Retail investors have been through it all in recent times. And right now, it’s inflation that’s weighing down on market sentiment. That said, I’m not all too worried. Instead, I’m hunting for value stocks to add to my portfolio.
Markets have taken a beating in the last few years, presenting a great buying opportunity. And I fully intend to capitalise on it.
My plan is simple. Buy value stocks with attractive dividend yields that I can hold for the years to come.
Here are two that I’m tracking. If I had the cash, I’d strongly consider buying them today.
Safestore
First up is Safestore (LSE: SAFE). As its name suggests, the business is a provider of self-storage units, the largest in the UK of its kind, and a powerhouse in Europe. While the business of leasing storage space may seem far from thrilling, I see value in the stock.
To start, it currently trades on a price-to-earnings (P/E) ratio of around six. This sits comfortably below the ‘benchmark’ for value of 10 as well as the average of its FTSE 250 peers.
Regardless of a cost-of-living crisis, the business has experienced a consistent uptick in revenues in the past few years as consumers vie for extra storage space to tuck away their excess goods. Following its success in the UK, it’s also continuing to grow its presence in Europe, including a joint venture into Germany.
On top of this, Safestore stock also provides a solid source of passive income. As I write, it yields around 3.6%. In the last decade, its dividend has increased by a whopping 400%.
With some debt on its books, interest rate hikes could place pressure on margins and harm the firm going forward.
However, I see the demand for self-storage continuing its upward trend in times ahead. And with that, I consider Safestore shares a smart investment.
Barclays
A few weeks back, I opened a small position in Barclays (LSE: BARC). It’s not been the best 12 months for the stock, down 12%. But I’m remaining optimistic. And with a P/E ratio of just four, I classed it as an opportunity too good to miss.
What’s more, its price-to-book ratio also makes the stock look cheap. This measures how the market values a company compared to the value of its total assets. With Barclays sitting at around 0.4, I sense an opportunity.
The second half of my criteria, a meaty and reliable dividend yield, is also met by the stock. With it offering a yield of around 5.3%, this isn’t inflation-beating. However, it’s not only the now I’m buying for.
The business has placed an emphasis on returning value to shareholders in recent times. For example, its half-year results released at the tail end of July highlighted its latest share buyback scheme, totalling £750m. This represents a 50% improvement from the figure seen last year.
The risks surrounding Barclays revolve around rising interest rates. Rate hikes could see defaults jump. Moreover, banking stocks have experienced large volatility of late.
That said, looking undervalued with a solid source of passive income, I’d be willing to snap up some shares.
