I think it depends. It’s always good to be aware when investor sentiment is pushing prices up, but there are still some opportunities that are well worth a closer look in today’s market.

Croda International

Shares in Croda International (LSE:CRDA) have rallied 27% from their 52-week lows. But investors who think the chance to buy the FTSE 100 stock has gone might be making a big mistake.

There’s still a 3.5% dividend yield available, which is much higher than the average for the last 10 years. So investors shouldn’t be too quick to think they’ve missed it.

The risk that jumps out at the moment is that the speciality chemicals company’s dividend hasn’t been covered by its free cash flow in recent years. That’s obviously not sustainable over the long term. 

Croda has maintained its impressive 30+ year record of dividend growth, but the increases have been minimal. But that might be set to change. 

The company is highly cyclical. But management thinks the firm is about to emerge from an investment-heavy phase into a much more cash-generative one.

If they’re right, then this could be the perfect time for investors to think about loading up on the stock. In my view, it’s well worth considering as a potential buy in March.

Kraft Heinz

Kraft Heinz (NASDAQ:KHC) has been something of an S&P 500 anomaly recently. Despite its sector being firmly in favour with investors, the stock has gone nowhere in 2026.

The business has been facing some challenges recently. The recent emphasis on healthy eating in the US is a major one, as well as the rise of GLP-1 drugs.

On top of this, the company has abandoned plans to split itself into two parts. But with all of this going on, it’s easy to forget that Kraft Heinz has some key strengths.

Its size gives it a big advantage when it comes to negotiating with suppliers. And I don’t think that’s likely to change any time soon. 

It also has the number one or number two products in 80% of the categories it competes in. That’s something that shouldn’t be underestimated.

The dividend yield is 6.5% and this is comfortably covered by free cash flows. The stock isn’t winning any popularity contests right now, but that’s not what investing is about.

Something for everyone

Croda International has managed to keep growing its dividend through a challenging period for the firm. And the stock is now starting to show some early signs of a recovery.

Kraft Heinz’s challenges are looking more resilient. But the company’s cash flows more than cover an attractive dividend yield and its key strengths also look to be intact. It’s still worth further research, I feel.

I think that means income investors of all types can find something in the stock market. Dividend shares are back in fashion, but there are still opportunities that are worth a look.

The post 2 top dividend stocks to consider buying in March appeared first on The Motley Fool UK.

Why the US has income potential

In contrast to building a portfolio using FTSE 100 companies, the S&P 500 offers a much more comprehensive choice given the large number of constituents. However, it means an investor needs to be disciplined. For example, the average dividend yield in the S&P 500 is 1.18%, well below the FTSE 100’s 3.2%. So active stock picking becomes more critical with a broader pool of companies.

Fortunately, there are still some great dividend shares in the index. From looking at different options, I think it’s possible to build a diversified portfolio of six-to-10 stocks with an average yield of 6%. We’re not talking about small firms here in this bucket. Some of the companies that could be included are the United Parcel Service (current yield of 7.1%), Pfizer (6.91%) and Verizon Communications (6.61%).

If an investor put £500 a month in a portfolio averaging 6%, the money could quickly compound. If we assume the dividends get reinvested straight away, after a decade the pot could be worth £82.8k. The following year, £5.3k could be generated solely from income payments.

Of course, dividends aren’t guaranteed. Over the coming years, yields could fluctuate, making the average 6% harder or easier to achieve in practice. But it goes a long way to show that the US has clear dividend potential.

Sweet potential

One stock that could be included is Kraft Heinz (NASDAQ:KHC). It’s one of the world’s largest food companies, serving up everything from ketchup to chocolate. Even though America is a big market, it’s truly global in size. This means it can generate diversified revenue from having the branded food products in grocery stores in various markets.

Over the past year, the stock is down 19%. This is due to a variety of factors impacting the business. For example, it has cited weak consumer demand in recent updates, along with rising input costs and even currency headaches from the global operations. Even though all of these are risks going forward, I don’t see them as long-term problems.

