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FRP Advisory 

What it does: FRP helps businesses in economic trouble by providing advice on restructuring, debt and pensions.

By Royston Wild. Finding solid growth stocks to buy is becoming increasing challenging for UK investors. Inflation is soaring and economic growth is stalling, putting corporate profit forecasts under increasing strain. 

But FRP Advisory Group (LSE: FRP) is a stock that’s set to benefit from these deteriorating conditions. The business provides a range of advisory services to companies in financial distress, the number of which is soaring in Britain. Higher interest rates mean that businesses are struggling to pay their debts.

According to tax, audit and advisory firm Mazars Accountants, the number of corporate insolvencies has rocketed 70% over the past year, to 19,191. Unfortunately it has warned, too, that “the dismal outlook means more pain for businesses is likely.” 

FRP’s share price has slumped more recently. This is because of rising costs that caused profits to fall in its latest financial year (to April 2022). 

I consider this to be a great dip buying opportunity and expect FRP’s shares to bounce back as trading activity gathers momentum. Revenues at FRP leapt 21% year-on-year in fiscal 2022, and rose 11% on an organic basis. 

Royston Wild does not own shares in FRP Advisory. 

Kainos

What it does: Kainos is a technology company that helps public and private organisations with digital transformation.

By Edward Sheldon, CFA. Kainos (LSE: KNOS) shares have experienced a significant pullback this year as growth shares have fallen out of favour and I think this has created a compelling investment opportunity.

Kainos is benefitting as companies and government organisations embrace technology and this is reflected in the group’s financial performance. Last financial year (ended 31 March 2022), revenue was up 29%. Meanwhile, at the end of the period, the group’s contracted backlog was £260m – up 26% year on year.

Looking ahead, I’m confident that Kainos will continue to grow at a healthy rate. That’s because digital transformation can help organisations lower costs and beat inflation. It’s worth noting that CEO Brendan Mooney recently said that demand for the company’s services has “never been higher”.

Now, this growth stock isn’t cheap. Currently, its P/E ratio is in the high 20s. This adds risk to the investment case. However, I believe that long-term investors in the company, like myself, will be rewarded over time.

Edward Sheldon owns shares in Kainos

dotDigital

What it does: dotDigital is a SaaS company providing an omnichannel marketing automation and customer engagement platform.

By Zaven Boyrazian. The technology sector hasn’t had much love in 2022. Yet, despite the volatility, there remain plenty of attractive opportunities for my portfolio. One that’s caught my attention at the moment is dotDigital (LSE:DOTD).

With the tailwinds from the pandemic slowing down, top-line growth followed suit, upsetting quite a few momentum investors. Yet even without these catalysts, revenue continues to expand at a respectable rate. Meanwhile, its latest trading update showed a 16.8% jump in average revenue per customer.

In other words, clients are spending more money on the firm’s marketing platform. And even with an uncertain economic outlook, marketing email volumes are up 22% to 29.4 billion versus a year ago. This all bodes well for the company, especially given its fierce competition from alternative platforms.

Pairing this with a seemingly cheap valuation makes dotDigital look like an excellent growth addition to my portfolio this month.

Zaven Boyrazian owns shares in dotDigital.

Domino’s Pizza

What it does: Domino’s is a UK-based pizza delivery company and FTSE 250 constituent.

By Paul Summers: At the time of writing, shares in Domino’s Pizza (LSE: DOM) are down by over a third in 2022. That’s not entirely surprising. The squeeze on discretionary income was never likely to be good news for the firm. 

For a long-term growth investor like me, however, this is looking like an opportunity to acquire the stock at a cheaper-than-usual valuation. A forecast price-to-earnings (P/E) ratio of 14 for the current year is below the 5-year average of 16. There’s also a 3.5% dividend yield to reinvest while I wait.

I’m not expecting a rip-roaring recovery in earnings over the next year or so. Nonetheless, decent interim numbers at the beginning of August coupled with encouraging news on the search for a new CEO could herald a change in market sentiment.

