As the dog days of summer recede and the City gets back to a busy time of year, I am considering how to build my share portfolio. I have been looking for cheap shares I can buy – here are a handful I would consider adding in the coming month if I had spare cash to invest.
Vodafone
Telecoms giant Vodafone has seen its share price crumble 56% over the past five years. It now offers a dividend yield of 10.7%, among the highest of any FTSE 100 share.
The company does face challenges, such as a lot of debt. However, it has a strong position in multiple markets across Europe and Africa, a well-recognised brand and a large customer base. The current price looks like a bargain to me.
Hollywood Bowl
Business has been strong at Hollywood Bowl. In its most recent results back in May, the leisure operator revealed that revenues in the first half of the year had grown by over a fifth compared to the same period the prior year. The interim dividend was boosted 9%. These cheap shares now trade on a price-to-earnings ratio of 13 and offer a 5.2% dividend yield.
I like the business because I expect demand to remain strong but there are few competitors that can operate at a similar scale to Hollywood. Perhaps a weak economy will curb consumer spending, hurting profits. In the long run though, I think the company offers me value at today’s share price.
JD Sports
Shares in footwear and clothes retailer JD Sports have risen 12% this year and 42% over the past five years. I think there could be more to come.
If I had spare cash to invest today, I would happily add it to my current holding. JD has a proven business model that is highly cash generative. It is growing its already sizeable footprint in the massive US market, as part of an aggressive plan to add hundreds of stores around the globe each year.
Pricy trainers might fall down people’s shopping list in a weak economy, threatening sales and profits. But the company has traded in tough times before – and is now bigger than ever.
M&G
From a dividend perspective, one of the gems of the FTSE 100 is asset manager M&G. Its yield of 10.3% is attractive to me. The firm’s dividend policy is to maintain or grow its payout annually, although that is never guaranteed.
One concern I have is that challenging stock markets may lead customers to pull funds from M&G. That could hurt profits.
But a strong brand, large customer base across multiple markets and deep financial expertise are all strengths to me.
Legal & General
The final cheap share on my watchlist is Legal & General. A lot of the attributes I like about M&G also apply to Legal & General.
The business aims to raise its dividend annually and has a yield of 8.9% at the current share price. It has cut its dividend in the past when the economy was tough. There is a risk that could happen again if we enter an unexpectedly deep recession.
As a long-term investor though, I like the business strength and income potential of these cheap shares.
