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£5k to spend? 2 cheap dividend stocks I’d buy in an ISA for May

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I’d happily snap up shares in Highland Gold Mining (LSE: HGM) for my ISA before next month. A price-to-earnings (P/E) multiple of below 9 times for 2020 provides compelling value for money. But this isn’t the only reason. At current prices the precious metals digger sports a chunky 4.7% dividend yield as well.

An uncertain social, economic, and political landscape following the coronavirus outbreak has fuelled bullion demand in recent months. It’s why, according to the World Gold Council, global gold exchange-traded funds (or ETFs) registered their largest quarterly inflows for four years between January and March. The same fears that drove this safe-haven buying remain in play in May, too. This could drive the gold price, and with it the share prices of the likes of Highland Gold, to the stars.

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The golden touch

Recent comments from Cameron Alexander, precious metals research manager at Refinitiv, illustrate why many (including me) are so bullish. He says that, “with heightened uncertainty and expectations of the global economic recession, unprecedented levels of stimulus from central banks around the world and interest rates remaining at historically low levels and in negative territories, we believe that gold will rebound to even higher levels.” He expects gold to average $1,637 an ounce in 2020 and to move towards $1,800 later in the year. It was last dealing around the $1,700 per ounce mark.

A booming gold price is not the only reason I think this particular AIM-quoted stock is a great ISA buy, however. A whole host of operational problems can make investment in mining stocks a risky game. But Highland Gold is reporting no such troubles of late. It announced last week that the 63,482 ounces of gold and gold equivalent that it hailed out of the earth in quarter one was in line with forecasts.

The letters ISA (Individual Savings Account) on dice on stacks of gold coins on a white background.

Another ISA hero

I’d also buy National Grid (LSE: NG) stock for my ISA for May. Recent share price weakness leaves it trading on an undemanding prospective P/E ratio of around 15 times. What really grabs my attention, though, is the FTSE 100 firm’s mighty 5.4% dividend yield.

My foolish colleague Roland Head recently took the opportunity to cast doubts on the power play’s dividends for this year. I think he might be a bit overly bearish, though. As a recent trading statement illustrated, the company – which operates electricity grids in the UK and the US – is reporting business as usual despite the recent lockdown.

Meanwhile, the reduction of central bank interest rates on both sides of the Atlantic makes it more cost effective for National Grid to service its balance sheet and go about its business, reducing the need for a hefty dividend cut. Besides, even if some reduction is in the offing I doubt it will be anywhere near as painful as those of some other Footsie shares in recent weeks.

With the macroeconomic outlook likely to remain scary for months (if not years) I reckon National Grid is a top stock to buy in any ISA next month.

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Royston Wild has no position in any of the shares mentioned. 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 us better investors.

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