Looking to buy UK shares? 4 dividend stocks I think are too cheap after the stock market crash

The recent stock market crash means that many dividend yields have blasted through the stratosphere. Here are four UK shares I’d buy for my ISA.

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.

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 looking at the 2020 stock market crash as an opportunity to build a five-star portfolio at little cost. It’s also a terrific chance to a brilliant return as an income investor. This is because yields from many dividend-paying UK shares have rocketed through the roof.

4 cheap UK shares on my radar

Make no mistake: UK share markets are chock-full of bargains right now. Here are four dividend heroes I’m thinking of adding to my own Stocks and Shares ISA:

  • Persimmon, whose shares have fallen 5% in value in 2020, provides oodles for bargain hunters to sink their teeth into today. The FTSE 100 housebuilder not only changes hands on a low forward price-to-earnings (P/E) ratio of 12 times it sports a mighty dividend yield just shy of 5% as well. The UK’s colossal homes shortage means that Persimmon can expect its newbuilds to keep selling like hotcakes long into the future. And the builder is investing heavily to capitalise on these strong market conditions. House production rose 14% year on year in the first half of 2020.
  • It’s not just stocks that have tanked in value that look too cheap to miss, of course. There’s plenty of UK shares whose prices have rocketed and yet still trade on dirt-cheap price-to-earnings ratios. Take Caledonia Mining Corporation as an example. The gold digger has surged 130% in value in 2020 as bullion values have rocketed to record highs. Yet Caledonia Mining trades on an forward-looking earnings multiple of just 8 times, a reading that fails to reflect the bright outlook for gold prices. A dividend yield close to 2% isn’t as exciting as that of Persimmon. But that low P/E reading means I’m paying close attention.

Stack of new bank notes

Passive income stocks: our picks

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

  • I’d argue that Sylvania Platinum Limited is another irresistible UK share to buy today. Like gold, platinum group metals (or PGMs) have enjoyed a solid price uplift in 2020 on strong safe-haven buying. And persistent macroeconomic uncertainty and low interest rates should keep investment demand quite healthy too. But this is not the only reason why Sylvania’s a brilliant buy today. I’d buy it to ride the inevitable economic recovery, too, a period when industrial demand should rocket. Today the business trades on a low forward P/E ratio of 4 times and boasts a 13% dividend yield. Despite its rising share price in 2020, I think it remains too cheap to miss.
  • I’m also paying close attention to PayPoint today. This UK share has plummeted 49% in price in 2020 as Covid-19 has hit its operations and bill payments through its terminals have fallen. But the long-term outlook for this technology stock – which makes retail services terminals for convenience stores – remains compelling. Adoption of its industry-leading PayPoint One terminal remains strong and should deliver stunning profits growth during this decade. Currently PayPoint trades on a forward P/E ratio of just 12 times and carries a meaty 6% corresponding dividend yield.

Passive income stocks: our picks

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

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 recommended PayPoint. 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

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Here’s how a 40-year-old could start investing £100 per week to retire early

If a 40-year-old decides to start investing today, here's how they could potentially turn £100 a week into over £500k…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

The FTSE 100 is up 60% in 5 years. Here’s why — and a big lesson!

The flagship FTSE 100 index has put in a very strong performance over five years. There's a specific reason for…

Read more »

Investing Articles

How much do investors need in an ISA to earn a £2,500 monthly passive income?

Charlie Carman explores how investors could strive for £30k in tax-free passive income each year from a dividend stock portfolio.

Read more »

Investing Articles

How much would a 45-year-old need to invest in an ISA to earn a £1k monthly passive income at 65?

Harvey Jones looks at how much an investor would need to put away every month to build a steady passive…

Read more »

Investing Articles

3 things to do ahead of the new 2025-26 ISA year

It's time for us all to put on our investing boots and get to work on developing our plans for…

Read more »

Older couple walking in park
Investing Articles

Is £150,000 enough to generate £1,000 a month in passive income?

Stephen Wright takes a look at three UK stocks with dividend yields above 8% that passive income investors might be…

Read more »

Investing Articles

Aim to earn a £50k second income in retirement by investing just this much each month

Even with a small monthly investment, it’s possible to earn a £50k second income with a successful investment strategy and…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Down 22% in a month! Is this my chance to buy shares in this FTSE 100 outperformer?

Shares in InterContinental Hotels Group have outperformed the FTSE 100 over the long term. So is a chance to buy…

Read more »