With the US Federal Reserve likely to cut interest rates again next month, demand in the US could increase. Inflation is easing, and cost pressures may become less of a problem in 2026. Against this backdrop, I think the dividend is sustainable. Over the past six years, it has kept up a consistent quarterly dividend payment. The current dividend is fully covered by the latest earnings per share, giving me further confidence in future dividends.

Finally, let’s not forget that many of the brands sold by the company are staples that have been popular with customers for decades in some cases. I think this is a strong point when looking for ideas that can stand the test of time, making it a stock worth considering for investors looking at this stategy.

The post If you invested £500 a month in S&P 500 income stocks, here’s what it could be worth in a decade appeared first on The Motley Fool UK.

Since the start of the year though, the S&P 500‘s fallen almost 3.754%, while the FTSE 100‘s up 4.25%. So is it worth me taking another look across the Atlantic for passive income opportunities?

The tax issue

For an investor like me, tax is a real consideration when it comes to buying US stocks. There’s a 30% withholding tax to factor in (which is reduced to 15% in my case, with a W-8BEN form).

Stocks are never exactly equivalent because no two companies are identical. But other things being equal, a US stock needs to have a dividend 15% above a UK one for me to make the same return. 

That’s a significant hurdle to clear and it hasn’t been the case recently. S&P 500 stocks have tended to trade at a premium to their FTSE 100 counterparts, making the equation even less favourable.

This is why I’ve tended to focus my attention on the UK when it comes to passive income stocks. But with the valuation gap starting to close, it might be time to take a look across the Atlantic.

Dividend stocks

In general, the stocks with the highest yields in the S&P 500 look to me like ones that are facing some significant challenges. But there are one or two shares that I think are potentially interesting.

Kraft Heinz (NASDAQ:KHC) is one example. It has a 4.87% dividend yield, so investors like me could end up with a 4.13% annual passive income after taking off the withholding tax. 

The stock has had a tough few years and it’s not hard to see why. Sales growth has been largely non-existent since 2019, which has resulted in the shares underperforming the S&P 500.

There are also ongoing challenges – most notably the rise of anti-obesity drugs. But I think there are also a lot of reasons to be positive. 

A stock on the up?

One of the reasons Kraft Heinz has struggled over the last five years has been the debt on its balance sheet. Interest payments have weighed on margins and profits, but things have been improving. Since 2020, long-term debt’s gone from around $28bn to just over $19bn. And interest payments have fallen from $1.35bn to $843m a year. 

With its balance sheet in a stronger position, Kraft Heinz has turned its attention to share buybacks. Since 2023, the company has been spending around $1bn on reducing its outstanding share count.

This should help the durability of the dividend – fewer shares outstanding means less cash is needed to maintain the current distribution. And this helps reduce the overall risk for investors. 

Should I be buying?

The withholding tax means UK dividend investors need to find better businesses with higher yields to justify buying. And despite the recent drop, I think it’s still the other way around.

In my view, a lot of investors are overlooking the recent improvements at Kraft Heinz. But I still think – for now, anyway – I can find more attractive dividend stocks in the UK.

The post Should I start considering US stocks as a second income opportunity? appeared first on The Motley Fool UK.

Today, Buffett and his team are invested in 37 different stocks, each operating in a vast number of industries. Yet, almost 90% of his entire portfolio is concentrated in just 10 businesses. So what are his highest conviction ideas? And should investors consider buying these stocks today?

Warren Buffett’s top 10 holdings

The Berkshire Hathaway portfolio seems to have quite a diverse range of industry exposure. So given these firms have Buffett’s stamp of approval, why don’t investors just copy his portfolio and reap the same returns?

This is actually quite a popular strategy. And since Berkshire has to publish updates to portfolio positions each quarter, it’s not that difficult to execute either. However, mindlessly following in another investor’s footsteps may not actually be a sensible idea, even if that investor is Buffett.

Mistakes happen

As impressive as his track record is, he’s made plenty of mistakes over the years. And Kraft Heinz has been one of them.

