These cheap UK shares offer big dividend yields for 2022. Are they too good to miss or investor traps I should avoid?
Hammer to fall?
Shopping centres operator Hammerson (LSE: HMSO) offers mighty all-round value today. Its 4% dividend yield for 2022 is more than double the FTSE 250 average. Meanwhile, City predictions of a 44% earnings rebound next year leave the company trading on a forward price-to-earnings growth (PEG) ratio of 0.4.
A reading below 1 suggests a stock could be undervalued. But even this low valuation isn’t enough to encourage me to invest today. Shoppers are deserting physical retail in their droves again as the Covid-19 crisis worsens. Springboard data shows footfall at Britain’s shopping malls down a whopping 32.9% on Sunday versus two years ago. Things are bound to get even stickier for Hammerson and its retail tenants if the government tightens coronavirus restrictions too.
Turnaround plans
On the positive side, Hammerson has been making considerable progress to bring its debt mountain down. It’s raised an extra £92m thanks to the sale of six assets since the halfway point of 2021, it announced last week. That said, the amount of debt the business continues to hold is colossal. And I worry that this could push it back to the brink if shoppers stay away from its retail destinations. Hammerson had net debt of £1.9bn as of June.
The company’s drive to focus on cities with strong economic and population growth may well deliver meaty profits growth over the long term. So could its decision to move away from pure retail and towards providing a more ‘social’ experience for visitors. But this isn’t something I’m prepared to take a chance with right now.
A 5.4% dividend yield I’d rather buy
I’d much rather spend my hard-earned cash on gold-mining stock Centamin (LSE: CEY). There are plenty of reasons why I think precious metals prices could soar in 2022. First and foremost is a prolonged period of high Covid-19 infections that might derail the economic recovery. Then there’s the global inflationary bubble that analysts are tipping to worsen before it gets better. China’s sharply-cooling economy and weakening property sector are other reasons why safe-haven assets like gold could gain momentum.
I’d prefer to buy a gold-mining share like Centamin rather than snap up physical metal or invest in a gold-backed financial product like an ETF. Okay, doing this exposes me to the unpredictable nature of metals mining where production issues can have significant consequences for a company’s bottom line. But I believe the possibility of big dividends can offset this problem.
And Centamin does offer huge income opportunities for 2022 and beyond. This FTSE 250 firm has a big 5.4% dividend yield for next year. It also offers decent value from an earnings perspective, the digger trading on a forward price-to-earnings (P/E) ratio of around 12 times. This is one of the big-dividend-paying UK shares I have my eye on today.