The Motley Fool

Stock Market Crash: I’d buy these 2 cheap UK shares yielding +9%

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.

Tired or stressed businessman sitting on the walkway in panic digital stock market crash financial background
Image source: Getty Images

Following this year’s stock market crash, many shares continue to trade at low levels and offer significant value. With that in mind, today I’m going to take a look at two cheap UK shares. They both yield more than 9% and seem to offer a margin of safety. 

Stock market crash bargains

Insurance group Direct Line (LSE: DLG) recently told investors that due to a decline in the number of cars on the road in the first half of 2020, it would be paying a special dividend out of excess profits. 

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

The decision to repay investors has made Direct Line one of the best cheap UK shares for income investors to buy today.

City analysts have the company paying a total dividend of 32.5p for 2020, which gives a dividend yield of 11% on the current share price. 

What’s more, the stock appears to offer a wide margin of safety at current levels. While shares in the insurance group have recovered from their stock market crash lows, they still look cheap compared to the rest of the market.

Indeed, shares in Direct Line are currently changing hands at a forward price-to-earnings (P/E) multiple of 11. That’s compared to the market average at 14. 

Considering the company’s recent dividend announcement, and better-than-expected trading performance in the first half of the year, I think shares in Direct Line warrant a higher valuation.

As such, now could be an excellent time to buy this stock as part of a basket of cheap UK shares. 

Cheap UK shares on offer

Another bargain I have my eye on is Legal & General (LSE: LGEN)

Legal is one of the UK’s top income stocks. It has held on to this position throughout the coronavirus crisis and March’s stock market crash. 

As an income investment, the company stands out. Legal is the largest pension manager in the UK. This means the corporation is highly regulated and has to invest for the long term. Management has to make sure investors can trust the business to be around in 50 years when it’s time to claim their pension. 

This means the firm has to employ a sustainable dividend policy – that’s great news for income investors.

Unlike other cheap UK shares that have cut their dividends recently, Legal currently supports a dividend yield of nearly 9%. The payout is covered 1.6 times by earnings per share. 

And just like Direct Line, Legal also looks cheap after the recent stock market crash. The stock is selling at a forward P/E of 7.3, which is half the market average. When investor sentiment towards the business improves, it is possible the stock could double from current levels.

All in all, as an undervalued income investment, Legal looks as if it could be a great addition to any portfolio of cheap UK shares. The company’s market-beating dividend yield and low valuation suggest that it could produce high total returns.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Rupert Hargreaves 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.