Like Buffett, the famous ketchup manufacturer is a well-known name even among non-investors. At the time, he was impressed with the firm’s ability to generate excessive pre-tax profits that almost matched its operating assets. That’s a pretty exceptional feat for a food-producing business.

So what went wrong? Despite having a solid track record of picking winning consumer brands (like Coca-Cola and See’s Candy), he failed to properly assess the threat of competition from Amazon and Costco. With these rival brands delivering higher sales versus Heinz, the firm was secretly losing market share. As a consequence, Buffett ended up overpaying quite a bit.

That story largely hasn’t changed since his initial investment. And even today, his position in Kraft Heinz is still sitting in the red by around 60%. Yet he’s held on because the poor performance was driven by paying too much rather than the underlying company being fundamentally flawed. And in the meantime, the group’s consistent cash flows are funding a dividend that’s slowly offsetting the negative returns.

The bottom line

All of this is to say that no investor‘s immune to making mistakes. So while it’s likely a sensible idea to keep tabs on world-class investors like Buffett, it’s also prudent to assess each decision they make. Otherwise, copycat investors can potentially end up buying companies like Kraft Heinz at a terrible price, destroying wealth rather than creating it.

The post Here are the 10 BIGGEST investments in Warren Buffett’s portfolio appeared first on The Motley Fool UK.

Chipotle Mexican Grill

What it does: Chipotle Mexican Grill is a restaurant chain serving Mexican-inspired cuisine, including burritos, tacos, and salads.    

By Ben McPoland. I recently offloaded my shares of Chipotle Mexican Grill (NYSE: CMG). The restaurant stock has delivered some tasty outperformance for investors. As I write, it’s up 352% over five years.

The company’s focus on using fresh ingredients sourced from sustainable suppliers continues to be a huge hit with consumers. In Q1, it reported revenue and diluted earnings per share growth of 14.1% and 23.9%, respectively.

So why did I sell?

Two reasons, really. One is the valuation is sky-high, with the stock trading at 69 times earnings. That’s much higher than the US market average, which is high itself.

Second, I want to add to my position in Pershing Square Holdings, the FTSE 100 investment trust associated with hedge fund legend Bill Ackman.

The fund has a large holding in Chipotle stock, which allows me to stay invested (albeit indirectly). Also, Pershing shares are trading at a 26% discount to net asset value.

Basically then, I thought I’d take my gains from an overvalued stock to invest in one that looks to be significantly undervalued.

Ben McPoland owns shares of Pershing Square Holdings.

Kraft Heinz

What it does: Kraft Heinz is a packaged food manufacturer. Its largest shareholder is Warren Buffett’s Berkshire Hathaway.

By Stephen Wright. I’ve recently sold my investment in Kraft Heinz (NASDAQ:KHC). I don’t see anything wrong with the business, but I found an opportunity that looked better to me. 

The stock has a 4.4% dividend yield. Adjusting for withholding taxes, this amounts to a 3.74% return for UK investors (before foreign exchange fluctuations). 

The company has been improving its balance sheet over the last five years and is now in a much better financial position. But I think there are better stocks to own right now.

I’ve used the cash I had invested in Kraft Heinz to buy shares in Games Workshop. I think the company’s lower capital requirements give it better protection against inflation.

On top of that, I think the FTSE 250 firm might be a better source of passive income over time. That’s why I’ve made the change to my portfolio.

Stephen Wright owns shares in Games Workshop.

Vodafone

What it does: Supplier of mobile telecommunication services to individual and business customers in Europe and abroad.

By Mark David Hartley. I recently sold my Vodafone (LSE:VOD) shares after months of losses. The stock is down by almost 30% in the past 12 months and I don’t see a recovery on the horizon. Until recently, I considered the investment profitable due to the high 10% dividend yield but those dreams have been dashed. From next year, the dividend yield will be slashed in half, killing one of the stock’s key value propositions.

