Should you buy these stocks and their 7% and 9% dividend yields for your ISA?

Are these big-yielding dividend shares too cheap to miss right now? Royston Wild takes up the case.

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Oil rig

Fears over the impact of the coronavirus on oil demand, and the consequent share price fall for many of the world’s oil majors, leaves some of these companies looking pretty attractive right now.

Take BP (LSE: BP) as an example. As I type, it carries a bulky dividend yield of 7% for 2020. A low forward P/E ratio of 11.5 times confirms its brilliance — on paper at least — as a true value hero.

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That’s not to say that I for one am happy to invest in the crude colossus today, though. I’ve long warned about the worrisome long-term outlook for oil prices on rising global supply and the near-term threat created by a slowing global economy. And that recent coronavirus outbreak has added another layer of risk to the BP earnings picture and those of its peers.

UBS hacked back its first-quarter Brent forecasts by 6 bucks per barrel just yesterday. It now sits at $56. The downgrade means that the investment bank expects the black stuff to average $60 per barrel, down from its prior estimate of $63.50.

These might not be the only sizeable reductions we see as the coronavirus crisis escalates either.  I for one won’t be touching BP with a bargepole right now.

A better buy?

I’m also not tempted to buy up Halfords Group (LSE: HFD) shares today. This is despite the release of some more reassuring retail sales numbers of late.

Fresh Office for National Statistics (ONS) data this week showed retail sales volumes rose jump 0.9% in January. This was the largest monthly rise since March 2019 and gives a little hope to the likes of Halfords following a steady stream of terrible retail sales releases through 2019.

But this anomalous release is exactly why I’m not interested in buying the battered retailer. Monthly sales gauges are notoriously volatile and I’d want to see more signs of retail improvement before taking the plunge with the car accessories and cycles seller. Indeed, the ONS noted that sales between November and January were down 0.8% compared to the prior three-month period.

9%+ dividend yields!

Halfords’s own trading details haven’t done much to change my bearish opinion either. Latest financials last month showed like-for-like sales in the 40 weeks to January 3 dropped 1.2%.

Performance has been better of late, sure, with solid sales of cycling products (up 5.9%) helping group underlying sales rise 1.3% in the final 14 weeks. However, corresponding sales at its core auto division continued to shrink and were down 2.7% in those final weeks. There’s still clearly much more work for the retailer to do.

City analysts certainly expect trading to remain tricky at Halfords. It’s why they expect earnings to drop 14% in the current financial year (to March 2020). Another 7% bottom-line reversal is anticipated for fiscal 2021 too.

So forget about its cheapness, I say. Not even a low forward P/E ratio of 7.3 times and a bold 9.3% dividend yield is enough to encourage me to invest.

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Royston Wild has no position in any of the shares mentioned. 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.

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 considered, so you should consider taking independent financial advice.

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