Two UK shares I currently hold positions in are Primary Health Properties (LSE: PHP) and Warehouse REIT (LSE: WHR).

What are REITs?

A real estate investment trust (REIT) is a business that owns, operates, or finances income-generating real estate. These businesses are traded as normal stocks and give investors like me the opportunity to purchase shares and earn dividends without having to buy or manage property myself.

There are many UK shares that are classed as REITs. The enticing fact for me is that they must pay 90% of taxable income in the form of shareholder dividends.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Healthcare properties

Primary Health Properties focuses on properties in the healthcare sector. These include doctors surgeries and other healthcare-related facilities.

I like Primary for a few reasons. Firstly, it operates in a fairly defensive industry in that healthcare is an essential requirement. In addition to this, the UK has an elderly population and demand will only increase, in my opinion.

Next, Primary’s rental income is guaranteed through government bodies, which means it is protected against current inflationary issues and can continue to perform well and pay me dividends.

Moving on, Primary’s current dividend yield stands at close to 7%. This is nearly double the FTSE 100 average of 3%-4%. I am aware that dividends could be cancelled at the discretion of the business to conserve cash.

Primary’s progress could be at the mercy of changing NHS policy and government reforms, which could impact demand for its properties and in turn performance. Based on the current geopolitical and macroeconomic picture, this does not worry me at present.

To summarise, Primary has excellent defensive traits, and pays a handsome dividend with future prospects that are also looking bright.

Storage space

Warehouse REIT owns and operates storage and warehouse-based assets. These include warehouses for industrial, retail, and manufacturing industries.

I purchased Warehouse shares for a few reasons. To start with, the dividend yield is extremely enticing at 7.5%. This is much higher than the FTSE 250 average of 1.5%. In addition to this, its yield is underpinned by an impressive performance record. I can see that revenue and profit have increased year on year for the past four years.

What I also like about Warehouse is its business model. The majority of its warehouses are used as online order fulfilment and logistics centres. This is key for me because as online shopping habits only become more prevalent, more businesses will require such spaces. This could benefit Warehouse and its business, thus driving forward performance and increasing shareholder returns.

On a bearish note, Warehouse does have a fair bit of debt on its books. My issue here is not the level of debt, but more so the servicing of the debt. As interest rates rise, as they have been recently, paying down the debt could be tougher. Furthermore, this puts pressure on profit margins and dividend payments.

In conclusion, I believe Warehouse is in a good position to continue to perform well, pay regular dividends and boost my passive income stream.

The post Here are 2 UK shares I own to boost my passive income stream! appeared first on The Twelfth Magpie.

More reading

• £10,000 in either of these FTSE 250 gems could net around £800 in passive income. But which to pick?
• 1 REIT could turn a £20,000 ISA into annual passive income of £1,580
• With yields of 8.4% and 7.9%, are these FTSE 250 shares perfect for a Stocks and Shares ISA?
• 8% dividend yield! This REIT could be a BIG winner after Keir Starmer’s resignation
• With an 8.5% dividend yield, is this cheap income stock a no-brainer?

Sumayya Mansoor has positions in Primary Health Properties Plc and Warehouse REIT Plc. The Motley Fool UK has recommended Primary Health Properties Plc and Warehouse REIT Plc. 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.

Due to current economic volatility, some UK shares, including On The Beach (LSE:OTB), are falling. I remember being able to book holidays and travel easily pre-pandemic. For a couple of years, it became difficult due to restrictions and new rules. I sense some normality coming back. Should I buy shares with a view to a longer-term recovery?

Holiday retailer

On The Beach is an online retailer providing consumers with beach holiday packages. It acts as a gateway where customers can reach out to suppliers of accommodation and airline tickets through its multiple brands, via online and telephone channels.

So what’s happening with On The Beach shares currently? Well, as I write, they’re trading for 106p. At this time last year, the stock was trading for 358p. This is a 70% drop over a 12-month period.