The cut is aimed at turning the company’s fortunes around and it may well work. If Vodafone starts funnelling that extra cash into its operations, the share price could recover. After all, net income increased significantly in 2023, so it’s doing something right. If I see evidence of a recovery, I might just reinvest – but I don’t expect much for at least a year. In the meantime, I’d rather invest that cash into a more profitable venture.

Mark Hartley does not own shares in Vodafone.

The post 3 stocks that Fools have recently sold appeared first on The Motley Fool UK.

BP

What it does: BP is a global oil and gas company. It’s one of the largest companies in the world measured by revenues.

By Charlie Keough. The BP (LSE: BP.) share price has been gaining momentum in 2024. As I write, it’s up 7.2% year to date.

As such, I decided to increase my holdings in the Footsie powerhouse. The stock looks cheap, trading on around seven times trailing earnings. To go alongside that, it boasts a 4.5% dividend yield. That’s above the FTSE 100 average of 3.9%.

The largest risk to the business is the transition to a greener future. We’ve seen mounting pressure placed on firms such as BP in recent years.

However, I’m confident it’ll be some time before we see fossil fuels completely phased out. It has been widely touted that the target for reaching net zero is 2050. But that’s now being questioned. What’s more, BP has a strong energy transition strategy in place.

At its current price, I couldn’t resist. If I have any spare cash going forward, I may look to pick up some more shares.

Charlie Keough owns shares in BP.

GigaCloud Technology

What it does:  GigaCloud’s platform connects furniture factories in Asia with resellers in Western Europe and North America.

By James Fox. GigaCloud Technology (NASDAQ:GCT) has created a niche for itself, connecting ‘large parcel retailers’ – furniture makers – typically in China, with resellers and consumers in higher wealth markets. As such, the name is slightly misleading, and having followed analysis of this stock closely in recent months, it’s putting some investors off. 

Nonetheless, the business looks highly attractive. It’s trading at 14.1 times forward earnings and 11.7 times earnings for 2025. GigaCloud is a business in overdrive, with revenue increasing 94.8% over the past 12 months. Management recently guided towards another strong quarter, with revenue above estimates. 

There is some concern about the impact of Red Sea disruption on the business. However, management has suggested that Asia-Europe is a much smaller part of its business compared to Asia-North America. There was no mention of the Panama drought. 

All in all, I find this highly volatile stock an attractive long-term pick, with considerable potential for share price growth. 

James Fox owns shares in GigaCloud Technology.

Hunting

What it does: Hunting produces specialised equipment used for oil and gas drilling and related activities.

By Roland Head. I added Hunting (LSE: HTG) to my portfolio in early March, after the company published a strong set of 2023 results and confirmed a positive outlook for 2024.

Hunting suffered during the pandemic period due to a slowdown in drilling activity. This highlighted the company’s main weakness – it’s heavily cyclical and dependent on the spending plans of its energy producer customers.

However, demand recovered strongly last year, with revenue up 28% to $929m and pre-tax profit of $50m, reversing a 2022 loss. The company’s balance sheet remained in good health, in my view, with modest net debt of $33m and an overall net asset value of $957m.

This net asset figure is equivalent to a book value of around 455p per share, substantially above Hunting’s recent share price of 320p. I think there’s value here – also highlighted by the stock’s 2024 forecast price-to-earnings ratio of 10 and dividend yield of 2.8%.

Roland Head owns shares in Hunting.

Imperial Brands

What it does: Manufacturers and markets tobacco and tobacco-related products to customers in the UK and abroad.

By Mark David Hartley. With headquarters in London and Bristol, Imperial Brands (LSE:IMB) is one of the largest multinational tobacco producers in the world. I decided to buy shares in the company for two reasons – a buyback program and a high 8.5% dividend yield.

The controversial nature of the tobacco industry threatens valuations, leading firms to initiate incentives such as buybacks and increased dividends. The trade-off is a subdued share price in exchange for more profitable dividend returns.

Imperial’s most recent earnings reported an impressive £3.4bn in operating profit, representing an increase of 26% from the previous year. Subsequently, analysts forecast an average 16% price rise in the coming 12 months.

