Finding cheap UK shares to buy that offer both exceptional growth and income potential isn’t as difficult as you might think. In fact, recent stock market volatility has made it even easier to find top low-cost shares right now. Here are two with huge dividend yields north of 6% I’d buy today.
Good enough to eat
The ready-made food industry was growing rapidly prior to the pandemic, a reflection of the increasingly-busy lifestyles people lead. Now that we are all now getting out and about again in large numbers the sector is tipped for more scintillating growth too. It’s why I’m thinking of buying Bakkavor Group (LSE: BAKK) shares for my portfolio today.
Bakkavor makes freshly-prepared foods like salads, pizzas and desserts which it sells to major supermarkets such as Tesco, Sainsbury’s and fast-growing discounter Lidl. The business sources around 90% of revenues from the UK, though it also has a growing presence in the US and China. This geographical diversification gives it added stability as well as exposure to exciting growth markets.
It’s important to note that Bakkavor counts on a limited number of customers across its markets to drive revenues. The retailers which sell its goods might be major players in the grocery and hospitality industries. However, a loss of one or more of these key contracts could have a catastrophic impact upon profits.
That said, I believe this risk is baked into this ‘nearly’ penny stock’s low valuation. At current prices of 106p per share, the foodie trades on a forward price-to-earnings (P/E) ratio of 9.5 times. This is inside the widely-regarded bargain benchmark of 10 times and below.
I also like Bakkavor because of its market-beating 6.5% dividend yield for 2022. In terms of value, I think this UK share is quite hard to beat.
7%+ dividend yields!
Through its Domty brand, penny stock Arabian Food Industries Company (Domty) (LSE: DOMT) is a big beast in Egypt’s cheese market. Sales here are recovering steadily following the hit caused by Covid-19 (they rose 5% in the nine months to September, latest financials show). And I’m tipping them to grow strongly over the long term as population levels and personal incomes grow in its North African territory.
This view is shared by analysts at Mordor Intelligence. They believe the Egyptian packaged dairy product market will grow at an annualised rate of 4.7% between now and 2026. But Arabian Food Industries Co isn’t just about the manufacture of processed and white cheese. The business also manufactures juices and last year announced plans to begin selling baked goods to Egyptian customers too.
I also like Arabian Food Industries Co because, like Bakkavor, it offers excellent all-round value. Not only does the food producer trade on a rock-bottom forward P/E ratio of 6 times, at current prices of $2.10 per share. This penny stock carries a great 7.1% dividend yield too.
Despite the threat of rising milk prices I think this cheap UK share could help me build a winning portfolio.