UK shares have risks

I believe On The Beach shares will come under further pressure in the coming months due to current macroeconomic headwinds. Soaring inflation has created economic volatility including rising prices for a lot of commodities, including essentials such as food and energy. As a by-product, a cost-of-living crisis has emerged in the UK.

With this in mind, I believe On The Beach could suffer a drop-off in sales as people will choose not to book holidays. Instead, they will be focusing on paying for essentials such as food, and trying to heat their homes.

Why I like On The Beach and what I’m doing now

Let’s take a look at some bullish aspects of On The Beach. Firstly, after a couple of tough years due to the pandemic when it reported losses, it has seen demand increase past pre-Covid levels. This has, in turn, strengthened its balance sheet with some impressive results recently. Its interim report, released in May for the six months ended 31 March, made for good reading. Revenue increased by £12m compared to the same period last year, to £52.9m. Losses narrowed from £21.6m to just £7m. Finally, it managed to record a net cash figure of £14.6m and reduce debt to just £3.65m. This all tells me it has enough liquidity to deal with potential stormy waters ahead.

I try to adopt a buy-and-hold approach, similar to the teachings of investing guru Warren Buffett. He once said, “Our favourite holding period is forever”. I believe the current volatility and falling share price is an opportunity to buy shares in a company I believe will recover in the longer term. My stance comes from the fact there is a newfound appreciation for travelling after the pandemic.

Finally, On The Beach shares look decent value for money after the recent share price fall. They currently trade on a trailing 12-month price-to-earnings ratio of just seven.

Overall, I like the look of On The Beach shares. It is one of a number of falling UK shares that have caught my eye in recent months. I will place it on my buy list for the next time I have some funds to invest to boost my holdings.

The post UK shares: this falling holiday retailer could be a great long-term buy! appeared first on The Twelfth Magpie.

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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended On The Beach. 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.

The UK economy looks fragile at the moment. With the energy crisis driving inflation to historic highs and the pound falling, analysts expect the recovery to be sluggish and difficult. UK shares have been widely affected too, putting investors on high alert. 

Conversely, few sectors are currently witnessing a boom. But those companies that have continued to show strong growth are now receiving investor interest. I think this is the perfect time for me to diversify and pick up quality stocks on the way up. 

Shares that are defying trends

While the FTSE 100 is down over 6% this year, two overlooked gems on my watchlist have risen over 40% in three months. But looking at the fundamentals, they still look cheap. Let’s dive in. 

The energy sector is red hot right now. Despite the renewable energy push, oil is expected to power a majority of our industries for the foreseeable future. 

UK’s largest independent oil and gas business is Harbour Energy (LSE:HBR) and it has benefited greatly from this. Its shares are up over 41% in the last three months thanks to surging profits. 

In the first half (H1) of 2022, the company saw a 12-fold increase in pre-tax profits to US$1.49bn compared to $120m in H1 2021. The company cut down its net debt by 50% to $1.1bn and increased its 2022 shareholder payouts to $500m. 

Harbour Energy shares are trading at 448p with a price-to-earnings (P/E) ratio of 4.5 times. Given the current yield of 2.13%, which is expected to increase moving forward, this looks to me like a bargain. 

The next UK share on my list has jumped 47% over the last three months. 4imprint Group (LSE: FOUR) is a merchandise manufacturer that operates primarily in the US and controls 4% of the $23.6bn promotional products market.

The firm specialises in designing and manufacturing products that are functional adverts for large companies. 

In H1 2022, operating revenue was $515.54m, up 58% from H1 2021. Operating profits jumped a whopping 1124% to $43.98m primarily because of streamlined marketing and better pricing. 

4imprint doubled its new customer acquisitions and its order book grew 44% to 886,000 in 2022. The board is confident that the revenue target of $1bn will be achieved in 2022.

Its shares are currently trading at 3,645p at a P/E ratio of 20.9 times. Although this is not cheap on paper, I think its revenue growth in 2022 makes it a bargain. Many blue-chip businesses have struggled over the last few months, but 4imprint has shown considerable growth in a highly contested US market. 

