I’d buy these 3 dirt-cheap dividend shares in March to earn £1,250 annual extra income

Harvey Jones can see loads of FTSE 100 dividend shares he’d like to buy this month, but has narrowed down his preferences to these three.

| More on:
Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

After an underwhelming start to the year, March looks like a great time to load up on FTSE 100 dividend shares.

London’s blue-chip index is down 1.18% year to date, which means shares are slightly cheaper, valuations a little more generous, and yields a bit higher. Here are three stocks I’d really like to buy this month.

On 30 January, I invested the last £1,250 of cash in my self-invested personal pension (SIPP) into insurance conglomerate Phoenix Group Holdings (LSE: PHNX). That bought me 218 shares at £5.11 each, but it’s easily my smallest portfolio holding.

Sky-high income

The Phoenix share price has fallen 3.35% since, and I’d like to take this opportunity to top it up. It offers the highest yield on the entire FTSE 100 at 10.22% a year. Double-digit yields are often a red flag, but the board seems committed.

Phoenix has to give the shareholders some incentive to stay loyal. The share price is down 22.05% over one year and 28.96% over five. As a result it’s super-cheap, trading at just 6.1 times earnings.

On current form, the Phoenix share price could idle for years. However, if that dividend proves sustainable, I’d still double my money in less than eight years. I’ll treat any capital growth as a bonus.

Asia-focused bank HSBC Holdings (LSE: HSBA) had a bumpy February. Its shares plunged on the 21st after a $3bn impairment on its stake in China’s Bank of Communications slashed Q4 profits from $5bn to $1bn year-on-year.

Yet HSBC still posted a 78% rise in full-year pre-tax profit to $30.3bn and announced a $2bn share buyback. Bargain seekers quickly took advantage, with the share price recovering 4% in the final week.

HSBC shares look tempting trading at 6.75 times earnings, while the yield of 7.87% makes this even more enticing. Operating in China brings political and economic challenges, but they’re hard to avoid anywhere these days.

Hat-trick of high yields

Taylor Wimpey (LSE: TW) has been one of my best-performing portfolio holdings, up around 20% since I bought it last year. It’s not looking so clever today. My shares plunged on Thursday (29 February) after the housebuilder revealed full-year profits almost halved on higher mortgage rates and weaker demand.

Everybody knew 2023 was tough. It was the admission that Taylor Wimpey would build fewer homes this year that did the damage. I bought the stock on the assumption that it would recover once inflation and interest rates started falling. For that to happen, it needs to build.

There’s no way I’m selling my shares. Not with Taylor Wimpey yielding 6.84%. I’ll keep re-investing all my dividends, while I wait for brighter days to arrive. House prices are up 1.2% in the last year and I expect more to come.

These three stocks would give me an average yield of 8.32%. If I was to put £5,000 in each, that would give me a passive income of £1,248 a year. I might get some capital growth, too, when the FTSE 100 springs into life. Let’s hope it happens in March — but after I’ve bought these stocks, rather than before!

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. Harvey Jones has positions in Phoenix Group Plc and Taylor Wimpey 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.

More on Investing Articles

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Investing freedom — but inside a pension

Strapped consumers might be cutting back on investing, but they’re still keeping up their pension contributions. The only problem? A…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Forget gold! I’d rather buy these 3 FTSE high-yielders in a Stocks and Shares ISA

Gold looks like a risky investment to me as the price hits an all-time high. I'm ignoring the fuss to…

Read more »

Young female business analyst looking at a graph chart while working from home
Growth Shares

This 55p UK stock could rise more than 300%, according to a City broker

This UK stock has fallen from above 800p to below 60p. But analysts at Citi believe it’s capable of a…

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

I think this FTSE 250 trust has all the right ingredients to lock in long-term profits

Today I'm examining the prospects of a private equity investment trust on the FTSE 250 that caught my attention recently…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 under-the-radar UK shares investors should consider snapping up

Two UK shares have caught the eye of our writer. She explains why investors should be taking a closer look…

Read more »

Investing Articles

Are these 2 ultra-high-yielding income stocks a good buy for me?

These two income stocks often split the debate amongst investors. So what does our writer think of them as potential…

Read more »

Senior woman potting plant in garden at home
Investing Articles

5% yield! This dividend stock could be great for my retirement

Our writer explains why this dividend stock appeals to her as she’s investing to build wealth to enjoy in the…

Read more »

A young Asian woman holding up her index finger
Investing Articles

I’d aim for a second income of £1,000 a month with this super-reliable dividend stock

I think a great way to build a second income stream is by investing in dividend stocks via a Stocks…

Read more »