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Looking for ultra-cheap dividend shares is a superb pleasure of mine proper now. Each the FTSE 100 and FTSE 250 indices are loaded with shares which are buying and selling means, means beneath worth.
Take Phoenix Group (LSE:PHNX) for example. Not solely does it look dust low-cost with regards to predicted earnings. Its dividend yield’s approaching double-digit percentages.
Phoenix isn’t a family title like Authorized & Basic or Aviva. Nevertheless it actually isn’t a minnow within the monetary companies sector, with a market capitalisation of £5.5bn.
The enterprise — which affords financial savings and retirement merchandise within the UK — has round 12m clients on its books. And proper now, its shares appear like an excellent cut price to me.
Too low-cost to disregard?
Its ahead price-to-earnings (P/E) ratio of 12.2 occasions doesn’t look that spectacular. Nonetheless, scratch a little bit deeper and the agency appears to be like like a cut price within the context of potential income.
Predicted earnings development of 37% in 2024 leaves Phoenix on a price-to-earnings development (PEG) ratio of 0.3 occasions. Any studying beneath 1 implies {that a} share is undervalued.
In the meantime, the dividend yield on its shares is an enormous 9.8%, reflecting predictions of a 54p per share dividend for 2024.
Not solely is that this miles above the three.5% FTSE 100 ahead common. It additionally beats the corresponding yields on Aviva, Authorized & Basic, and M&G shares.
Shiny future
In fact, these engaging PEG ratios and yields are based mostly on dealer forecasts, neither of which might be assured.
As an example, Phoenix’s earnings may fall in need of estimates if powerful financial circumstances dent monetary product demand. They could additionally disappoint if the worldwide inventory market sinks.
Nonetheless, as a affected person investor I’m ready to take a little bit threat within the rapid future if the long-term image’s compelling sufficient. And within the case of Phoenix, the income image’s extraordinarily vibrant, pushed by rising demand for pensions and different retirement merchandise.
10%+ dividend yields
I consider the corporate will proceed paying giant and rising dividends from 2024 onwards.
I discussed earlier that the dividend yield on Phoenix Group shares falls simply in need of double-digit territory. Effectively, that’s solely half true. It sits at beneath 10% for 2024. However predictions of additional dividend development, to 55.9p and 57.3p for 2025 and 2026 respectively, drive the yield to 10.1% and 10.4%.
Once more, dividends are by no means assured. However I’m not about to wager towards the Footsie agency. It has an incredible observe report of rising shareholder payouts, because the chart above exhibits.
Phoenix’s sturdy stability sheet actually places it in good condition to proceed elevating dividends. Its shareholder capital protection ratio was 168% as of June, on the higher finish of its 140-180% goal.
And the agency stays heading in the right direction to attain whole money technology of £4.4bn through the three years to 2026. Whereas it’s not with out threat, I feel Phoenix is a superb FTSE cut price to contemplate proper now. And particularly for passive revenue traders.
