3 dirt-cheap passive income stocks to buy before April

Paul Summers thinks these passive income stocks already look like bargains ahead of results news.

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Buying company stocks in the run-up to results news might be seen as a risky move. Even so, I’d be happy to load up on several UK shares today based on their current valuations and the passive income they are likely to throw off. Here are three examples from companies due to report next month.

CMC Markets

Trading platform provider CMC Markets (LSE: CMCX) was a big winner from the multiple UK lockdowns and subsequent market volatility. Since then however, the shine has well and truly dulled. The shares are down over 40% from where they were this time last year.

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I reckon now might be an excellent entry point for me. A valuation of 11 times forecast FY23 earnings could prove cheap if CMC’s next trading update on 8 April is even slightly more upbeat than expected.

There’s the passive income stream to consider too. Despite deciding to cut its dividend massively this year, CMC still yields 4.4%.

Of course, there are risks. The industry in which CMC operates is both highly competitive and often the target for regulators. So long as I stayed diversified however, this wouldn’t faze me too much.

Jupiter Fund Management

Another stock I’d consider is Jupiter Fund Management (LSE: JUP). Like many other asset managers, the FTSE 250 company has seen its share price hammered in 2022, so far. Much of this is likely due to investors’ nervousness over the appalling conflict in Ukraine. Clearly, the shares could continue losing height if geopolitical events continue to worry the market.

As a Fool (and viewing this purely from an investment angle), I can afford to look beyond the next few months. What’s more, the potential dividends on offer help to compensate for any ongoing share price weakness. Jupiter currently has a monster forecast yield of 8.4%

While I’d be happy to buy today, I would need to remember that Jupiter’s market is a highly competitive one. In an effort to continue attracting savers to its services, it may need to lower its charges. This has a knock-on effect on profits which, in turn, could put the dividend at risk of a cut.

Does a cheap valuation of 10 times forecast FY22 earnings make up for this though? I’m inclined to say it does. A trading update will arrive on 26 April.

Taylor Wimpey

Throughout my time as a Foolish private investor, I’ve avoided housing developers due to my penchant for owning growth stocks. I wasn’t exactly keen to get exposure to a cyclical property market either.

Having said this, I do see the attraction if passive income were my priority. An example is FTSE 100 member Taylor Wimpey (LSE: TW). Right now, it trades at a low valuation of seven times forecast earnings (although rivals also trade on similarly low P/Es). That makes it the cheapest of the three discussed here.

If analysts are right (which can’t be assumed), the company will also return 10.5p per share to owners for the current financial year. This becomes an inflation-beating 8% yield.

Of course, no investment is without risk and dividends are never guaranteed. However, knowing that the total payout is expected to be covered 1.8 times by profit makes me confident it will be paid.

A trading statement is also due on 26 April.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Jupiter Fund Management. 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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