Concerns and verdict

Tax cuts will plague oil companies moving forward. The world’s five biggest oil companies saw profits increasing by £50bn between April and June. This prompted a 25% energy profits levy in the UK that will bring the total tax on oil companies to 65%. 

Also, many US businesses are freezing hiring to improve margins. This is indicative of a slowing economy that could affect marketing spend. 

However, both businesses discussed here have reinvested smartly and have stronger balance sheets heading towards 2023. While there could be a slowdown, I think these shares have a lot of growth potential right now. I’ll probably make a lump sum investment in both shares when signs of market recovery become stronger. 

The post Up 40%+ in 3 months! These 2 fast-growing UK shares still look cheap appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Suraj Radhakrishnan 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.

I believe there are plenty of UK shares trading at discount levels currently. My investment strategy is to buy and hold for the long term. With that in mind, I’m willing to bear some short-term pain. One stock that could be a good addition to my holdings is Dunelm (LSE:DNLM).

Home furnishings

Dunelm is a home furnishing retailer with an online presence, as well as 80 locations throughout the UK. Its stores are primarily larger out-of-town sites located in retail parks. It is best known for its textile products such as custom-made curtains, bed linens, cushions, and more. It also sells other furniture such as wardrobes, cupboards, tables, and so on.

So what’s the current state of play with Dunelm shares? At present, they’re trading for 770p. At this time last year, the stock was trading for 1,232p. This is a decline of 37.5% over a 12-month period.

UK shares have risks

Due to recent volatility, as well as the tragic events in Ukraine, Dunelm shares have come under pressure. Some of the headwinds include soaring inflation, the rising cost of raw materials, as well a global supply chain crisis.

All of these aspects threaten Dunelm’s shorter-term investment viability. Rising costs could put pressure on profit margins, as well as levels of return. The supply chain crisis may see its ability to offer certain products dwindle, in turn, negatively impacting sales and performance.

These headwinds have also created a cost-of-living crisis in the UK. With that in mind, Dunelm may suffer shorter-term performance issues, as consumers may have less money to spend on furnishings, and be more inclined to spend their hard-earned cash on staples such as food and energy bills.

The positives and my verdict

So to the bull case of Dunelm shares. Firstly, I noticed that Dunelm has a good track record of past performance. In the past four fiscal years, it has grown revenue and profit for three of these years. The exception was 2020, when its physical stores were shut for a long period due to restrictions linked to the pandemic. What pleases me in particular is the fact that 2022 performance has surpassed pre-pandemic performance by some margin.

As Dunelm has been performing well, it has been able to reward shareholders in the form of dividends. With the share price falling, its dividend yield has inflated somewhat, and currently stands at close to 9%. I am conscious that dividends are never guaranteed, and can be cancelled in times of volatility to conserve cash.

Finally, Dunelm is one of a number of UK shares trading at bargain levels. As I write, the shares are trading on a price-to-earnings ratio of just nine.

To summarise, I believe Dunelm could suffer a little bit in the short term, but, in the longer term continue its impressive growth trajectory, and performance levels too. This should provide consistent returns, and boost the share price upwards, in my opinion.

The fact that the shares are trading cheaply currently is a bonus and what caught my eye originally. I will place Dunelm shares on my buy list for when I next have some funds to invest.

The post UK shares: could this home furnishings stock be a great recovery buy? appeared first on The Twelfth Magpie.

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Jabran Khan 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.

Many UK shares could be trading at bargain levels thanks to recent stock market and economic volatility. One stock I want to take a closer look at is PZ Cussons (LSE:PZC). Should I buy or avoid the shares for my holdings?

Essential consumer goods

As an introduction, PZ Cussons manufactures and distributes cleaning, hygiene, and toiletry products for consumers. Some of its best known brands include Imperial Leather, Carex, and Cussons Baby. I must admit I’m a user of many of its products in my household.

