The run up to Christmas can be an expensive time. That can mean investing is a lower priority for some investors. Rather than wait though, if I had spare cash in December I would happily use it to snap up UK shares. Here are three reasons why.
Action is the thing
Putting off investing until the New Year on the basis that December brings a lot of other spending priorities has some logic.
But come January, there are new priorities at the start of a year. In fact, it is easy to keep procrastinating and never actually put an investment plan into action.
That is why, if had spare cash to invest in December and found shares I wanted to buy at their current price, I would do so.
Great looking valuations
But how likely am I to be able to do that? I think the answer is: very.
Right now, I consider the shares of some well-known British companies to be dirt cheap.
Consider two UK stocks I have been buying this year, ITV and Legal & General.
They operate in very different industries and face suitably different challenges. For ITV that might be declining demand for advertising as companies trim their marketing budgets, while in the case of Legal & General it could be volatile markets leading customers to pull funds, hurting revenues and profits.
In other ways though, I think that these two shares have some similarities.
Both have very well-known brands. Both have a proven model and have consistently generated large profits in recent years. Both operate in industries for which I expect to see ongoing strong demand.
But – perhaps surprisingly given those strengths – what those two shares also have in common is that they look very cheap to me.
With price-to-earnings ratios in single digits, I see them as attractively priced relative to their long-term commercial prospects.
Earn while I wait
Over time those valuations could increase to more accurately reflect what I see as the value of the companies. If that happens, I could own shares worth more than I paid for them.
That is not guaranteed, though. After all, ITV shares have continued to fall even while I have been upbeat about the broadcaster’s prospects.
But in both cases, I would hopefully earn money while waiting for any possible price appreciation over the long-term.
That is because of dividends.
While dividends are never guaranteed, both ITV and Legal & General have been generous payers. In fact, given their current share prices, both yield over 8%.
That means, if I invest today and the companies maintain their payouts, I ought to earn back my outlay in 13 years.
On top of that, I would still own these blue-chip UK shares! That sounds like a very attractive move to me.
The post Why I’d start putting money into dirt cheap UK shares this December appeared first on The Motley Fool UK.
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C Ruane has positions in ITV and Legal & General Group Plc. The Motley Fool UK has recommended ITV. 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.
