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He FTSE 100 it has surged into early 2023. But despite soaring gains across the index, there are still plenty of blue-chip British titles offering exceptional value on paper.
The next two UK stocks offer dividend yields above the Footsie average of 3.7%. They also trade very low multiples of profit. So should I add them to my investment portfolio today?
taylor wimpey
I already have shares in taylor wimpey (LSE: TW). And at current prices I’m tempted to add more to my investment portfolio.
At 114.7 pence per share, the builder is trading with a forward price-earnings (P/E) ratio of 10.4 times. It also has a corresponding dividend yield of 7.6%.
I think the business will generate strong returns over the long term as Britain recovers from its housing crisis. The government believes that the UK needs at least 300,000 new homes each year to meet growing demand.
However, a bleak near-term outlook means I’m happy to buy other dividend stocks to boost my income in 2023. Last week, Taylor Wimpey said: “We enter 2023 with a lower private order book than in recent years.”. He also said, “we expect overall volumes to be reduced” this year as shopper appetites fall.
A sharp slowdown in the housing market remains very possible as interest rates rise and the economy contracts. And as a consequence, dividends here could be lower than expected.
I will be looking for clues that housing demand is starting to turn before buying more of this highly cyclical stock.
Vodafone Group
I think Vodafone Group (LSE:VOD) could be in better shape to pay giant dividends in 2023. Demand for telecoms remains relatively flat at all points in the business cycle. Therefore, this FTSE 100 company should generate the earnings needed to finance large payouts to shareholders.
Vodafone is also a formidable cash generator. It is also selling assets to give its balance sheet an additional boost. In November, the company agreed to sell a €3.2bn stake in its tower business, in a deal scheduled for completion in the first half of 2023. And last week it announced the sale of its Hungarian operations for €1.7bn. .
So even if earnings disappoint, the company should have the capital to pay out market-beating dividends.
City analysts agree, and for financial years through March 2023 and 2024, Vodafone has a market-beating 9% dividend yield. The company also provides decent value when it comes to early earnings. At 91.7 pence per share, it is trading with a price-to-earnings (PEG) growth ratio of 0.8, below the bargain benchmark of one.
I expect the company’s aggressive push towards 5G to generate exceptional profits. I also think that its exposure to fast growing African economies could pay off.
Investors should remember that intense competition in its European market could also affect earnings. But today I am seriously considering adding Vodafone shares to my portfolio.