Paul Summers does not own shares in Domino’s Pizza.

Safestore

What it does: Safestore is a leading provider of self-storage facilities in the UK and Continental Europe

By Christopher Ruane. I continue to see value in Safestore (LSE: SAFE). Its shares are down 20% since April, although they are still 7% ahead of where they were this time last year.

In the first half, revenue grew 15% compared to the same period last year, diluted earnings were up 67%, operating cash inflows grew 25% and the dividend also grew 25%.

That is excellent growth – and I expect more of the same in future. Self-storage remains a fairly undeveloped industry in the UK compared to the US, for example. I see lots of space for growth. Safestore’s strong brand and proven operating model could help it capitalise on that. One risk I see is competitors trying to woo customers with low prices, pushing down profit margins across the industry.

But I think Safestore has a great, simple formula in a market with strong long-term growth prospects.

Christopher Ruane owns shares in Safestore.

CMC Markets

What it does: CMC Markets specialises in online trading, providing exposure to a range of different asset classes. It has a global presence.

By Andrew Woods. A glance at the historical earnings data for CMC Markets (LSE:CMCX) immediately indicates rapid growth over the past five years. For the year ended March, between 2018 and 2022, earnings per share (EPS) rose from 17.3p to 24.8p.

By my calculations, this results in a compound annual EPS growth rate of 7.5%. For me, I find this attractive in a growth stock. Over that time period, revenue also grew from £209m to £325m.

It’s quite clear that the firm benefited from increased trading activity during the pandemic. As customers enjoyed greater disposable income and had more time to devote to investing, the business saw its profit surge. What’s more, greater volatility in the stock market enabled the firm to derive more income from price spreads.

However, revenue fell by around £100m between 2021 and 2022, suggesting that customer interest and activity may have declined following the pandemic. Nevertheless, revenue and pre-tax profit are still higher than pre-pandemic figures.  

Andrew Woods has no position in CMC Markets.

A recovery with high volatility

The first stock in question is CMC Markets (LSE:CMCX). As a retail trading platform, the company has experienced high growth since the start of the pandemic. However, this growth has been stunted recently, something that has been reflected with the 39% fall in the share price over the past year.

In the full-year results released last month, the company noted a fall in profit due to the lack of “unusually significant trading volumes” from Covid-19. Net operating income fell by 31% versus the financial year ending 2021. However, income was still up 12% on a two-year basis, when comparing it to the pre-pandemic year.

In my opinion, the stock is a good growth buy for 2022 onwards. I’m not going to get caught up too much in the year-on-year decline in finances, as the pandemic artificially boosted numbers. Yet if high volatility was a gauge that helped to increase profitability for the company, then the 2022 financial year should be strong. So far this year we’ve experienced soaring commodity prices, falling stock markets and whipping currency action. All of this should aid CMC Markets.

The main risk to my view is if numbers continue to fall in the next trading update. This could cause any momentum generated during the pandemic to be lost completely.

A newly-listed growth stock

The second company I’m thinking about buying shares in is Moonpig (LSE:MOON). It’s another classic case of a growth stock hindered by the market cycle. The online card and gifting business increased turnover rapidly over the past few years, leading to the business going public in February 2021. The uncertainty and concern around stocks in recent months mean that the share price is down 52% over the last year.

Revenue for 2021 fell by 17.3%, however the EBITDA margin remained at a very healthy 24.6%. If this kind of profit margin is retained for the coming years, I think the business will be able to post a profit (or at least avoid a hefty loss).

Further, I think that if we do enter a stock market recovery, demand should be strong for products. The card side of the business should have consistent demand through good times and bad. Yet the experiences side of the business (an area of investment for the company) is more sensitive to consumer demand. So if we see the economy pick up, I think this division could really take off.

One concern I have is the fact that some big investors sold out recently. Back in May, some early stage institutional investors sold shares, which could have been linked to the end of the tie-in period to hold the shares after the IPO.

Why the dip?

Shares in CMC Markets plunged today after the release of results for the year ended 31 March 2022.

