British investors like value stocks. They also like high dividend yields.
Here, I’m going to highlight three stocks that are both cheap and have big yields so are worth considering. Let’s get into it.
Long-term growth story
First up is banking powerhouse HSBC (LSE: HSBA). It currently sports a forward-looking price-to-earnings (P/E) ratio of 6.7 and a yield of about 7.3% (excluding this year’s special dividend).
I tend to steer clear of banks when buying stocks for my portfolio as they often have very complex balance sheets (meaning there can be hidden risks). But even with that, I’m tempted by the bigger picture with this one.
I like the fact that HSBC has significant exposure to Asia. This region has a lot of potential from a banking perspective in the long run.
I also like the fact that the company is growing its wealth management unit. This is helping to diversify its revenue streams.
One other thing that stands out here is that the company is buying back its own shares (it just announced a $3bn buyback). This should provide some support for the stock in the near term.
Sky-high yield
Next we have savings and investment firm M&G (LSE: MNG). It has a P/E ratio of about 9.3 and a yield of around 9.6%.
Now, when a yield is this high, a bit of caution can be warranted. That’s because a super high yield can be a signal that a company is in financial distress (often what has happened is that the ‘smart money’ has dumped the stock, pushing its yield up temporarily).
Looking at M&G, however, I don’t see any major red flags. Last year, the company generated a significant increase in operating profit and ended the year with a Shareholder Solvency II ratio of 203% (a solvency ratio shows a company’s ability to meet its long-term debts and obligations).
Of course, investment companies like M&G can experience challenging years when there are periods of financial market turbulence, so this is a risk going forward. Yet this company has been around for over 150 years though, so I believe it can navigate any future volatility.
Exposed to powerful trends
Finally, we have mining giant Rio Tinto (LSE: RIO). It currently trades on a P/E ratio of 8.7 and has a dividend yield of 6.8%.
Investing in mining stocks can be a little risky. That’s because revenues, earnings, and dividends are highly dependent on commodity prices and these can swing around wildly (so I wouldn’t rely on the dividend yield I quoted above).
Taking a long-term view, however, Rio Tinto has the potential to do well. As a producer of iron ore, copper, and other important metals and minerals, it’s well placed to benefit from a number of major trends including the global energy transition, infrastructure development, and population growth.
I think the key with this kind of stock is to size it appropriately in one’s portfolio and own plenty of other stocks for diversification. That way, if it experiences some volatility due to a commodity price meltdown, it won’t be the end of the world.
Anyone looking for more value/dividend stock ideas, will find plenty right here at The Motley Fool.
The post 3 value stocks with huge dividend yields appeared first on The Motley Fool UK.
Should you buy HSBC now?
Don’t make any big decisions yet.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.
And he believes they could bring spectacular returns over the next decade.
Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows…
When such enormous changes hit a big industry, informed investors can potentially get rich.
So, with his new report, Mark’s aiming to put more investors in this enviable position.
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
8.4% and 7.2% yields! I’d buy these 2 exceptional FTSE 100 dividend shares today
Why I’m buying more of this cheap FTSE 100 stock, even though it’s falling
£20,000 in savings? That could become a passive income worth £19,233 a year
8%+ yields! 3 FTSE shares I’m eyeing for August
Down 15% this year, is the Rio Tinto share price too cheap to miss after H1 results?
Ed Sheldon has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and M&g Plc. HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. 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.