So what’s happening with PZ shares currently? Well, as I write, they’re trading for 194p. At this time last year, the stock was trading for 219p. This is an 11% drop over a 12-month period. Many UK shares have fallen as a direct result of increasing pressures, some of which I will explore in more detail shortly.

Challenges of note

The macroeconomic headwinds affecting many stocks, including PZ, include soaring inflation, the rising cost of raw materials, as well as the supply chain and energy crises. Combined, they have created a cost-of-living crisis here in the UK. The tragic events in Ukraine have also caused issues too.

For a business like PZ, rising costs, which could increase cost of production for its products, may eat away at profit margins, which underpin growth and shareholder returns.

In addition to this, supply chain constraints could see PZ unable to fulfil orders, and even stock shelves, which would in turn negatively affect sales and performance.

Lastly, the cost-of-living crisis may mean that some consumers may turn away from branded items that PZ sells. Instead, they may look towards cheaper alternatives, which could hurt its performance and returns too.

The positives and what I’m doing now

Away from the bearish aspects, there is lots to like about PZ Cussons, in my opinion. It’s current brand power, profile, and presence as a worldwide business, are key ingredients to its success now, and in the longer term. This is because the pandemic resulted in higher levels of hygiene and cleanliness consciousness throughout the world. For example, there probably isn’t a public space now that doesn’t have hand sanitiser at every entrance, exit, kiosk, or till. Overall, this could help boost performance and returns for a long time to come.

At present, PZ shares would boost my passive income stream through dividend payments. The current dividend yield stands at 3.5%. This is higher than the FTSE 250 average of 1.9%. I am conscious that dividends can be cancelled at any time, however.

Finally, I can see that PZ has a consistent track record of performance, which is encouraging. I am aware that past performance is not a guarantee of the future. However, looking back, it has recorded consistent levels of revenue and profit for the past four years.

To summarise, PZ Cusson shares could face some increased risk in the shorter term. Luckily for me, I invest for the long term, which means they look ideal for me and my holdings.

The post UK shares: is this consumer goods stock a no-brainer buy? appeared first on The Twelfth Magpie.

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Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended PZ Cussons. 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.

In recent times, I have wanted to buy UK shares with defensive characteristics as well as growth prospects. I purchased two stocks, Primary Healthcare Properties (LSE:PHP) and Supermarket Income REIT (LSE:SUPR). Here’s why.

Healthcare properties

Primary is a real estate investment trust, meaning it buys, operates, and rents out healthcare-related properties such as GP surgeries. The income it yields from these properties is returned to shareholders in the form of dividends. What I like about REITs is the fact that they must return 90% of profits to shareholders.

As I write, Primary shares are trading for 125p. At this time last year, the stock was trading for 153p. This equates to an 18% decline over a 12-month period. I’m not worried about this drop as many UK shares have fallen due to economic volatility and the events in Ukraine.

I like Primary shares as I believe their defensive capability stems from the fact that healthcare is an essential. No matter the economic outlook, healthcare will always be a basic requirement. This should mean that Primary can continue to perform, reward its shareholders, and grow.

In addition to this, Primary shares look decent value for money on a price-to-earnings ratio of 10. Furthermore, they would boost my passive income stream through dividend payments. The current dividend yield on offer stands at 4.9%. This is higher than the FTSE 250 average of 1.9%.

Despite my position in Primary shares, I am conscious of potential issues. First of all, dividends are never guaranteed. They can be cancelled at any time to help a business conserve cash. Next, Primary’s demand could be hurt by the rising demand for virtual healthcare in line with technological advancements. This could hinder future growth and returns.

Supermarket properties

Supermarket Income is also a REIT. It buys, owns, and rents out properties for supermarkets whether that’s retail locations or warehousing and operational properties.

So what’s happening with Supermarket shares currently? Well, as I write, they’re trading for 110p. At this time last year, the stock was trading for 115p, which is a 4% decline over a 12-month period.

