Two cheap shares I feel are too good to ignore are Lloyds Banking Group (LSE: LLOY) and Legal & General (LSE: LGEN). Here’s why I’d snap up the shares if I had the spare cash to invest.
Lloyds
Lloyds is one of the largest mortgage lenders in the UK.
As I write, Lloyds shares are trading for 42p. At this time last year, they were trading for 44p, which is a 4% drop over a 12-month period. However, looking as far back as the global financial crash in 2008, the shares were trading for 285p, which is an 85% drop to current levels.
There are a few key aspects I like about Lloyds. To start with, the shares look dirt-cheap on a price-to-earnings ratio of just five. For context, the FTSE 100 average ratio is closer to 14.
Next, Lloyds shares would boost my passive income with a dividend yield of just under 6%. However, I am aware that dividends can be cancelled at any time.
Moving on, Lloyds dominant market position as the UK’s largest mortgage lender is advantageous and one that could continue to boost earnings and returns.
From the bearish perspective, Lloyds, and other banks, are under pressure from challenger banks who are trying to disrupt the market and seize market share. Furthermore, the current high interest economy we’re in means gaining a mortgage, as well as paying existing ones, is tougher. This could impact earnings and returns.
Overall, I believe Lloyds is one of the cheap shares that are too good for me to miss. It has an enticing passive income opportunity, cheap valuation, and is a market leader too.
Legal & General
Legal & General is a financial services business with a diverse offering.
As I write, Legal shares are trading for 214p. At this time last year, they were trading for 259p, which is a 17% drop over a 12-month period. Prior to the pandemic, the shares were trading for 320p, which is a 33% drop to current levels.
I like Legal & General shares for a few reasons. Firstly, the business has a diverse offering. This includes investment, life insurance, and pension products too. This diversification can help navigate tough economic times like now as well as allowing the business growth opportunities.
Legal shares look cheap too on a price-to-earnings ratio of six, again, well under the FTSE 100 average. In addition to this, the shares’ dividend yield is close to 9%. It is also worth noting that Legal & General has an excellent record of paying dividends. However, I do understand that past performance is not a guarantee of the future.
One of the issues Lloyds could face is that its investment arm is linked to US equity and credit markets. With rising interest rates, there could be some tough times. Another issue is that the cost-of-living crisis in the UK could mean consumers have less cash to spend on retirement and life insurance products.
Overall, Legal & General is one of the cheap shares I plan on adding to my holdings when I can. Its diversification and passive income opportunities are its most appealing elements.
