10%+ dividend yields! Should I buy these cheap UK shares for a second income?

Dividend yields have leapt across the London Stock Exchange while P/E ratios have tumbled. Could these FTSE 100 and FTSE 250 stocks be too cheap to miss?

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I’m searching for UK shares that offer pulse-racing value. Here are two dirt-cheap dividend stocks I’m thinking of buying following stock market volatility.

Rio Tinto

Rio Tinto’s (LSE: RIO) share price has slumped as commodities prices have come under pressure. This particular FTSE 100 stock produces a wide range of raw materials including copper, aluminium and lithium. But it generates around 75% of group earnings from iron ore.

This creates significant danger as worsening demand and supply dynamics for the steelmaking ingredient depress prices. Iron ore shipments from Brazil, for example, jumped 8.7% year on year in September to two-year highs. Meanwhile, demand for the material is slipping as Asian steel mills curtail production.

Prices of Rio Tinto’s key commodities are in danger of severe cooling moving into 2023. But from a long-term perspective, I believe Rio Tinto’s profits outlook remains super attractive.

The company’s wide range of commodities give it exposure to several white-hot growth sectors. This in turn could power profits — and consequently shareholder returns — through the roof.

Copper and lithium demand should soar over the next decade as electric vehicle build rates pick up. Borates sales could rocket as sectors like consumer electronics, agriculture and construction grow. And its iron ore operations should benefit from urban-related construction in developing markets.

Rio Tinto’s share price is actually up fractionally from levels at the start of 2022. But I think it’s descent since the spring represents an attractive dip-buying opportunity.

It’s why I bought the company for my Stocks & Shares ISA in June. And at current prices of £50 per share, I’m thinking of buying more.

Rio Tinto trades on a forward P/E ratio of 6 times. It also boasts an 10.3% dividend yield for 2022.

Vistry Group

Levels of uncertainty around the housing market have spiked in the past fortnight. Share prices across the homebuilding sector have stabilised following an initial slump, but businesses like Vistry Group (LSE: VTY) are in danger of fresh plunges.

Mortgage rates are soaring in the aftermath of late September’s ‘mini budget.’ This is putting extra pressure on homebuyers’ budgets and threatening to derail property sales.

Rates on two-year and five-year fixed mortgages have soared to 12- and 14-year highs respectively above 6%. They’re predicted to keep rising too as the Bank of England acts against runaway inflation.

I own several housebuilding stocks. In fact, I bought Persimmon shares over the summer. And it’s clear to me that the risks facing these businesses has risen considerably of late.

But, at current prices, UK shares like Vistry look ultra-tempting. The FTSE 250 business trades on a P/E ratio of just 4.1 times and boasts a 12.5% dividend yield.

I might hold off buying Vistry shares right now until the near-term trading picture becomes clearer. Credit Suisse has advised that house prices could fall as much as 15%. But I believe the long-term outlook here remains solid, given Britain’s severe homes shortage and disjointed housebuilding policy.

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.

Royston Wild has positions in Persimmon and Rio Tinto. 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.

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