3 dirt-cheap FTSE income stocks to buy before August

Paul Summers picks out three high-yielding income stocks he’d be prepared to buy before the month is out.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Shot of a senior man drinking coffee and looking thoughtfully out of a window

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

With inflation now at an eye-watering 9.4%, dividend stocks are looking more attractive by the day as a way of protecting my wealth. With this in mind, here are three FTSE income stocks I’d feel comfortable buying before they report in August.

Top-tier insurer and investment manager Legal & General (LSE: LGEN) remains a great option for income, in my opinion. Barring the frankly dodgy year that was 2020, the FTSE 100 company has a great history of regularly increasing the amount of cash it returns to its owners. And I can’t see that changing when it reports half-year numbers on 9 August.

Earlier this month, CEO Sir Nigel Wilson said the company’s year-to-date performance had been “in line with expectations“. He went on to add that Legal’s exposure to inflation was “minimal“. That suggests to me that the huge 7.6% dividend yield is safe for now.

Naturally, L&G can do all the right things and still see its share price dragged down by wider macro concerns. So there’s most definitely still risk here. However, an ageing UK population needing to save for retirement should be a huge tailwind going forward.

With a price-to-earnings (P/E) ratio of eight, the business looks very well priced to me.

Taylor Wimpey

At face value, housebuilders continue to look like a great source of dividends for investors. The £4bn-cap Taylor Wimpey (LSE: TW) is just one example. As things stand, analysts have the business yielding a monster 8%.

Like Legal & General, this income stock isn’t expensive to acquire either. I can pick up a slice of the company for just six times forecast earnings.

So what’s the catch? Well, there’s always the potential for the housing market to temporarily cool as a result of a (nailed-on?) recession impacting buyer affordability. This could feasibly disrupt Taylor Wimpey’s earnings and, consequently, its ability to pay out cash to its investors.

Even so, I can’t help but think a lot of this is factored in. Taylor Wimpey shares have fallen almost a third in value already in 2022.

So long as I spread my money around other income stocks, I’d be happy buying before the end of this month.

Plus 500

For that extra bit of diversification just mentioned, online trading platform Plus 500 (LSE: PLUS) also appeals.

In sharp contrast to Taylor Wimpey, Plus’s share price has been in good form recently. I doubt few investors will complain about a 16% rise in the company’s value, considering the carnage seen elsewhere.

Despite this positive momentum, the shares are still available for seven times earnings. That’s an appealing price relative to the UK market as a whole. Then again, it’s pretty average for companies in this line of work. One reason for this is that trading platforms are subject to ongoing scrutiny by regulators and sudden changes in legislation can hit earnings hard.

Still, a near-5% dividend yield, as I type, should be covered almost three times by expected profit. And while a return to the crazy days of lockdown-fuelled trading looks unlikely, cashed-up Plus 500 stands to benefit from more traders taking positions as the hope of an economic recovery gathers pace.

Half-year numbers are due on 15 August.

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 assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »