Despite the London stock market’s strong gains, investors still have a huge selection of cheap, quality stocks to choose from.
With low price-to-earnings (P/E) ratios and enormous dividend yields, here are three to think about that offer excellent value, in my opinion.
Investec
Investec‘s (LSE:INVP) the first of these low-cost shares I think deserve serious consideration. At 554.5p per share, it trades on a forward P/E ratio of 6.2 times. Its corresponding dividend yield’s 7.5%. Discover three cheap shares with high yields and long-term growth potential — including top picks from the FTSE 250 and small-cap markets.
Banks and asset managers like this have significant growth potential as demand for financial services grow. I also like this FTSE 250 company’s substantial exposure to South Africa as well as the UK — the former’s emerging market carries substantial growth potential as population sizes and wealth levels boom.
Finally, I’m impressed by Investec’s resilience despite tough market conditions. Sales jumped 7.8% in the last financial year (to March), breaching £1bn for the first time ever.
Be mindful though, that the company’s South African operations create risk as well as opportunity. More specifically, huge political uncertainty following last year’s general election could hamper future performance.
Card Factory
Investing in UK retail shares remains high risk in the near term as the economy splutters. Yet at 95.1p per share, I think this is reflected in Card Factory‘s (LSE:CARD) ultra-low P/E ratio of 5.9 times for this financial year.
On the one hand, the company operates in a highly mature industry, which may limit future earnings growth. But it’s rapidly expanding in international markets to give profits a shot in the arm. Last year, it entered the £70bn gifts and celebrations market in the US, with the $25m acquisition of Garven.
This week it also announced the £24m purchase of funkypigeon.com to boost its UK operations. With Card Factory on course to eliminate debt in the near future, more growth-boosting acquisitions could be coming, alongside share buybacks and more chunky dividends.
Speaking of which, the forward dividend yield here’s a hefty 6%.
STV
Commercial broadcaster STV (LSE:STVG) has struggled of late as poor economic conditions and higher interest rates have sapped advertising revenues. It cautioned this week that it had seen “a further deterioration in the commissioning and advertising markets towards the end of H1 and into H2“, indicating these risks remain in play.
It’s not surprising to see the company’s share price sink in the aftermath. But for long-term investors, I think this drop could represent an attractive dip-buying opportunity to think about.
STV’s quality Studios division’s likely to enjoy long-term growth as traditional broadcasters and global streaming companies scramble for content. By 2030, it’s planning for at least a quarter of production revenues to come from international markets as its expansion continues.
For me, STV’s one of the best cheap shares to consider in the small-cap space. It trades on a forward-looking earnings multiple of 5.2 times. The prospective dividend’s a market-beating 8.5% too, based on a current price of 135p per share.
