These are great days for fans of cheap shares, as the FTSE 100 has been full of them. Buying them has been like shooting ducks in a barrel (not that I would, poor ducks). It’s simply a case of taking my pick.
I spent summer and autumn loading up my new self-invested personal pension (SIPP) with what looked to me like the biggest bargains on the FTSE 100. They were all trading at less than eight times earnings (where 15 is seen as fair value).
I didn’t do this in anticipation of making a quick killing, I thought it may take several years for them to recover their lost value. Yet I’m already nicely ahead. And this is only the start of what I hope will be a long and beautiful relationship.
A good start
Some of my stock picks are already up more than 25% since I made my first purchase, although my total return is lower because I averaged up as my faith in them grew. The dividends are starting to roll in too, and I’m hoping for much more to come.
I bought housebuilder Taylor Wimpey twice in September and once in November, and I’m already up 16.75% after charges. I reinvested my first dividend of £79.55 on 21 November. I bought the shares when the stock was yielding more than 7%, so it should prove a rewarding ride.
I had a nibble at fund manager M&G in autumn 2022 and I’m up around 30% since then, once its mighty 9% yield is included. I came back for bigger bites in July, September and November this year, and these handed me a £133.93 divi on 7 November. I bought more on 30 November. If I had any cash left I’d buy it again.
I had high hopes for insurer and fund manager Legal & General Group, which like M&G, I thought would benefit when interest rates peaked and investor confidence returned. I bought its shares in April, July and August, and pocketed a £100.09 dividend on 28 September. I’m up 9.75% in total, but these are early days.
The income is rolling in
Guess what? The Lloyds Banking Group share price is finally rising too. We haven’t seen much of that over the last decade. From being in the red on my June and September purchases, I’m suddenly up 8.85%, including the £40.34 dividend I reinvested on 14 September.
The one shock was paper and packaging specialist Smurfit Kappa Group, whose shares crashed more than 10% shortly after I bought them in June, after markets decided it had overpaid for a US acquisition. Once I got over the shock, I averaged down and now I’m up 5.42% overall (and haven’t received a dividend yet).
Of course, these are early days. If the recent mini-rally fades, my paper gains could quickly turn into paper losses. That’s fine. I plan to hold the shares for years, decades ideally. While it’s a confidence booster to see them get off to a bright start, what matters is how well they do in the longer run. I’m optimistic here too. And I will only get more optimistic, every time a new dividend hits my account.
The post I’ve only just bought these 5 dirt cheap shares and they’re already flying appeared first on The Motley Fool UK.
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
setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()
More reading
Here’s how I could build a second income in 2024 for £3 a day!
2 UK shares that could surge in 2024 if the Bank of England cuts interest rates
20% annual stock market returns: titan strategies revealed!
I’d buy 377 shares of this mid-cap dividend stock for £1,000 a year in passive income
One 59p penny stock I’d avoid like the plague!
Harvey Jones has positions in Legal & General Group Plc, Lloyds Banking Group Plc, M&G Plc, Smurfit Kappa Group Plc, and Taylor Wimpey Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc and M&G Plc. 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.
