I’m looking for the best cheap dividend stocks to buy this August. Here are two I’d happily add to my income portfolio.
Braemar Shipping Services
What it does: Provides chartering, risk management, and investment advice to the shipping industry.
Commercial transport stocks like Braemar Shipping Services (LSE: BMS) face huge uncertainty as the global economy cools. In days gone by, falling trade and lower demand for their services would play havoc with their shipping rates.
This is still a threat as inflation worsens and key economic indicators slump. But due to a supply imbalance in the shipping market I’m confident businesses like this will remain solid investments.
Weak shipbuilding activity over the past decade has created a dearth of available vessels. And due to labour shortages shipyards can’t get enough boats out to meet demand.
Healthy dividend growth
So while shipping rates are trending lower of late, business conditions remain extremely favourable for the likes of Braemar. Indeed, City analysts expect annual earnings to rise 24% in the year to February 2023.
It’s a forecast that leaves Braemar trading on a rock-bottom price-to-earnings growth (PEG) ratio of 0.5. Investing theory says that a reading below 1 share is undervalued.
It also means analysts predict healthy dividend growth. An expected 7p per share dividend for financial 2022 is predicted to rise to 8.5p this year. Consequently the shipping giant carries a 3.3% dividend yield.
Finally, this year’s expected dividend payment is covered 2.7 times by anticipated earnings. Any reading above two times provides a good level of protection for investors.
So Braemar should be in a strong position to make this year’s dividend forecast even if the shipping rates worsen.
Ibstock
What it does: Manufactures a wide range of standard and specialised bricks and cladding.
Britain will need to turbocharge housebuilding over the next decade to meet the needs of a growing population. So I expect brickmaker Ibstock (LSE: IBST) to witness booming long-term demand. It’s why I’ve invested in this FTSE 250 stock myself.
The fact that house prices continue surging despite the worsening economy illustrates how depleted the UK’s housing stock is. Latest Halifax data in fact showed average home prices rising at their fastest pace for 14 years. And it’s why City analysts think Ibstock’s earnings will rise 22% year on year in 2022.
A high dividend stock
Unfortunately supply chain problems in the construction industry are prompting some housebuilders (like Persimmon) to reduce their production targets. If this problem persists it could have a significant knock-on effect for Ibstock’s sales.
Still, in my opinion, this is reflected in the company’s low price. Like Braemar, Ibstock shares trade on a PEG ratio of just 0.5.
I also like this dividend share because of its solid dividend yields. A predicted 8.9p per share dividend for 2022 yields a meaty 5%. That’s up from 7.5p last year.
And what’s more, Ibstock’s dividend cover sits around the safety benchmark of two times.