Looking closely at the financial results, it’s clear to me that the company has failed to meet expectations that have only risen since the pandemic struck in March 2020. Pre-tax profit fell by 59% to £92.1m. Furthermore, net operating income declined by around 31% to £281.9m. 

While these figures seem to be disappointing, I’m not entirely sure the 21% price drop is warranted. These results merely show a return to pre-pandemic levels. 

During the worst of the pandemic, when remote working was the norm and the furlough scheme was in full flow, CMC Markets and other online trading platforms attracted many new customers. 

This was largely due to many people having more time and spare cash with which to trade. Furthermore, the pandemic brought significant volatility to the stock market.

All of these factors led to surging revenue and profit for the company, although I think the leadership probably knew this trend couldn’t last forever.

What next?

There are immediate consequences from these results. The firm has cut its total dividend to 12.38p from 30.63p per share. 

While it may be disappointing to have a smaller income stream from this stock, at least I understand the reasoning behind the cut.

There is also the possibility that more people simply lose interest in online trading, or that a lack of market volatility results in declining results over the longer term.

I think that both of these risks are unlikely, given that the number of leveraged active clients is still 12% higher than pre-pandemic levels. 

Additionally, recent events like the war in Ukraine have led to greater market volatility.

The business also reported in March that it was in a “robust capital position” and initiated a £30m share buyback scheme. This solid financial base is attractive to me, as a potential investor.

The company has also forecast a 30% increase to net operating income in the next three years. CEO Peter Cruddas believes that “new technology” will help to create more efficient systems and reduce transaction costs, potentially resulting in greater income and more clients.

Overall, the decline today and in the past year seems a bit extreme to me. After all, the firm has pretty much maintained pre-pandemic levels and could build on this. I will be buying shares in this business in anticipation of future growth.    

The top faller on the UK market today is down by 17% as I write. Shares in this business have now fallen by 50% over the last year. Despite this, I think it’s a good business. In my view, the shares now look cheap. Should I buy this stock for my portfolio?

Profit down 59%!

The company in question is FTSE 250 trading and investment platform CMC Markets (LSE: CMCX). Like most companies in this sector, CMC is suffering a nasty hangover after the lockdown trading boom that took place during the pandemic.

Today’s final results show the scale of the slump. CMC’s net operating income fell by 31% to £282m during the year ended 31 March. Pre-tax profit dropped 59% to £92m.

However, I think these numbers only tell half the story. CMC’s net operating income is still 12% higher than it was during the 2019/20 financial year. Client numbers are higher too, suggesting that many of the new clients CMC won in 2021 have stuck around.

New growth opportunities

Founder and chief executive Lord Cruddas owns more than 50% of CMC stock, so he has a strong incentive to return the business to profitable growth.

One area he’s targeting is the expansion of the group’s leveraged business. This operation allows investors to use spread bets and CFDs to bet on market movements and generates the majority of profits.

The main problem with the leveraged business is that profits tend to be volatile, depending on market conditions. There are also regulatory risks. Most traders lose money with leveraged trading, so the UK regulator (and others) have targeted this sector with stricter rules in recent years.

To find new ways to expand its leveraged trading business, CMC is targeting business clients. These aren’t bound by the same regulations as retail traders and could bring substantial new business to CMC.

Alongside this, it’s targeting a bigger presence in the UK share-dealing market. The company is about to launch a new low-cost platform that will compete with rivals such as IG Group and Hargreaves Lansdown.

Lord Cruddas says CMC is basing its UK strategy on its successful business in Australia, where it’s “the number two investment platform for retail investors”.

Why I’d buy this UK share

Despite last year’s profit slump, it remained very profitable. The group generated an operating profit margin of 28%, which is in line with its pre-pandemic performance.

The group’s expansion plans look sensible to me. I expect to see a return to growth over the next couple of years.

After today’s fall, CMC shares trade on around 10 times forecast earnings, with a dividend yield of 5%. That looks cheap to me for such a profitable business.

