UK stocks have performed pretty poorly this year, with the exception of mining and oil companies that make up a sizeable proportion of the FTSE 100.
The FTSE 250 is down around 13% over the past 12 months and that’s pretty reflective of the general downward track UK stocks have been on. And when share prices are down, dividend yields get bigger.
But the market will recover eventually. In fact, there are signs that it is already on its way up. And today I’m looking at two UK stocks with big dividends to buy before the next bull run.
After all, the yield is only relative to the price I pay for the stock, regardless of whether it goes up or down.
Right now, Phoenix Group (LSE:PHNX) is offering a 7.2% dividend yield. That’s pretty huge and a recent increase comes on the back of a strong year for the life insurance specialist. Phoenix has been slowly increasing dividend payments since 2018, and the rise announced in March was a 3% increase on 2021.
The company said it was also shifting its dividend policy. It’s now moving from “stable and sustainable” to a sustainable payout that “grows over time“. Prior to this, Phoenix Group had relied on mergers and acquisitions to fund payout increases.
Naturally dividends aren’t guaranteed, but Phoenix maintained its payouts during the pandemic. It also has reliable cash flows and a whopping 240 years of history.
The stock is down 4% over the past 12 months and this is part of the reason the dividend yield appears sizeable. The falling share price also belies the company’s performance over that period. Like much of the market, Phoenix Group has come under selling pressure this year.
With regards to long-term growth, the share price is down 6.8% over five years. So it’s not overly positive on that front. But the company, which buys legacy life insurance and pension funds that are closed to new business and manages them, has a track record of clever acquisitions and mergers to continue growing the business.
I feel Phoenix Group would be a good addition to my portfolio right now.
Vistry Group (LSE:VTY) is down 25% over the past 12 months as investor outlook on the housebuilding sector sours. But that’s only served to push up the dividend yield. The yield currently stands at 6.7%.
The company is one of the fasting-growing in the sector. It recently announced that it expects pre-tax profit to be at the top end of market forecasts (£417m). Vistry highlighted that price rises were driving margins above full-year targets after a better-than-expected first half.
The 2022 projections put profit way above pre-pandemic levels and far above the £319m achieved last year. Vistry also has a strong order book and even claims that supply constraints are easing. Completions for the first six months of the year rose to 3,219, up from 3,126. Forward sales increased to £2.9bn from £2.7bn.
Interest rates are set to rise by 50 basis points today and that could slow demand for houses. That’s definitely a concern, but I think it’s already priced in when we look at the share price today. I already own Vistry shares but would buy more at today’s price.