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As a value investor, I rely on stock evaluators to find stocks to buy. In fact, during 2022, my wife bought 11 new shares for our portfolio. We own these two for their luscious dividend yields and would like to purchase more when I have the cash.
#1: Legal and General
My first dividend dynamo is Legal and General Group (LSE: LGEN), a company I admire for its pedigree and performance. Founded in 1836, L&G is a leading provider of life insurance, savings and investments. It has 10 million customers and manages £1.4 trillion in assets.
The fall in stock and bond prices in 2022 was painful for L&G and its clients. From its 52-week high of 295.7 pence on February 3, the shares collapsed to 201.4 pence on October 13. They have since rallied, closing at 254.9p on Friday. This values the FTSE 100 firm at £15.2bn, down 12.7% in a year.
As with most value stocks I buy, L&G stock looks cheap to me. It is trading at a price-earnings ratio of 7.5, with an earnings yield of 13.3%, a considerable discount to the London market. Plus, its big dividend yield of 7.3% per annum is covered 1.8 times by earnings. To me, this indicates that this cash payout is solid, with room to grow.
However, if financial markets fall again, L&G’s earnings and share price could take a hit. If this were to happen, you could buy even more shares for your long-term passive income!
#2: Vodafone
Our most recent stock purchase is telecom stalwart vodafone (LSE: VOD), a leading provider of fixed, broadband and mobile communications. The Newbury, Berkshire-based multinational was founded in 1982 and today has more than 300 million customers in Europe and Africa.
Vodafone equipment was used to make the UK’s first mobile call on 1 January 1985 and transmitted the world’s first SMS text message (“Merry Christmas“) in December 1992. Unfortunately, Vodafone has fallen a long, long way from being the biggest company in Europe during the dot-com boom that ended in bankruptcy in 2000.
At Friday’s closing price of 91.88 pence, this FTSE 100 company is valued at £25bn, a mere fraction of its peak value of roughly £200bn. In early December, I noticed that Vodafone’s share price was falling sharply, so my wife swooped in and bought shares at 90.2 per year.
The price usually crashed immediately, falling to a 52-week low of 83.24 pence on December 16. However, the shares have since rallied to their current level of 91.88 pence, producing a minuscule 1.9% paper gain on our most recent holding. Phew.
If I had more money to buy shares, I would probably add more Vodafone shares today. First, because they are down 21.8% over the past year, versus a 6.5% gain for the FTSE 100. Second, because their price-earnings ratio of 14.4 and the performance of gains of 7% are in line with the broader Footsie.
Third, I’m drawn to Vodafone’s hefty dividend yield of 8.4% a year, even though earnings only cover it 0.8 times. Although the group has a mountain of net debt on its balance sheet, this seems manageable to me. And I’m hopeful that spring price increases will boost Vodafone’s revenue and profits, fingers crossed.
In short, I would happily buy more of these two stocks today, if I had some extra money to invest, that is!