However, despite strong financials, shares are down 5.5% this year. The weakened performance has prompted IMB to initiate a £1.1bn buyback program, half of which is already done with the second half to be completed by the end of October.

Mark David Hartley owns shares in Imperial Brands.

Kraft Heinz

What it does: Kraft Heinz is a packaged foods company. Around 33% of the company’s revenues come from condiments and sauces.

By Stephen Wright. I started buying shares in Kraft Heinz (NASDAQ:KHC) for a while now. When I started, I had a specific investment thesis.

While I wasn’t expecting huge revenue increases from the company, I thought an improving balance sheet would allow it to return more money to shareholders over time. And that’s been happening.

After bringing its debt down over the last few years, the firm has now reached a point where its leverage is under control. As a result, it has begun a share buyback programme.

The market doesn’t seem too impressed – the stock hasn’t responded particularly positively. But with my initial thesis seemingly playing out, I’ve been adding to my investment.

Results from the fourth quarter of 2023 were hampered by inflation and this is a risk going forward. In my view, though, the stock looks like a bargain at today’s prices.

Stephen Wright owns shares in Kraft Heinz.

Legal & General Group

What it does: Legal & General Group is one of Europe’s largest investment managers and financial services companies.

By Royston Wild. Back in March, I bought shares in financial services colossus Legal & General Group (LSE:LGEN) for the second straight month.

I had cash to invest after selling out of veterinary care provider CVS Group on rising regulatory threats. And Legal & General shares still looked attractively priced despite recent price gains.

Today the company still looks dirt cheap. It trades on a forward price-to-earnings (P/E) ratio of 9.2 times. Furthermore, its dividend yield stands at a brilliant 8.8% dividend yield.

I was especially attracted to the company on account of its dividend prospects. Its forward yield is currently far ahead of its ten-year average of 6.9%. This reading also comfortably beats the 3.8% average for Footsie shares.

This dividend yield is also well supported by Legal & General’s cash-rich balance sheet. The company’s Solvency II capital ratio stood at an enormous 224% as of December.

These formidable financial resources could give it scope to pay above-average dividends for years to come, as well as the means to invest for future growth.

Royston Wild owns shares in Legal & General Group.

The post 6 stocks that Fools have been buying! appeared first on The Motley Fool UK.

Despite this, I figured there was a better opportunity available. And the stock I’ve been buying just so happens to be another Berkshire investment.

Why sell?

First things first – I can’t see anything wrong with Bank of America shares. But with the stock up 42% since October, I don’t think they offer the same value they once did.

Buffett also pointed out a significant risk with the stock at the last Berkshire Hathaway meeting. Concerns over US banking regulation caused him to sell shares in JP Morgan and other banks.

I held my shares a bit longer, since I thought there were still attractive returns on offer. A 3.6% dividend plus share buybacks averaging 2.6% a year looked attractive to me.

A higher share price changes things somewhat – the dividend yield comes down and share buybacks have less effect. That’s why I decided to sell the stock to buy something else.

What to buy?

I’ve been adding to my stake in Kraft Heinz (NASDAQ:KHC) with some of the cash I generated from the BofA sale. The stock is down 10% over the last 12 months and I think I see an opportunity.

My investment thesis for the company has been the same for a while. I’m not expecting significant revenue growth from the business, but I think it can improve profitability by reducing its debt. 

So far, that thesis seems to be playing out. Back in November, the firm announced it had met its balance sheet targets and was therefore going to spend $3bn on share buybacks by the end of 2026.

At today’s prices, that’s about a 7% return – or 2.4% a year. By itself, that’s not eye-catching, but adding it to a dividend currently yielding 4.6% makes for a more interesting proposition.

Looking for opportunities

Investing, as Buffett notes, isn’t about predicting what share prices will do. It’s about working out how much cash a business is likely to be able to pay out over time. 

It’s not so long since I thought I could get a 6.2% return from BoA. But at today’s prices, I think I have a better chance of achieving this kind of return with Kraft Heinz.

