The Motley Fool

ISA investors! 2 cheap stocks with BIG dividends I’m avoiding at all costs

Image source: Getty Images.

Marshall Motor Holdings (LSE:MMH) is a big-yielding share I feel that ISA investors should avoid at all costs. I don’t care about its low forward price-to-earnings (P/E) ratio of 5.3 times. It’s mighty 8.5% dividend yield also doesn’t shake me. This is a share I won’t be buying for my own Stocks and Shares ISA.

Car sales are tanking following the Covid-19 outbreak, and the threat of a painful and prolonged economic downturn — exacerbated by the prospect of a hard Brexit — paints a worrying picture for vehicle demand for this decade. Latest data from the Society of Motor Manufacturers and Traders showed sales of new autos sank to their lowest level since 1946 in April.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

The AIM-quoted company saw like-for-like profits fall more than 4% in 2019 because of that aforementioned Brexit uncertainty. The shuttering of its showrooms more recently, and the threat posed by an upcoming recession, is particularly scary following a significant increase in the amount of debt on its books too. I plan to give this particular income share a wide berth.

A FTSE 100 stock

Would you be better off buying shares in FTSE 100 giant J Sainsbury (LSE: SBRY) for your ISA instead? It’s understandable that sales of big-ticket discretionary items are slumping right now and may keep doing so. But food is one of the essential purchases we cannot do without, whatever social, economic and political trouble is raging outside our windows.

As one of the UK’s major online grocery retailers, Sainsbury’s is in great shape to ride this trend, right? Forecasts just released by GlobalData underline just how much this particular market is expected to grow by, with lockdown measures turbocharging orders from stranded shoppers and isolation hastening e-commerce adoption by new users.

The research giant estimates that the online grocery retail market will grow by 25.5% in 2020, up from a prior estimate of 8.5%. According to GlobalData, steps by major UK supermarkets to expand their capacity for online orders will underpin this monumental surge. Sainsbury’s for one has opened up 50% more delivery slots than it had previously.

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

More big risk

The coronavirus outbreak may have quickened the adoption of internet grocery shopping. However, it’s no reason to buy into Sainsbury’s today, I feel. Tough economic conditions may see consumers flock to low-cost physical retailers like Aldi and Lidl in huge numbers once lockdown measures are lifted, troubles that may stretch long into the 2020s.

Besides, Sainsbury’s has long lagged its rivals like Tesco and Morrisons on the shop floor and in cyberspace. And signs are emerging that those German discounters are to take their first steps in the online grocery market too. The FTSE 100 share clearly has a lot more work to do to transform its sales performance before becoming a stock I’d consider buying.

So forget its low forward P/E ratio of 10/1 times and bulky 5.6% dividend yield. You’d be better off shopping for other income shares for your ISA, in my opinion.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

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

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.