claims inflation. Pre-tax profit fell to £178.1m from £261.3m in the first half a year earlier, although this was ahead of consensus expectations of £155m.

As a result of the above, the insurer is now down 31% over the year. However, I see this dip as an opportunity to add this stock to my portfolio. Regardless of a possible recession, people will still need or want to insure their homes and vehicles.

And this is something the business has highlighted. The group contends that its fundamentals remain strong and that through steps taken within its garage network, as well as pushing up prices, Direct Line has returned to writing at target margins “based on latest claims assumptions“.

I’m buying Direct Line because of these defensive qualities, but also its sizeable 11% yield. Even if payments are cut, proportional to the decline in H1 profits, it will still remain above the index average.

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy 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.

James Fox has positions in Vistry. 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.

More on Investing Articles

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Here’s the Tesco share price forecast for the next 12 months!

Tesco's valuation has dropped to multi-year lows after recent share price weakness. Is now the time to consider buying the…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: March’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

I asked ChatGPT for the best FTSE 100 investment trust to buy… here’s what it said

There aren't many FTSE 100-listed investment trusts and according to ChatGPT there’s only one winner. Dr James Fox explores.

Read more »

Investing Articles

How much should investors put in an ISA to achieve the average UK wage in passive income?

Millions of Britons use the Stocks and Shares ISA as a vehicle to build wealth, but a successful investor can…

Read more »

Investing Articles

2 cheap FTSE dividend stocks to consider buying for an ISA

The deadline for using up the Stocks and Shares ISA allowance is almost upon us. Paul Summers has spotted two…

Read more »

Investing Articles

£20k in a Stocks and Shares ISA? Here’s how an investor could target £1,342 in passive income each month

Christopher Ruane explains how a long-term approach to investing a Stocks and Shares ISA could generate a four-figure monthly income.

Read more »

Shot of an young Indian businesswoman sitting alone in the office at night and using a digital tablet
Investing Articles

Millions are missing out on ISA account benefits! Here’s what I’m doing now

Swathes of people are missing the chance to supercharge their returns with a Stocks and Shares or Lifetime ISA account.…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Here’s my plan to survive and thrive in a stock market correction

A falling stock market can be an opportunity, but investors need a plan. Stephen Wright shares his strategy for taking…

Read more »