The biggest threat to my thesis is a resurgance in inflation. That would be a nuisance for a number of reasons, but in this context it would be bad for the company’s margins.

Kraft Heinz is investing heavily into its brands though. They’re its main defence against increasing costs and I think these will prove a valuable asset over time. 

Buffett stocks

I’m a big fan of the Berkshire CEO and I’m always interested in what the company has been selling. But I always make sure I have my own investment thesis.

By itself, the fact that someone else bought (or sold) a stock isn’t a good enough reason for me to do the same. While I’m buying and selling Buffett stocks, I’m making sure I stick to my own ideas.

The post I just sold this Warren Buffett stock… and bought this one instead appeared first on The Motley Fool UK.

I’m not disputing that, but I think there are also opportunities for investors looking to earn passive income. And there are a couple that stand out to me at the moment.

Lloyds Banking Group

Of Goldman’s five largest investments, only one could be reasonably thought of as a dividend stock. That stock, interestingly, is JP Morgan Chase. 

I think this is a fair enough choice and I wouldn’t argue with anyone who said the US bank is the best financial institution in the world. But I prefer Lloyds Banking Group (LSE:LLOY) as a stock for 2024.

The main reason for preferring Lloyds is valuation. It achieves a lower return on equity than its US counterpart (15% vs 17%) but I think the relative discount in the stock more than offsets this.

Lloyds shares trade at a 33% discount to the company’s book value, compared to a 64% premium for JP Morgan. In my view, that difference is enough to prefer the UK bank as a stock to buy.

Investors should note that the bank is closely tied to the UK economy, which has faltered lately. But if a mild recession causes the Bank of England to cut interest rates, things could work out very nicely. 

Kraft Heinz

In general, the consumer defensive sector has struggled in 2023. But I think that means there are bargains to be found in this sector for investors looking for passive income in 2024.

Kraft Heinz (NASDAQ:KHC) is one of the best examples of this. The stock trade at a price-to-earnings (P/E) ratio of around 15 and I think it looks like a stable business. 

Switching costs in this sector are basically non-existent, so there’s a permanent risk of consumers trading down to save money. That’s something investors should keep in mind when it comes to this company.

Kraft Heinz, though, has learned from its previous mistakes. It has been investing heavily in its brands as well as coming up with new products to maintain its market share. 

I think the company’s size also gives it a significant advantage. When it comes to marketing spend and distribution, the business has a scale that most of its rivals lack.

Kraft Heinz hasn’t increased its dividend for a number of years, making it look steady, rather than spectacular. But with an improving balance sheet, I wouldn’t be surprised to see growth in the future.

Passive income in 2024

Analysts at the big banks think the dominant theme for investors in 2024 will be artificial intelligence. They might be right, but investors looking for passive income should probably look elsewhere.

Companies focused on AI at the moment are largely using their cash to pursue growth opportunities. In other words, their priority isn’t returning cash to shareholders.

There’s absolutely nothing wrong with that. But as money flows into tech stocks focused on growth, I think there are opportunities opening up elsewhere.

The post 2 top dividend shares to consider buying for passive income in 2024 appeared first on The Motley Fool UK.

One of these is Kraft Heinz (NASDAQ:KHC). The stock hasn’t done well over the last five years, but I think there could be much better times ahead. 

Inflation

Inflation has been a big problem for Kraft Heinz recently. Higher input costs have left the company with a choice – raise prices to retailers, or face contracting margins.

The company has been attempting to increase prices, but this comes with a degree of risk. Since switching costs with its products are virtually non-existent, there’s a chance higher prices might just put customers off. 

Kraft Heinz has had some success with this process, but even the best businesses aren’t able to raise price tags indefinitely without sales falling. And the company’s latest 7% increase led to a 5% drop in volumes.

The good news, though, is that inflation appears to be subsiding. In the US (where the company generates 75% of its revenue) the rate of annual price increases has fallen from 9% last June to around 3%. 

