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8.5% dividend yields! 3 dirt-cheap stocks I’d buy in October

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There were already plenty of top cheap stocks for investors to pick up in September. But the recent stock market crash means that even more smashing British stocks can be picked up for next to nothing.

Here are three low-cost companies on my radar right now. I think they could be among the best cheap UK shares to buy as we approach October.

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#1: 8.5% dividend yields

Most housebuilding stocks like Persimmon offer staggering all-round value. Not only does this particular builder trade on a rock-bottom forward price-to-earnings growth (PEG) ratio of 0.8, the FTSE 250 firm carries a mighty 8.5% dividend yield too!

A reading PEG reading below 1 suggests a stock could be undervalued. It’s a reading I think more than reflects the risks that soaring raw material prices pose to the housebuilder. I think cheap stock Persimmon should keep delivering decent shareholder returns amid robust home prices.

Estate agent Hamptons thinks average property value growth will cool from an expected 4.5% in 2021. But they still expect values to rise by a meaty 3.5% and 3% in 2022 and 2023 respectively, giving the builders (and their shareholders) terrific peace of mind.

A person holding onto a fan of twenty pound notes

#2: A cheap UK stock for the inflation boom

I think Petropavlovsk could be one of the best stocks to buy as inflation rises. This is because the gold it produces is a traditional flight-to-safety asset which rises in price as the value of paper currencies comes under scrutiny. Statista data shows that safe-haven demand for the metal is already rising strongly. Investment demand clocked in at 284.5m tonnes in the second quarter versus 180.7m in quarter one. 

Petropavlovsk might struggle to capitalise on this inflationary environment if it encounters trouble at its mining operations and production disappoints. Still at current prices I think the Russian digger might still be a top buy. Today it trades on a forward price-to-earnings (P/E) ratio of 9 times, well inside bargain territory of 10 times and below.

#3: an 8%-plus yielder from the FTSE 100

UK share investors need to be mindful of how a rapidly slowing domestic economy could damage their returns. One cheap stock I’d buy to protect myself against the slide is Admiral Group. The levels of spending on general insurance remains stable at all stages in the economic cycle. This is particularly true in Admiral’s core motor division, given that cover is a legal requirement.

It’s true that this FTSE 100 stock faces significant danger from an intensely competitive market. What’s more, motor insurers like this face a potential surge in costs in the years ahead. This includes from soaring motor claims as drivers get back on the road following Covid-19 lockdowns, and rising buildings insurance claims due to climate change. But I think Admiral still merits serious consideration at current prices. The insurer trades on a forward PEG ratio of just 0.5. It boasts a glorious 8.5% dividend yield as well.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral Group. 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.

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