As with Primary, I believe Supermarket’s defensive traits stem from the fact that food and consumer goods are essential. Despite what may be happening in the wider economy, consumers require basic goods, such as food and other consumables.

Reviewing Supermarket’s fundamentals, its shares also look good value for money on a price-to-earnings ratio of just 10. They would also boost my passive income stream as well. Supermarket’s current dividend yield stands at 5.1%, considerably higher than the index average.

Looking at potential challenges that could derail Supermarket shares, there are again similarities. With the rise in technology, online shopping delivered directly to your door has taken off in recent years. Ocado is a big player in this market but other traditional retailers have also begun offering this too. This could result in Supermarket experiencing less demand for its properties. As a result, this could hinder performance, growth, and returns.

In conclusion, I believe both of these UK shares will boost my holdings for a long time to come. As well as their favourable fundamentals currently, their defensive traits ease any concerns around the risks noted.

The post Here’s why I own these 2 defensive UK shares! appeared first on The Twelfth Magpie.

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• With yields of 8.4% and 7.9%, are these FTSE 250 shares perfect for a Stocks and Shares ISA?
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Jabran Khan has positions in Primary Health Properties and Supermarket Income REIT. The Motley Fool UK has recommended Primary Health Properties. 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.

Building durable passive income is an excellent approach for investors who don’t want the constant stress of watching share price movements. Targeting shares with high dividend yields provides me more personal time and financial freedom as regular payouts flow through in the background.

But identifying rewarding dividend stocks is tricky. Payouts can depend on the company’s quarterly and annual performance. Therefore, I favour companies that have a consistent dividend history alongside stable financial performances. Let’s look at two UK shares that stand out as key candidates for my passive income portfolio. 

M&G

Global investment manager M&G (LSE: MNG) currently trades just under 197p. Half-year results crashed the share price in August and it fell 12% to 196p. Yet the stock remained robust over the last 12 months with just a 1% fall. With an impressive dividend history, I think this UK share can help deliver the second income I’m after. 

M&G offers a 9.11% dividend yield. Its interim payout follows previous figures, with 6.2p per share to arrive on 29 September. A buyback should elevate shareholder value as £150m of a total £500m is deployed. By the end of September, M&G will have returned an impressive £1.5bn to investors since FY19. 

Yet the company needs to financially sustain this. Assets under management fell from £370bn at the beginning of FY22 to £349m in its half-year report. Management blamed this on adverse market movements. Consequently, post-tax profits plummeted 75% from a loss of £248m to £1.04bn. 

This suggests the dividend aristocrat may struggle to deliver future payouts. But I’m not concerned. M&G increased capital generation from £309m to £439m. Management also announced acquisition of Continuum Financial Services. This indicates the company can remain afloat through short-term profit falls and begin increasing revenues through its new customer base.

I think M&G can recover from its wavering financials and continue to deliver on its average final payout of 17.4p (since FY19). Indeed, I’ll be adding M&G shares to my passive income portfolio. 

Imperial Brands

Imperial Brands (LSE: IMB) is another UK share I’d consider. Strong revenue increases resulted in its share price leaping 10% in mid-May, while the tobacco company has seen a 26% rise over the last year. It now trades at 1933.

Yet the half-year report wasn’t all positive. Operating profits fell 27% to £1.2bn. A departure from Russian markets (estimated at £201m) and divestment from the Premium Cigar Divisions (£281m) clearly took a hit.  

However, the company has expanded its Pulze product range in European markets and Blu marketing proposition in the US. Net revenues from next-gen products increased 39.5%, totalling £77m. This indicates Imperial has successfully adapted to the changing market as consumers increasingly switch from cigarettes to electronic vapes. 

The company also boasts an impressive dividend history. With an average final payout of 167p since FY17. Its dividend yield currently stands at 8.4%. With the successful launch of NGPs in Europe and the US, I think payouts will continue to arrive at similar figures.

Despite a fall in operating profit, the company is increasingly adapting to its market and demonstrating high prospects in overseas markets. This gives me faith that Imperial can continue to deliver strong payouts for the foreseeable future. Imperial will certainly be a staple of my passive income portfolio. 

