2 cheap dividend-paying UK shares I’d buy in an ISA now for the stock market rally

These two cheap dividend-paying UK shares could deliver improving performances in a long-term stock market rally, in my opinion.

| 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.

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.

The recent stock market rally means many dividend-paying UK shares have made gains of late. However, it’s still possible to invest money in cheap FTSE 100 and FTSE 250 shares for the long run.

The current stock market rally may or may not last over a sustained period. However, over the long run, a diverse ISA portfolio of UK stocks could deliver impressive total returns.

With that in mind, here are two stocks that could deliver attractive performances in the coming years after experiencing gains in recent weeks.

Should you invest £1,000 in Dfs Furniture 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 Dfs Furniture Plc made the list?

See the 6 stocks

A buying opportunity among cheap dividend-paying UK shares?

Despite a 10% rise in the past two weeks, the Morrisons (LSE: MRW) share price appears to offer good value for money, relative to other cheap UK shares. It trades on a price-to-earnings (P/E) ratio of around 12.5, which suggests it offers a wide margin of safety compared to the wider FTSE 100.

The supermarket giant is forecast to return to positive earnings growth next year. Its bottom line is expected to rise by around 5%. In the long run, it’s targeting investment in areas such as online delivery slots. It’s also diversifying its range of retail locations through a wholesale supply arrangement. Both strategies could mean it’s in a good position to produce further growth.

Morrisons currently has a dividend yield of 4.2%. That’s slightly below the FTSE 100’s 4.7% yield. However, the company’s resilient business model and the growth opportunities is has in online trading could mean it has a more upbeat passive income outlook than other UK shares. As such, it may become more popular in an era of low interest rates.

A FTSE 100 outperformer with further growth potential?

The BHP (LSE: BHP) share price has consistently outperformed many other UK shares this year. For example, it’s currently down 8% in 2020, while the FTSE 100 has fallen by 16% over the same time period.

The diversified mining company’s recent updates have highlighted its operational resilience despite an uncertain working environment. It also has a diverse asset base that may prove to be more robust than those of its industry peers. Meanwhile, it has a solid financial position relative to many of its rivals. This may mean it can successfully overcome further challenges for the world economy. Those that may lead to depressed demand for a range of commodities in the coming months.

BHP may lack the stability of other dividend-paying UK shares, in terms of its financial prospects which are very reliant on the world economy’s performance. However, its dividend yield currently stands at around 7%. This suggests it offers good value for money. That’s even with an uncertain future accounted for.

And, with dividends being covered 1.5 times by net profit, there may be scope for continued generous shareholder payouts over the long run.

Should you invest £1,000 in Dfs Furniture 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 Dfs Furniture Plc made the list?

See the 6 stocks

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.

Peter Stephens owns shares of BHP Group and Morrisons. 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

Investing Articles

What’s up with the Lloyds share price?

The Lloyds share price is up 26% in 2025, representing one of the strongest performance on the FTSE 100. Dr…

Read more »

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 »