Dividend shares are a great source of income. And, for me, it now looks like a great time to buy as markets dip on a host of negative economic pressures, including higher inflation and interest rates.
Valuations have become much more attractive this year as negative economic forecasts weigh on share prices. Dividend yields, which are relative to the share price, have also grown.
So here are three dividend shares I’m looking to buy, or buy more of, before the market recovers.
J Sainsbury
J Sainsbury (LSE:SBRY) stock is down 25% over the past 12 months. The supermarket group is certainly feeling the impact of a cost-of-living crisis that is squeezing household spending.
Management recently said that first-quarter underlying sales fell 4% as consumers started to cut back on discretionary spending.
Grocery sales were down 2.4% compared with last year, while sales at its Argos division fell 10.5% in the quarter. However, sales are being compared with a booming quarter in 2021, when the pandemic pushed grocery sales higher. Revenue jumped in the last full reporting year, nearly reaching £30bn.
Profit is due to come in between £630m and £690m. This is lower than the 2021-22 profits of £730m, but an understandable fall, given the unique conditions.
Sainsbury’s is also spending £500m over the next 24 months to keep costs low. I like this plan as it may prevent the retailer from losing out to budget supermarkets.
This makes me confident about the long-run prospects. And, currently, the 6.1% dividend yield is very attractive. Last year, coverage was a healthy 1.94.
Vistry
The macroeconomic environment doesn’t look good for housebuilders in the coming months. Households are saving less money due to the cost-of-living crisis and interest rates are rising.
However, right now, the housing sector is booming and Vistry (LSE:VTY) is doing particularly well. For 2022, the firm expects profits ranging £396.3m-£415m. Vistry posted adjusted pre-tax profits of £346m last year, which itself was way above pre-pandemic levels.
The company has a strong order book and even says supply constraints are easing.
Vistry is currently offering a 7.3% dividend yield and its share price has fallen 33% over 12 months.
Orders could slow towards the end of the year, but in the long run, I think housebuilders will prosper. After all, there’s a dearth of homes in the UK.
Barclays
I think there’s plenty of value in UK banking stocks right now. I’m not the only one, Credit Suisse recently said the same.
Barclays (LSE:BARC) is one of my favourites and is the cheapest of the British banking giants. It’s down 12% over the past 12 months, but in reality it’s been unpopular for a while.
It’s cheap, with a price-to-earnings ratio of just four, and its dividend yield is also four.
Banks typically perform poorly during recessions, so the second half of the year will present some challenges. However, interest rates are up, meaning higher margins. Barclays will even receive more interest on the money it leaves with the Bank of England. Credit Suisse recently said it expects Barclays to beat expectations in forthcoming earnings data.
I’m also backing Barclays to perform over the long run. It’s a solid business, operating in a fundamentally strong economy.