The stock market crash has come and gone, but it has sure taken its toll. Many FTSE 100 companies cut or suspended dividends as the markets and the economy crashed. As a result, a so-far steady source of investor income has suffered a big blow. Moreover, growth investment opportunities have shrunk as high-quality FTSE 100 stocks made share price gains and the index recovered. But all’s not lost. I think the discerning investor can still find dirt-cheap, dividend-paying stocks, making them among the best UK shares to buy today.
Why dividend investing is important
I think its important to renew focus on diviend stocks now. When the economy’s robust and jobs are plentiful, it’s easier to overlook this secondary income source. But in a recession, like now, it can offer stability. Not only is job security for many at a low, there’s no way of knowing how long it will take for the economy to get back on its feet. The latest growth data was dismal, and while some first signs of recovery are visible, it could take some time to gather speed.
The challenge, however, is that dividends have dwindled. Anticipating tough times ahead or already seeing financial weakness, companies are conserving what’s possible. In some cases, the authorities themselves have encouraged them to pause dividends, for example, financial institutions. As a result, what used to be some of the best UK shares for dividends, are no longer viable options.
Best UK shares to buy now
I’m not completely discouraged, however, when it comes to building a passive income. This is because there are still some dirt-cheap FTSE 100 stocks that offer a dividend yield. One of them is the oil giant Royal Dutch Shell, which hit on particularly hard times recently. In line with this, it reduced its dividend payouts. But the share price adjusted downward as well. As a result, RDSB still has a dividend yield of 4.2%.
This isn’t the best yield that the FTSE 100 has to offer, but buying the share has its unique advantages. One, its inexpensive with a price-to-earnings (P/E) at 9.9 times, especially when compared to many other dividend paying FTSE 100 stocks. Two, it has a long history of paying dividends, which means that the probability of passive income from RDSB falling to zero is low. Three, I reckon its share price will bounce back as the economy starts recovering. I’m even hopeful that it will increase its dividend payouts as its fortunes improve, making it one of the best UK shares to buy now.
I’d also include the FTSE 100 multi-commodity miner Anglo American among the best UK shares to buy now. Similar to Shell, it has a dividend yield of 4.6% but an even lower P/E ratio of 7 times. Its financials may be impacted by the current slowdown this year. But global consulting firm PwC points out that the world’s top 40 miners are weathering this time well, at least so far. AAL is one of these miners, making it one of the best UK shares to buy now.