But it’s not quite cheap enough yet, mainly because I already own shares in rival IG Group. I’d be happy to buy CMC shares for my portfolio today if I didn’t hold IG, but I will consider buying CMC if it falls further.

The FTSE 250’s weak performance is quite unusual. The mid-cap index has outperformed the FTSE 100 by 250% since 2002. Although past performance is not an indicator of future returns, I think there’s plenty of value in the FTSE 250 today. Here are five FTSE 250 shares that are on my buy list for May.

A contrarian buy?

My first pick is chemicals group Synthomer (LSE: SYNT). This business has been through a lot of change over the last couple of years.

In 2020 and 2021, demand for latex globes surged due to the pandemic. Latex sales are now returning to normal, but the group has recently completed a major acquisition in the US. This has created a new adhesives division within the group.

It’s a complicated picture and Synthomer’s share price has suffered as a result of the uncertain outlook .

With so many changes – and a new chief executive – I can certainly see some risk of further setbacks. However, I think I’m now starting to see some clarity.

Synthomer’s latest trading update reported an “encouraging start to the year”. Meanwhile, broker forecasts suggest that the group’s 2022 earnings and dividend will stabilise well above 2019 levels.

These City estimates price the stock on just seven times forecast earnings, with a dividend yield of 5.8%. That seems cheap to me for a business that’s been quite profitable in the past. Synthomer is on my list as a potential buy for my portfolio in May.

A whopping 9% yield

My next pick is well-known UK insurer Direct Line Insurance (LSE: DLG). This FTSE 250 business is best known for its home and motor policies, which are sold under brands including Direct Line, Churchill and Privilege.

Direct Line shares currently offer a forecast dividend yield of 9.5%. This very high yield is more than double the FTSE 100 average of around 4%. High yields can indicate some extra risk.

In this case, I think the problem is that Direct Line’s profits have been falling in recent years. The group’s 2021 results showed pre-tax profit of £446m. That compares to a figure of £581m in 2018.

My analysis suggests Direct Line’s dividend will be affordable. But this view does depend on the company’s profits starting to recover, following significant investment in new IT.

The company says these changes are already starting to deliver improved profitability. CEO Penny James also says that Direct Line is starting to see stronger market conditions in motor insurance this year, allowing the group to increase its pricing.

I already hold Direct Line shares and have no plans to sell. I think the evidence so far supports a recovery. In my view, these shares are probably too cheap.

A FTSE 250 bargain?

Shares in my next company have fallen by nearly 30% since hitting a record high in November. The company concerned is Pagegroup (LSE: PAGE), which is one of the FTSE 250’s largest recruitment groups.

My guess is that the market is pricing in the risk of a recession. This could lead to a slowdown in new hiring, hitting Pagegroup’s profits.

However, there’s not much evidence of this yet in the company’s performance. Pagegroup saw gross profits rise by 43% to £258m during the first quarter of this year. The company reported a “record performance in March”, which was the first month ever to generate a £100m gross profit.

I was also reassured to see growth spread quite evenly across the regions where the group operates. Gross profit rose by 41% in EMEA, 36% in Asia Pacific, 43% in the UK, and 57% in the Americas.

Pagegroup’s share slump has left the stock trading on 10 times forecast earnings, with a 4% dividend yield. On balance, I think this is probably too cheap. Pagegroup is on my list as a potential buy.

A founder-led business

One thing I often look for are companies where senior management have a significant ownership stake. I feel this makes it more likely that they will run the business with shareholders in mind.

One possible bargain share that fits this description is financial trading group CMC Markets (LSE: CMCX). CMC is led by CEO Lord Cruddas. He founded the business in 1989 and still owns 57%.

CMC’s profits boomed during lockdown, but have cooled (as expected) since then. The market has punished the stock quite severely in my view, and CMC’s share price has fallen by over 40% since April 2021.

One risk here is that profits can be unpredictable, as many traders rely on volatile markets to find trading opportunities. Quieter markets generally mean lower profits.

