The Motley Fool

6 cheap UK shares with high dividend yields to buy

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.

A person holding onto a fan of twenty pound notes
Image source: Getty Images.

High dividend yields are back in vogue. FTSE 100 companies are reinstating dividends or increasing them. The best part is that some of these still classify as cheap UK shares.

In other words, I can earn a dividend income from reasonably priced stocks! 

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!

By reasonably priced, I mean having a price-to-earnings (P/E) ratio below that of the FTSE 100 index. As per data provider, Siblis Research, that number was 17.5 times at the start of 2021. 

#1. M&G: a high dividend yield that cannot be ignored

The first is investment manager M&G, which became an independent entity after its split from insurance giant Prudential in 2019. It has the biggest dividend yield, of 8.5%, among FTSE 100 stocks and it also has a really low earnings ratio of 5 times. It also posted weak results recently and runs performance risk too.  

#2. British American Tobacco: long-term risks

Tobacco biggie British American Tobacco has the next highest dividend yield of 8.3% and an earnings ratio of 9 times. Unlike M&G it saw rising profits recently. But the long-term strategic risk to this passive income generator just cannot be ignored

#3. Phoenix Group Holdings: streamlining underway

Phoenix Group Holdings, the insurance provider with a high dividend yield of 6.5%, also classifies as a cheap UK share with a P/E of 8 times. Its recent streamlining of the strategic partnership with Standard Life Aberdeen can help its business going forward. I am wary of its erratic past performance though. 

#4. GlaxoSmithKline: consistent growth

The pharmaceuticals and healthcare biggie GlaxoSmithKline (GSK) is another cheap UK share to note. Its earnings ratio is higher than some at 11 times, but its dividend yield is strong at 6.4% and it has shown itself to be a consistently growing company. Its falling share price since the start of last year is a downer though because that can negate passive income gains. 

#5. Polymetal International: out of favour

The precious metals’ miner Polymetal International has a similar dividend yield to GSK but it has a far lower earnings ratio of 6.5 times. But precious metals are out of favour with investors after being in the spotlight last year. The risk here is that the trend can continue to fall as macro-trends dominate the investor mindset, possibly eroding the value of my capital even as I earn dividends.

#6. Legal & General: Covid-19 impacted

The general insurer Legal & General, with a dividend yield of 6.2% comes next. Its earnings ratio is a bit higher than that of others at 14 times, which can take away from its overall attractiveness. Als0, its full-year 2020 results released earlier today also show some pandemic hit, though I reckon 2021 can be better for insurers as the economy reopens. 

In sum, the fact is that there are both risks and risks to stock market investments. But I think looking at both the pros and cons helps me make the best calculated risks in my goal to earn a high dividend yield. And these cheap UK shares offer a good way to do so.

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 still 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 is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Manika Premsingh owns shares of Polymetal International. 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.