Severe stock market weakness in 2022 has left many top income stocks trading at dirt-cheap prices.Here are two dividend shares I’m considering investing in right now.
TBC Bank
Dividend yield: 11.2%
Investing in UK banking stocks normally involves checking out a Lloyds, a Barclays or an HSBC. I’d look past the usual suspects though and choose TBC Bank Group (LSE: TBCG), another big dividend-paying stock.
First of all this income stock offers far superior value to those other bank shares. On top of its double-digit dividend yield TBC trades on a fractional price-to-earnings (P/E) ratio of just 2.6 times.
Second, I think TBC’s long-term outlook is far superior. This is because it operates in Georgia where economic growth is tipped to balloon over the next decade at least. Strong trading conditions drove TBC’s net profit 46% higher in the three months to March.
The bank could endure some near term difficulties as the economic situation worsens. But I believe this risk is more than baked into its ultra-low valuation.
SSE
Dividend yield: 5.1%
Utilities stocks and energy producers are great safe havens for investors when times get tough.
Water, electricity and broadband supply are essential at all points of the economic cycle. This means profits and cash flows at suppliers remain stable over time, giving them the means (and the confidence) to pay decent dividends during good times and bad.
SSE (LSE: SSE) is one such stock I particularly like. As a long-term investor I applaud its decision to focus on renewable energy, a hot growth sector as the world transitions away from fossil fuels.
Events like the heatwaves seen across Europe and in parts of the US this week are becoming more common. And they’re hastening lawmakers’ attempts to move from oil and gas, creating a favourable environment for firms like SSE to operate in.
Companies like this will have a critical role to play in the United Kingdom’s goal of net zero by 2050. This is why last year the firm announced plans to accelerate green energy investment over the next decade.
Investors need to be aware of the high debts that utilities companies like this carry. This can have an impact on dividend payments and particularly in this era of rising interest rates. Higher rates increase the cost that businesses pay to service their debts.
However, over the long haul I believe the benefits of investing in SSE today outweigh the risks it faces. And at current prices I think the FTSE 100 stock is too cheap to miss. As well as that 5% dividend yield, the business trades on a price-to-earnings growth (PEG) ratio of just 0.6.