However, CMC is also taking steps to diversify by expanding its stockbroking business. This should provide more stable earnings and create some new growth opportunities.

As I write, CMC shares are trading on 12 times forecast earnings, with a dividend yield of 4.3%. I think this FTSE 250 share could be a bargain and would be happy to add it to my portfolio.

A quality retailer

I want to wrap up with a look at FTSE 250 homewares retailer Dunelm (LSE: DNLM). This is another family-controlled business with a track record of strong profitability.

Dunelm’s sales boomed during the pandemic, as we all spent more time at home. However, over the last year, the group’s share price has fallen by 30%, even though sales have continued to rise.

This FTSE 250 retailer’s latest trading update showed sales up by 25% during the nine months to 26 March. During the first three months of 2022, sales were 69% higher than at the same time last year.

City analysts expect the company’s earnings to rise by 27% to 80p per share this year. That prices Dunelm stock on 12 times earnings, with a possible 5.8% dividend yield.

There’s a risk that the rising cost of living and the return of summer holidays could hit Dunelm’s sales later this year. But this is one of the most profitable big retailers in the UK. I think the sell-off has gone far enough. I’ve been buying Dunelm shares for my portfolio.

The start of a potential turnaround

The two top stocks I’m considering are both from the finance sector. These are Abrdn (LSE:ABDN) and CMC Markets (LSE:CMCX).

Abrdn (formerly known as Standard Life Aberdeen) is a savings and investment business. It has struggled in recent years to make a profit, which is one of the main reasons why the share price has tumbled. Over the past one year, the shares are down 31%.

The move lower has helped to increase the dividend yield. At the moment the yield sits at 7.02%. I’d be keen to buy now because I think the top income stock is nearing the bottom. Its turning point has already started, I believe, based on the 2021 results. For the first time since the business was merged in 2017, there was an increase in revenue. This 6% rise reflects a change in the wind, in my opinion, and helped to deliver a 47% increase in adjusted operating profit.

However, I do need to note that the company saw a net outflow of client funds of £3.2bn for the year. This needs to be stopped for 2022, as a smaller amount assets to be managed will result in lower fees earned.

A top stock with an eye-popping yield

CMC Markets does overlap Abrdn in some respects with its retail investment target market. However, the trading platform is geared more to short-term speculative financial bets. To this end, this stock performed exceptionally well during 2020, when retail trading took off.

However, the share price is down 49% over the past year, as lower market volatility in 2021 saw the full-year earnings outlook cut last summer. In a similar way to Abrdn, the slump has helped to boost the dividend yield. At the moment, the yield sits at 9.15%. But this has fallen recently due to a reduction in the interim dividend.

Yet I also believe that the company is seeing a turnaround. Last week the business released a trading update, highlighting the strong performance in its Q4. It noted that this period “was CMC’s strongest quarter of the year leaving net operating income at the top end of guidance at approximately £280m”.

The market volatility has clearly helped the business, to such an extent that in one quarter it can push figures to the top end of projections! Personally, I don’t see volatility easing off any time soon. Therefore, I think this could be a top stock for the rest of 2022.

On the basis of the current dividend yields on offer, I’m considering adding both stocks to my portfolio now.

Strong trading update for CMC Markets 

I am hopeful after its 9% jump in share price this morning following its trading update for the financial year ending 31 March 2022. There is plenty going right with the company these days. For instance, it expects net operating income to be £280m. This is at the top end of its guidance. 

The company did particularly well during the pandemic, as UK’s household savings rose to all-time highs. While the latest numbers do not top this, the company says that “it is a record performance outside of the pandemic period”. A big reason for its share price fall over the past year was its downgraded earnings forecasts. But clearly, sentiment on the stock seems to be moving past that initial shock. 

Still a dividend stock, and helped by buybacks

Sentiment has also likely been positively impacted by the company’s share buyback programme, which will complete by the middle of next year. Buybacks can be good for share prices. And they can also be quite rewarding for existing shareholders, who get paid for the shares bought back by the company. 

