I’m searching for the best dividend stocks to buy for my portfolio right now. Here are two top UK income shares I think could be too cheap to miss.
Playing the retirement boom
I was flicking through the papers earlier today when I came across an extraordinary statistic. According to McCarthy Stone — a construction firm that builds homes for elderly people — demand for retirement properties is four times higher than current levels of supply. The Daily Telegraph story reflects the massive opportunity that Britain’s rapidly ageing population offers to share investors.
I used to tip McCarthy Stone a top stock to buy before its private equity takeover last year. But investors can still capitalise on soaring demand for retirement properties by buying Legal & General Group (LSE: LGEN). This FTSE 100 stock develops homes for retirees through its Inspired Villages and Guild Living divisions. Collectively these units have a combined pipeline of around 4,500 homes.
7.1% dividend yields
I like Legal & General because of the broad range of financial services it offers to older people. I reckon interest in its lifetime mortgages, pension plans, and other products for retirees should grow robustly as populations in its markets age. My main concern with buying this business is the massive competition it faces from other established players like Aviva, Zurich, and RSA Insurance.
That being said, this is a danger I’d be happy to accept given the cheapness of Legal & General’s share price. City analysts think earnings here will rise 5% in 2022. This leaves the company trading on a price-to-earnings (P/E) ratio of eight times. At current prices, Legal & General also offers a spectacular 7.1% dividend yield. This is more than double the current 3.5% FTSE 100 forward average.
Takeover action is heating up
Businesses that offer warehousing and logistics services also offer masses of investment potential as e-commerce takes off. This is reflected by fresh takeover action on the industry. On Monday, it was announced that US-based GXO will acquire Clipper Logistics — a UK share I actually own — for a cool £950m.
Clipper is a share I bought back in 2020 to make money from the internet shopping boom. The services it provides are essential in helping retailers and product manufacturers to reach the online consumer. I might take the cash I receive from Clipper’s sale and reinvest it in Urban Logistics REIT (LSE: SHED).
Another great dividend share to buy
At 176p per share, this property investment trust offers some serious value for money. City brokers think earnings here will soar 36% in the upcoming financial year (beginning April 2022). This leaves it trading on a forward price-to-earnings growth (PEG) ratio of 0.5. In addition, the dividend yield at Urban Logistics registers at a fatty 5%.
I think Urban Logistics is a particularly good buy for those seeking passive income from UK shares. Its position as a real estate investment trust means it has to pay a minimum of 90% of annual profits out as dividends. I’d buy the business — which operates scores of properties all over the country — even though a failure to locate decent acquisitions could hit profits growth later down the line.
