3 dirt-cheap UK shares I’ll be watching in May

Paul Summers highlights three UK shares trading at low valuations. All report next month.

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The wobbly performance of UK shares in 2022 to date looks like it will continue into May. On a more positive note, many top-tier companies trade at low valuations. That smells of opportunity for long-term-focused Fools like me.

Accordingly, here are three cheap blue-chip stocks I’ll be paying particular attention to next month.

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BP

You probably don’t need to be reminded that the oil price has been going through the roof in recent months. This is bound to have had a positive impact on BP‘s (LSE: BP) Q1 numbers, due on 3 May.

But how much of this is already reflected in the shares? Well, BP stock is up 11% in 2022 and getting on for a 30% hike in the last 12 months. So perhaps quite a bit.

Then again, BP shares still trade at just five times earnings. To sweeten the investment case further, there’s a 4.8% dividend yield. This looks incredibly secure too, thanks to all that cash coming in.

One rather obvious risk here is that we have no way of knowing what price a barrel of black gold will be even a few months from now. A resolution to the Russia/Ukraine conflict could bring the oil price crashing down.

Notwithstanding this, my gut tells me to expect more upside next month.

BT

The second of three UK shares I’ll be keeping a keen eye on is telecommunications giant BT (LSE: BT-A). Although it may not share BP’s trading tailwinds, the share price has been resilient in 2022, so far. Ongoing demand for defensive stocks in troubled times has seen it rise 4%.

I suspect a decent set of Q4/full-year numbers on 12 May (supported by higher prices) will likely see the shares move further upwards.

In the meantime, BT shares change hands for just over eight times forecast earnings. That’s cheap relative to the market as a whole and its industry. A 7.8p per share payout — equivalent to a yield of 4.4% — is also expected in FY23.

That said, the debt burden isn’t going away. Nor will the costs of maintaining infrastructure. So BT shares might not be quite the bargain they seem.

Like BP however, I continue to rate this stock as a potential candidate for a diversified income-focused portfolio.

Kingfisher

B&Q owner Kingfisher (LSE: KGF) completes the trio of lowly-valued UK shares I’ll be watching. In contrast to BP and BT, holders of this stock are enduring a pretty lousy year. The share price is down almost 30%. Perhaps this isn’t all that surprising.

Kingfisher was a huge beneficiary of the multiple lockdowns as people opted to engage in a spot of DIY or gardening. A booming UK property market did no harm either. Now the former is a distant memory, it would seem investors believe that trading will moderate.

Should I start hammering the buy button? Well, a P/E of just less than nine certainly looks cheap. There’s a potential 4.8% dividend yield in the offing too.

Even so, it’s worth noting that Kingfisher is now one of the most shorted UK shares around. In other words, traders are betting it has further to fall.

With this in mind, I’ll wait to see what the company has to say in its next trading update on 26 May.

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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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