3 of my favorite cheap, high-yield dividend stocks this August!

The London stock market has experienced strong momentum so far this year. FTSE100 And FTSE250 are both up about 8% since January 1. But despite these solid gains, investors can still unearth undervalued gems with ultra-low earnings multiples and sky-high dividend yields.

Below are some of my favorites this August.

The dividend yield of these stocks is above the FTSE 100 average of 3.5%. These companies also trade at a low price-to-earnings (P/E) or price-to-earnings-growth (PEG) ratio, or both.

As a reminder, a PEG ratio below 1 means that a stock is undervalued.

For this reason, I believe investors should consider buying these passive income heroes today.

HSBC

HSBC’s enormous dividend yield of over 9% for 2024 surpasses levels seen in recent years, thanks to the planned payment of special dividends following recent asset sales in Canada.

Dividends are expected to return to more normal levels after this year, but the bank can still generate huge returns in the coming years, with a return of 7.1% for 2025, for example.

HSBC’s low profit figures reflect the risk the bank faces from the weakening Chinese economy, and problems there pose a problem for the bank’s entire Asian region.

However, as a long-term investor, I think HSBC stock is currently an excellent bargain. Earnings are expected to rise sharply in the coming years as the wealth and population boom drives demand for financial services.

Impact on healthcare

Impact Healthcare is another reliable dividend payer that pays dividends year after year. Rental income is indexed to inflation and tenants are locked into 20- to 35-year leases. In addition, being classified as a real estate investment trust (REIT) means that the company must pay out at least 90% of annual rental income in the form of dividends.

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Impact Healthcare owns and operates 138 care homes across the UK and I believe there is a huge opportunity for the company to grow its profits and dividends as the UK’s elderly population rapidly increases.

I think it’s a potentially great buy, although the housing industry’s labor shortage could slow earnings growth.

WPP

Advertising agencies like WPP are struggling due to recent cuts to their marketing budgets. This could remain a problem in the future if global interest rates remain at current levels.

The story continues

The latest financials showed a comparable sales decline of 1.6% in the first quarter, but with a potential industry recovery just around the corner, I think it could be a great idea to grab a piece of this particular FTSE 100 stock.

I believe the share price could rise rapidly from current levels as digital advertising, a segment in which WPP invests heavily, has the potential to deliver significant long-term growth.

I am also pleased with the increasing focus on artificial intelligence (AI). What I also like is the excellent relationships with global blue-chip companies and the huge presence in developing and emerging markets.

The post “3 of my favourite cheap high-yield dividend stocks for August!” appeared first on The Motley Fool UK.

Further reading

HSBC Holdings is a promotional partner of The Ascent, a Motley Fool company. Royston Wild does not own any of the stocks mentioned. The Motley Fool UK has recommended HSBC Holdings. The views expressed in this article about the companies mentioned in this article are those of the author and as such 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.

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