That means some of the pressure on margins should be about to let up. And if it does, I think the stock could respond in kind.

Risks

At this stage, there’s a chance that the drop in inflation might be temporary. And even if it isn’t, there are other risks for investors to consider – the most prominent of which is the threat of GLP-1 drugs.

These drugs can be prescribed in the US to tackle obesity and diabetes. They have the effect of reducing the amount people consume, which is an obvious issue for a business like Kraft Heinz.

This seems to be weighing on the share prices of companies in the sector generally. But there are reasons for thinking that it might not be the threat the market is currently supposing.

According to Freddie Lait at Latitude Investment Manageenet, around 40% of the US population are classified as obese. Of those, about half might be able to afford the drug and only about half of those are likely to stick with it.

If this is right, then the threat to Kraft Heinz is about 7.5% of overall sales (based on the US market accounting for three-quarters of its sales, as mentioned) by the time GLP-1s are fully rolled out. But that could be some years away and the firm’s revenues might well have grown enough to offset this by then.

Good prospects

Right now, Kraft Heinz shares trade at a price-to-earnings (P/E) ratio of around 11 and come with a dividend yield of around 5%. For a business that has an above average chance of proving resilient in a recession, that looks like a bargain to me.

If US inflation stays at low levels compared to the last few years, I wouldn’t expect the price to hang around here. To me, it looks too low, given the company’s prospects.

Warren Buffett might not be likely to buy more of the stock, with Berkshire already owning over 25% of the outstanding shares. For investors who aren’t in that position, though, I think it’s one to consider buying.

The post Why this Warren Buffett stock could be about to surge appeared first on The Motley Fool UK.

I’m not expecting these to be around forever, though, and signs of recovery are just starting to emerge. So I’m looking to take advantage while I still can.

The PRS REIT

Top of my list is The PRS REIT (LSE:PRSR). The company buys houses from builders, leases them to tenants, and distributes its rental income to shareholders in the form of dividends.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Rising interest rates have been weighing on UK house prices recently. As a result, the company has seen the value of its assets fall – and its share price is down 10% since the start of the year.

There is a genuine risk here – the UK’s construction output is down this year and this is a significant headwind for the company’s growth. And a full recession would make this worse.

The 5% dividend yield looks like a good opportunity to me. For an investor prepared to invest at today’s prices, I think this could be a good source of passive income for the long term.

Earlier this week, though, the Bank of England announced a decision to stop increasing interest rates. Shares in the PRS REIT jumped 7% on the news. 

I therefore don’t think the stock – or the dividend yield – is going to remain at these levels indefinitely. That’s why it’s on my list of shares to buy in November

Kraft Heinz

In general, US stocks have fared much better than their UK counterparts lately. Since the start of the year, the FTSE 100 is down 1.4%, compared to a 13% gain for the S&P 500.

This makes the US an unlikely place to look for bargain stocks. But the relative outperformance is mostly due to strong performances from seven big tech firms, driven by optimism around AI growth. 

Beyond this, though, US and UK equities have put up largely similar results. And I’m looking to take advantage of what I see as an unusually good opportunity in Kraft Heinz (NASDAQ:KHC) shares.

Inflation is a constant risk with Kraft Heinz and investors ought to be aware of the potential impact on margins. In the US, this has been creeping up since June and has reached 3.7%. 

That presents a threat to margins, but the company has been handling it well so far. Its most recent earnings report announced increased revenues, wider margins, and higher (adjusted) profits.

The stock is down 18% since the start of the year and I think it looks cheap at a price-to-earnings (P/E) ratio of 13. But the price has started to rally, so I intend to add to my investment before it’s too late.

Time to buy

Central banks in both the UK and the US have stopped raising interest rates as their priorities shift from fighting inflation to avoiding recession. That’s positive news for share prices.

The result of this, though, is that the bargains that investors have been enjoying in 2023 are unlikely to be around for much longer. As such, I see November as a time to be buying.

The post 2 cheap shares I’m looking to buy in November… before it’s too late appeared first on The Motley Fool UK.