This will also make up for CMC Markets’ potential dividend cut. For the last financial year, the company had a huge dividend yield of 10%. But if the sharp latest reduction is anything to go by, it could be set to fall. As an investor in the FTSE 250 stock though, I am not terribly worried. It has had a pretty decent dividend yield over time. In the past five years alone, it has averaged 6.3%, still qualifying it as a dividend stock. And then there are the buybacks.

Good growth prospects for the FTSE 250 stock

Moreover, I think it has good growth prospects too. Over the past six months or so, it has increasingly talked about splitting the business into two — a leveraged segment and a non-leveraged one. Things appear to have gone quite well since. As per the latest update, its non-leveraged platform will be available to the broader market over the next quarter. For now, it has been launched for its UK staff, which “has been achieved ahead of schedule and on budget”. 

A dirt-cheap stock I’d buy

To take stock, there is little denying that CMC Markets has been a disappointing stock to hold from a capital growth perspective in the past year. Its earnings have corrected. And as a result, its dividends have declined too. 

But the worst appears to be over. Its latest earnings numbers as still quite strong. The company is in the process of buying back shares, which could give shareholders solid returns and even make up for the cut in dividends. And its decision to split up the business could be good for growth too. Despite all this, it has a dirt-cheap valuation of 7.4 times right now, in terms of price-to-earnings ratio. I could buy more of it now. 

The London-headquartered firm offers online trading in shares, spread betting, contracts for difference and foreign exchange across world markets.

What’s behind today’s rise?

Stares in CMC Markets rose on Friday after the company said that the recently wrapped up fourth quarter had been its strongest. As a result, the firm said that full-year net operating income would be at the top end of its guidance.

The London-based firm stated annual net operating income was predicted to be approximately £280m.

“Outside of the pandemic year (financial year ending March 2021), this is a record net operating income result for the company,” chief executive Peter Cruddas said in a statement. He added that the performance data reflected the success of its B2B technology partnerships.

However, the financial services company noted that gross leveraged client income is expected to have fallen from £335m to £288m.

Meanwhile, full-year operating costs were expected to rise, the firm said. Estimates suggested operating costs, excluding variable remuneration, were expected to be approximately £173m, up from £168m a year earlier. The increase was primarily due to higher personnel costs, which were linked to the company’s desire to deliver on its strategic objectives.

CMC Markets will publish results for the financial year ended March 31 on June 9.

Should I buy?

One of the most attractive things about this stock is its 11.7% dividend yield. This is certainly a yield that would help my portfolio overcome inflation, which hit 6.2% in the UK in February.

The stock is now trading at 212p a share, that’s well down from a year high of 545p. The stock had a good run during the pandemic as savings rose and so did interest in investing. But the share price fall came as the pandemic trading boom came to an end.

Despite today’s jump, the stock is trading at considerable discount versus this time last year, but not far off its pre-pandemic levels. CMC now has a price-to-earnings ratio of just under four and that makes it dirt cheap to me.

Moreover, I don’t think the outlook is bad for the company either. According to chief financial officer, Euan Marshall, the company’s platforms have both been running at “close to record levels”. This is certainly encouraging.

One thing to be wary of is the dividend yield. Its coverage ratio for the last two years was above two. But the current 11.7% may be unsustainable.

Nevertheless, I still think this share has considerable upside potential and will be adding it to my portfolio.

Success story

Prior to 2020, CMC had a very mediocre 2019. Turnover fell by 21.4% and pre-tax profit by 89.5% from £60.1m to just £6.3m. Things appeared to be on the decline for the business.

However, 2020 became, by a significant margin, their best year of trading to date. The combination of individuals’ cash sitting in essentially interest-free savings accounts, a lot of free time attributable to lockdowns and astonishing capital growth in technology companies fuelled a boom in retail trading globally. Pre-tax profit surged to £141.1m in the first half of its financial year to September 2020.

