The FTSE 100 (^FTSE) and the S&P 500 (^GSPC) have left ‘Liberation Day’ volatility behind – for the time being anyway – and are at or near all-time highs. But there are some dividend shares that still seem cheap to me.
It’s easy to see why share prices have been on the up over the last six weeks or so. But there are also some important risks that I think investors need to pay attention to.
The macroeconomic data in the US looks pretty good overall. Composite PMI – a key leading indicator of economic output – has rebounded from its April low and inflation seems to be falling.
So far, so good. But I’m wary that the effects of the uncertainty around tariffs over the last couple of months hasn’t started to show up in the data yet and the picture might change when it does.
In other words, investors generally look greedy, rather than fearful at the moment. But in terms of individual stocks, the picture is quite different in a few cases.
Shares in LondonMetric Property (LMP.L) come with a dividend yield of around 6%. That’s high compared to where it’s been over the last few years, but the company seems like it’s in good shape.
The firm has recently agreed a deal to boost its portfolio of warehouses by acquiring Urban Logistics REIT (SHED.L). Once the transaction goes through, the plan is to divest some of its less attractive properties.
The deal is being financed through a combination of cash and stock, which should increase the outstanding share count by 12%. That creates a risk for investors if the integration process doesn’t go as expected.
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This is a common risk with real estate investment trusts (REITs), where the requirement to return cash to shareholders can make financing a challenge. But the best operators can be terrific investments.
It’s almost certainly fair to say that Nike (NKE) has been losing its way a bit lately. Due to a focus on distribution, rather than product development, the firm has been losing market share to smaller rivals.
The share price has been falling as a result, but the dividend is still well-covered by the company’s free cash flow. And the stock trades at an unusually low price-to-book (P/B) multiple.
Nike has changed its CEO and refocusing on its core product. But investors should note that – according to the Piper Sandler Teen Survey – it’s still losing ground to competitors.
