2 dirt-cheap FTSE dividend shares to buy today

Paul Summers picks two out-of-favour dividend shares that he’d buy for an income-focused portfolio

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There’s no shortage of bargain dividend shares in the UK market at the moment. Here are two that I’d be tempted to buy right now.

888 Holdings

Online gambling firm 888 Holdings (LSE: 888) is a stock I once owned and would consider owning again for two reasons.

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First, the shares just look too cheap. True, the trading momentum enjoyed by 888 during multiple UK lockdowns is now over (which partly explains the 50%+ fall in the share price in the last year). However, a forward P/E of just nine strikes me as a steal. This is a highly profitable and practically debt-free company. 888 also boasts a strong brand and great growth prospects, especially in the US. If its next update proves even remotely better than expected, we could be in for a nice bounce.

Second, the income stream is worth grabbing. Assuming analysts are right (which, admittedly is a big assumption), the FTSE 250 member will return the equivalent of 11p per share to holders this year. That gives a juicy yield of 5.8% based on the share price as I type. That’s far, far more than I’d get from a Cash ISA or standard savings account. It’s also a lot more than I’d receive from an index fund tracking the UK market.

Naturally, buying individual company stocks carries more risk. This is certainly the case with 888. The annual dividend has actually been increased and cut a number of times in recent years. That could be a red flag for me if I were utterly dependent on shares for covering my living expenses. Further regulation in the industry is another potential headwind. Some investors also seem wary of the recent deal to buy parts of peer William Hill. This would include the latter’s 1,400 UK betting shops (and the not-insignificant costs that come from running them)

Of course, I would never rely on 888 for all my passive income needs. As such, I still reckon there are enough positives here to make this cheap stock a strong contender for a dividend portfolio.

Liontrust Asset Management

Investment manager Liontrust Asset Management (LSE: LION) is a second cheap FTSE dividend share I’d consider buying alongside 888 for the income it offers.

In addition to offering diversification, Liontrust boasts a great track record when it comes to increasing its payouts. For the last few years, the annual payout has been hiked by double-digit percentages.

As things stand, analysts have the FTSE 250 firm returning 64.5p per share for this financial year. That becomes a yield of 5% based on the share price at the close of play yesterday.

Potential negatives to consider here include the cutthroat nature of asset management. The possibility that Liontrust may need to lower its fees to compete with rivals can’t be overlooked. This would lower earnings, potentially causing trouble for the dividend. Through no fault of their own, even the most successful firms in this space can also suffer if geopolitical events conspire to push frightened savers to withdraw their money.

On a more comforting note, Liontrust’s dividend looks set to be easily covered by profits this year. A cheap valuation (11 times earnings) also helps mitigate some risk.

No investment is perfect, but the £800m cap ticks a lot of my boxes.

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Paul Summers 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.

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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