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2 value stocks for high-yield dividend investors

Today I’m taking a look at two reasonably priced stocks offering yields of 4% or more.

Top performer

Persimmon (LSE: PSN) is among the top 10 best performing stocks in the FTSE 100 Index, after shares in the residential housebuilder gained 44% in the past 12 months.

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After such a strong run in its shares, you may be forgiven for thinking there’s little value left for prospective investors. However, with a forecast P/E of just 11 and a prospective yield of 5.2% this year, I reckon Persimmon should still be up for consideration in any dividend portfolio.

Although the cyclical nature of the sector means investors will always worry about the next property downturn, the FTSE 100 company today released an impressive set of results for the first half of the year, allaying fears that the slowdown in the UK housing market would dampen the housebuilder’s profitability.

Legal completions for the six months to the end of June were 8% higher at 7,794, while the average selling price rose 4% to £213,262. Results were also helped by improving operating margins, which rose by 3.8 percentage points to 27.6%, leading pre-tax profits to jump 30% to £457.4m.

And thanks to its strong financial performance, Persimmon is generating good cash flow, which underpins the stock’s income appeal. Net free cash generation increased 24% to £284.5m in the period — equivalent to roughly 3.6% of its market capitalisation.

Looking forward, investors can be reassured that about its dividend prospects after management reiterated its commitment to return at least 110p per share to shareholders each July until 2021 under its capital return plan. This means shareholders could look forward to a minimum yield of at least 4.2% over the next four years.

Hostelworld

Another value and income play is Hostelworld (LSE: HSW). The online hostel booking platform, which directly appeals to younger customers, has been a game changer in the budget accommodation sector.

Shares in the company rose by as much as 10% today, after it announced that profits swung back into the black in the first half of the year. Despite the impact of terrorist attacks on travel demand alongside general macroeconomic uncertainties and currency fluctuations, first-half sales increased 16% to €46.6m, while pre-tax profits swung from a €5.5m loss last year to €5.2m.

Reassuringly, CEO Feargal Mooney announced a 6.3% hike in its interim dividend, meaning shareholders will get an interim payout of 5.1 cents per share.

We remain confident in our long-term strategy and execution and will continue to manage the risks to our business posed by the impact of terrorist attacks on travel demand alongside general macroeconomic uncertainties and currency fluctuations,” he added.

At the moment, city analysts are projecting growth in underlying earnings of 2% for the full year, with a further increase of 4% in 2018. Based on these estimates, valuations are attractive, as Hostelworld trades at forward P/E ratio of 16.2, falling to 15.4 by 2018.

Hostelworld has a prospective yield of 4.8%.

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The Motley Fool UK has no position in any of the shares mentioned. 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

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