I’m eyeing these two cheap dividend shares for 2024!

This Fool likes dividend shares as a play for 2024. Here, he identifies two that look cheap and explains why he’d buy them.

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A large part of my portfolio consists of dividend shares. Inflation has run rampant this year. To hedge against this, I’ve been looking to generate some passive income.

This is a method I plan to take forward into 2024. Although it looks likely that inflation will continue to fall next year, I’m still keen to pick up income stocks. I’ll reinvest my dividends and over time watch my pot grow.

With share prices taking a hit in 2023, I think there are plenty of undervalued companies out there right now.

If I have the spare cash, these two gems could be my next buys.

I already own shares in financial services stalwart Legal & General (LSE: LGEN). The stock is down just shy of 5% in the last 12 months, meaning its price is just 241p. As it’s up nearly 9% in the last month, I’m hoping it’ll carry this form over to next year.

Of course, its dividend yield is a major attraction. An 8% yield puts it up there as one of the FTSE 100’s highest payers. Its dividend has experienced steady growth in the last decade, which is a further positive sign.

Before we move on, I must make it clear that dividends are never guaranteed. History has proven this, from the global financial crash of 2008 to the pandemic more recently. However, the dividend is covered around two times by earnings, which provides me with a level of comfort.

It’s also on target to complete a strategic plan next year that will have seen it return up to £5.9bn to shareholders in dividends. That’s a further encouraging sign.

Aside from that, I like Legal & General due to its strong brand name. The years ahead may be choppy. I want companies in my portfolio that have stood the test of time.

That said, with a bleak outlook for the next few years, its share price may experience further volatility. Its assets under management have fallen in recent times. This may continue.

However, I’m a long-term investor. Legal & General is firmly on my radar.

HSBC

I’m also keeping a very close eye on HSBC (LSE:HSBA). The bank has had a strong 12 months, rising 24%.

A yield of 5.6% comes in slightly lower than that offered by Legal & General. That said, it’s still comfortably above the Footsie average. It’s also looked to give back to shareholders. In 2023, share buybacks have totalled $7bn.

With it trading on five times earnings, it looks cheap. I’m also drawn to the stock due to its international presence. This may give it an edge over competitors.

The biggest risk it’ll face is its exposure to China. The nation’s property marketing has been flagging lately and HSBC is heavily invested in it. China’s ongoing geopolitical tensions are also a worry.

However, I also see its exposure to Asia as a positive. In the years ahead, the region is predicted to continue with the impressive growth its posted. Research predicts Asia’s commercial banking sector will grow by nearly 20% annually until 2031.

I’m looking to pick up both stocks in the upcoming weeks. I’m keen to diversify my portfolio. Therefore, as I already own Legal & General, I’ll be buying HSBC shares first.

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.

HSBC Holdings is an advertising partner of The Ascent, a Motley Fool company. Charlie Keough has positions in Legal & General Group Plc. The Motley Fool UK has recommended HSBC Holdings. 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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