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2 bargain dividend stocks I’d buy with £5,000 today

Investors seeking knockout dividend shares for next-to-nothing need to take a close look at Redrow (LSE: RDW).

The appeal of Britain’s housebuilding sector has waned significantly in recent months. Redrow, for example, has seen its share price fall 6% so far in 2018. Conversely the construction colossus, like most of its peers, enjoyed a stellar 2017, a period during which its market value swelled by almost 25%.

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Yet there’s very little to have changed in recent months for the homemaking industry, which still remains pretty stable despite the ongoing tension surrounding the impact of Brexit.

Indeed, latest construction PMI data showed that while the ‘Beast From The East’ forced the sector back into contraction in March (a 20-month low of 47 was plumbed, in fact), severe winter weather was not enough to stop activity across the housebuilding sub-segment from still expanding.

Build a fortune

It will take more than strong winds to blow Redrow’s building appetite off course given the underlying strength of the market, as the country’s titanic homes shortage drives demand across the newbuild market, and historically-low interest rates keep first-time buyers interested.

The FTSE 250 business itself underlined the still-favourable market dynamics in February when it advised of record interim profits of £890m, as well as an order book of £1.05bn which also represented an all-time high.

Against this backdrop, City analysts expect Redrow to punch earnings growth of 15% and 9% in the years to June 2018 and 2019, respectively. And the aforementioned share price weakness, combined with current forecasts, means that Redrow can currently be picked up for next to nothing.

It boasts a forward P/E ratio of 7.6 times, comfortably below the accepted bargain watermark of 10 times. And it carries a corresponding sub-1 PEG multiple of 0.5, too.

Meanwhile, dividend projections for Redrow also result in pretty chunky yields as well. The predicted 24.1p per share reward for this year yields 3.9%. The estimated 28p payout for fiscal 2019 also drives the yield to 4.6%.

A golden selection

Clearly Redrow offers plenty for growth, value and dividend hunters to get their teeth into. And investors seeking sterling earnings and income expansion should also take a look at another FTSE 250 firm, Polymetal International (LSE: POLY).

Supported by an anticipated 13% earnings rise in 2018, the gold miner is expected to lift the dividend to 49.5 US cents per share. This results in a giant 5.5% yield.

With earnings expected to rise an extra 25% next year, dividend forecasts improve to 61 cents, which in turn, moves the yield to 6.8%.

And like the housebuilder, Polymetal can also be picked up for a song with the firm sporting a prospective P/E ratio of 8.8 times (and a PEG reading of 0.7).

These bubbly forecasts are thanks to Polymetal’s production-boosting measures, with output expected to rise to 1.55m ounces from 1.43m ounces last year, as well as a resilient outlook for gold prices. I reckon the mining giant, like Redrow, is a share that investors can buy now and hold for many years to come.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Redrow. 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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