Top
Image Alt

The Investing Box

  /  Editor's Pick   /  2 cheap income stocks to help fight back against inflation!

2 cheap income stocks to help fight back against inflation!

A young black man makes the symbol of a peace sign with two fingers

Income stocks are a great way for me to put my money to work. Not only do they provide a passive-income stream, but they also require minimal effort.

With inflation sitting at the near-10% mark in the UK for August, this means my stagnant cash is losing value every day. And as such, I’m on the lookout for some cheap income stocks that can help me protect my money.

Here are two I’m strongly considering.

Rio Tinto

First on my list is Rio Tinto (LSE: RIO). The stock has fallen by over 5% across the last year, with it also down by just over 1% in 2022. However, in the last month the Rio Tinto share price has jumped 3%.  

At its current price, the stock offers an attractive dividend yield of 10.8%. While inflation is predicted to peak potentially above 20%, this yield is currently above the UK figure. This is a great way for me to mitigate the possibility of my cash eroding.

Despite cutting its interim dividend to $2.67 per share, the firm’s total payout for the first half still equated to its second highest ever!

On top of this, the stock looks cheap. It trades on a price-to-earnings ratio of 5.3, comfortably below the ‘value’ benchmark of 10. This is also below the average of its FTSE 100 peers.  

With a focus on iron ore, what could pose an issue for the business is the falling demand from China. The country accounts for half of the world’s steel output, so with ongoing Covid struggles alongside a weakening economy, this could spell trouble for Rio Tinto.

However, with a positive long-term outlook for commodities, I think Rio Tinto shares would be a solid buy for me today.

Taylor Wimpey

Another stock I have my eye on is homebuilder Taylor Wimpey (LSE: TW). Unlike Rio Tinto, it’s been a dire 12 months for the stock, as its share price has fallen around 36%. This year alone, it’s down nearly 40%.

With its demise, Taylor Wimpey’s shares offer a meaty 8.5% dividend yield. This isn’t above the UK inflation rate, of course. But the passive-income stream it will create will be valuable to my portfolio in the months ahead.

It’s been a turbulent few years for homebuilders. After making solid recoveries following the pandemic as the housing market boomed, 2022 has seen them suffer as a bleak economic outlook has seen market sentiment plummet.

Despite this, Taylor Wimpey’s half-year results were strong. The business managed to grow its operating profit on top of the impressive 2021 it had. It also saw its operating margin rise from 19.3% to 20.4%.

The biggest challenge the business is set to face in the months ahead is rising material costs as inflation continues to spike. Supply chain issues may also hinder its operations. However, with these as short-term concerns, I’d strongly consider buying Taylor Wimpey shares today.

The post 2 cheap income stocks to help fight back against inflation! appeared first on The Motley Fool UK.

6 shares that we think could be the biggest winners of the stock market crash

The hotshot analysts at The Motley Fool UK’s flagship share-tipping service Share Advisor have just unveiled what they think could be the six best buys for investors right now.

And while timing isn’t everything, the average return of their previous stock picks shows that it could pay to get in early on their best ideas – particularly in this current climate!

What’s more, all six ‘Best Buys Now’ are available to access right now, in just a few clicks.

Learn more

setButtonColorDefaults(“#5FA85D”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#43A24A”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#FFFFFF”, ‘color’, ‘#FFFFFF’);
})()

More reading

Charlie Keough has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.