With skyrocketing fundamentals came incredible share price growth of more than 550% from April 2019 to April 2021. Things were certainly on the up. Consequently, the dividend paid to shareholders on 9 September 2021 of 21.43p per share was huge relative to the rest of the industry, at over 10%.

Growth becomes contraction

Due to the fact that CMC Market’s revenue is primarily derived from volatility within the financial markets, results fell slightly short in 2021, although they were still better than pre-pandemic levels.

The VIX (Volatility Index) cooled from a rating of 66 (very high) in March 2020 to just 20 at the beginning of 2021, indicating volume of trading within the financial markets was simmering down a notch compared with the pandemic-induced frenzy.

This direct correlation could be considered as an inherent risk of investing in a company like CMC, where returns will be influenced heavily by market conditions regardless of the firm’s individual successes. But in many ways, this can be said for the vast majority of listed organisations.

Looking to the future

Although CMC’s forecasted dividend payment has been reduced to just 3.50p, it has recently just launched a share buyback scheme of up to £30m. In addition to this the VIX index has risen over the past months to 32 due to the uncertainty regarding the global economic outcomes of Russia’s invasion of Ukraine. These events are unlikely to be a coincidence, and I suspect that CMC’s trading has been relatively strong as of late.

However, the retail investing landscape is not what it once was: inflation is biting the real disposable incomes of households that will surely be less willing to invest in a volatile market when they have large utility bills to pay.

For now, I’m going to sit on the fence regarding investment into CMC Markets, despite the lucrative operating margins and attractive dividend yields. I would think it wise to observe how the macroeconomic picture develops over the next month, particularly regarding the inflation metric determining real household income and just the general persistence of market volatility.

CMC Markets

Trading platform provider CMC Markets (LSE: CMCX) was a big winner from the multiple UK lockdowns and subsequent market volatility. Since then however, the shine has well and truly dulled. The shares are down over 40% from where they were this time last year.

I reckon now might be an excellent entry point for me. A valuation of 11 times forecast FY23 earnings could prove cheap if CMC’s next trading update on 8 April is even slightly more upbeat than expected.

There’s the passive income stream to consider too. Despite deciding to cut its dividend massively this year, CMC still yields 4.4%.

Of course, there are risks. The industry in which CMC operates is both highly competitive and often the target for regulators. So long as I stayed diversified however, this wouldn’t faze me too much.

Jupiter Fund Management

Another stock I’d consider is Jupiter Fund Management (LSE: JUP). Like many other asset managers, the FTSE 250 company has seen its share price hammered in 2022, so far. Much of this is likely due to investors’ nervousness over the appalling conflict in Ukraine. Clearly, the shares could continue losing height if geopolitical events continue to worry the market.

As a Fool (and viewing this purely from an investment angle), I can afford to look beyond the next few months. What’s more, the potential dividends on offer help to compensate for any ongoing share price weakness. Jupiter currently has a monster forecast yield of 8.4%

While I’d be happy to buy today, I would need to remember that Jupiter’s market is a highly competitive one. In an effort to continue attracting savers to its services, it may need to lower its charges. This has a knock-on effect on profits which, in turn, could put the dividend at risk of a cut.

Does a cheap valuation of 10 times forecast FY22 earnings make up for this though? I’m inclined to say it does. A trading update will arrive on 26 April.

Taylor Wimpey

Throughout my time as a Foolish private investor, I’ve avoided housing developers due to my penchant for owning growth stocks. I wasn’t exactly keen to get exposure to a cyclical property market either.

Having said this, I do see the attraction if passive income were my priority. An example is FTSE 100 member Taylor Wimpey (LSE: TW). Right now, it trades at a low valuation of seven times forecast earnings (although rivals also trade on similarly low P/Es). That makes it the cheapest of the three discussed here.

If analysts are right (which can’t be assumed), the company will also return 10.5p per share to owners for the current financial year. This becomes an inflation-beating 8% yield.

Of course, no investment is without risk and dividends are never guaranteed. However, knowing that the total payout is expected to be covered 1.8 times by profit makes me confident it will be paid.

A trading statement is also due on 26 April.