How I’d start investing in great value UK shares with £10,000 today

Harvey Jones can see a heap of UK shares he’d like to add to an ISA today. Many combine low valuations with sky-high dividend yields.

| More on:
Middle-aged white male courier delivering boxes to young black lady

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.

I wish I had £10,000 to invest in UK shares at the moment. With the FTSE 100 retreating from its all-time high, now looks like a great buying opportunity.

Some may find that odd. Isn’t the best time to buy shares when prices are going through the roof? Personally, I take a different view. My favourite time to buy is when the market’s dipped and top blue-chips are trading at a discount.

FTSE 100 shares aren’t quite as cheap as they were a year ago. That’s hardly surprising as the index is up 8.13% since then. With dividends on top, the total return is around 12%.

Time to buy FTSE 100 stocks?

However, I don’t buy index trackers. I’m building a portfolio of individual FTSE 100 shares, and many of the stocks I bought last summer and autumn have done much better than that. My biggest winner, 3i Group, is up 52.74% in the last year.

Paper and packaging specialist Smurfit Kappa Group (LSE: SKG) has been quietly doing the job too. I bought it on 6 June last year because I thought it looked great value, trading at less than six times earnings while yielding more than 4%.

I was unlucky with my timing. Almost immediately, the group announced plans to acquire US-based rival WestRock, but the market decided it had overpaid. The share price dropped 10%. My response? To buy more shares at the lower price. And I’m glad I did.

The Smurfit Kappa share price is now up 32.04% over one year, with dividends lifting the total return above 35%. Obviously, it’s no Nvidia. Or Rolls-Royce, for that matter. But that doesn’t worry me too much.

I don’t buy shares with the intention of banking a quickfire gain. I look for companies that have potential to deliver share price growth and dividend income over years and, with luck, decades. I think Smurfit Kappa can do that. It’s benefited from the shift to e-commerce, with all the extra packaging that entails. I don’t see that trend reversing.

Dividends and growth

And while markets fretted over its WestRock acquisition, I’m thrilled it’s getting a foot in the massive US market. Yes, there are signs the US is slowing. And yes, rising raw material costs have squeezed margins.

However, with the shares trading at just 12.7 times earnings, I still think Smurfit Kappa looks great value. But it isn’t the only bargain on the index, as my table shows. Many come with high yields too.

StockPrice-to-earnings ratioYield
BP6.8x4.79%
British American Tobacco6.5x9.65%
BT Group7.6x5.45%
HSBC Holdings7.7x6.92%
Imperial Brands7.2x7.29%
Lloyds Banking Group7.3x5.01%
NatWest Group6.4x5.44%
Rio Tinto9.2x6.53%
DS Smith8.2x5.11%

If I had £10,000 to invest today, I’d first look to plug gaps in my portfolio by targeting shares I don’t own, such as oil giant BP, or China–focused bank HSBC Holdings. If the stock market dips further, I’ll buy more bargain UK shares.

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 Lloyds Banking Group Plc and Smurfit Kappa Group Plc. The Motley Fool UK has recommended British American Tobacco P.l.c., DS Smith, HSBC Holdings, Imperial Brands Plc, Lloyds Banking Group Plc, Nvidia, and Rolls-Royce Plc. 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

Investing Articles

2 of the best US growth and dividend stocks to consider!

These heavyweight US stocks have been delivering tasty investor returns for decades. Here's why they could remain great picks for…

Read more »

Investing Articles

I reckon these 2 penny shares are hidden gems worth a closer look!

Some penny shares are well-known, whereas many others go under the radar, but that doesn’t necessarily mean they aren’t potentially…

Read more »

Investing Articles

Just released: our 3 best dividend-focused stocks to buy before August [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

2 FTSE 100 shares with blockbuster yields investors should consider buying

Our writer has noticed that these FTSE 100 shares offer mammoth dividend yields, and reckons investors should take a closer…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Down 36% and yielding 7.8%, is this FTSE 250 share a bargain?

Christopher Ruane looks at a FTSE 250 share with a sizeable dividend yield and a recent record of dividend growth.…

Read more »

Investing Articles

Is Barclays one of the FTSE 100’s best bargain stocks?

Right now, Barclays' shares are cheaper than those of FTSE 100 rival stocks Lloyds and NatWest. So should I buy…

Read more »

Happy young female stock-picker in a cafe
Investing Articles

Is a takeover offer about to boost the Rentokil stock price, and should I buy?

The Rentokil share price is up 10% on takeover rumours. Is it a stock to buy or one to be…

Read more »

Investing Articles

Here’s my Rolls-Royce dividend forecast for 2024-27!

Our writer considers whether the Rolls-Royce dividend might be reinstated in coming years, based on financial performance and stated payout…

Read more »