The post How I’m targeting lifelong passive income with these top UK shares appeared first on The Twelfth Magpie.

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Hamish Cassidy has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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.

I believe there could be some UK shares out there trading at rock-bottom prices due to recent market volatility. One stock that has caught my eye recently is Hotel Chocolat (LSE:HOTC). Let’s take a closer look at it to see if I should buy or avoid the shares.

Chocolate retailer

As a quick introduction, Hotel Chocolat is a British-based chocolatier and cocoa grower. It has a retail network in the UK and Japan, as well as an online presence. It is the only UK company that grows cocoa on its own farm.

So what’s happening with Hotel Chocolat shares currently? As I write, they’re trading for 142p, while at this time last year, the stock was trading for 380p. This which equates to a 62% decline over a 12-month period.

To buy or not to buy?

I have compiled a list of pros and cons to help me decide if I should buy Hotel Chocolat shares.

FOR: Hotel Chocolat posted full-year results for the 52-week period ended 26 June 2022. I found them to be positive overall. Revenue increased by 37% compared to 2021, and 60% compared to 2019, which was its last full-year period without pandemic-related disruption. Cash generation was up too, as well as operating profit, falling in line with expectations. In my opinion, it has bounced back well from pandemic woes and can now look towards future growth aspirations, which it pointed to in the update as well.

AGAINST: Since the pandemic, it now has to contend with macroeconomic headwinds. These include soaring inflation, the rising cost of materials, and supply chain constraints. Rising costs can put pressure on profit margins, which underpin returns as well as growth initiatives. Supply chain problems may negatively impact operations such as product availability, which could affect sales and performance too.

FOR: One advantage I believe that Hotel Chocolat has over competitors is the fact it grows cocoa on its own farm in St Lucia. I believe this advantage might help ease supply chain issues for Hotel Chocolat, and possibly give it an advantage over competitors. Supply chain problems are hampering many UK shares and their day-to-day operations.

AGAINST: Earlier this month, Hotel Chocolat announced that it would cease operating its US direct-to-consumer arm, but remain open to wholesale opportunities. In its July update, it said that it would look to focus on low-risk and profitable growth opportunities only. Perhaps the US market does not fall into this category. As a potential investor, seeing the company exiting a lucrative, large market like the US is slightly off-putting.

What I’m doing now

If I had some spare cash, I would be willing to buy Hotel Chocolat shares. Hotel Chocolat’s recent results, its advantage with its own cocoa farm, as well as global profile and presence help me make my decision. I believe the current macroeconomic headwinds will ease eventually. Furthermore, I believe it has a healthy enough balance sheet to help it overcome these obstacles.

The post UK shares: should I buy this beaten-down retailer for long-term growth? appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Jabran Khan has no position in any of the shares mentioned. The Motley Fool UK has recommended Hotel Chocolat. 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.

Looking at the all-time FTSE 100 graph, the incredible bull run we are in right now is evident. The Footsie is up over 40% since the March 2020 crash. And I am looking at minor crashes along the way as opportunities to cash in on cut-price UK shares.

I hear investors lament missed market opportunities. Right now, some top-quality UK shares are down over 30%! Here are two companies I am watching closely to make an investment in the coming months. 

Reduce your bills

B&M European Value Retail (LSE:BME) is one UK share that has been on my watchlist for a few years. With inflation projected to hit 22% next year, I expect discount retail stores to see a spike in revenue. And B&M has quickly become a big player in this sector. 

While many grocers felt the brunt of rising raw material costs, B&M managed to maintain stable revenue and sales in the financial year (FY) 2022. The group recorded a pre-tax profit of £525m, exactly the same as in FY21. Two-year sales growth (compared to FY20) was at 13%, showing that the business managed to retain a large chunk of its customers gained during the pandemic. 

By focusing on in-demand products and avoiding overstuffing store stock, the company has managed to keep costs low and generate a profit. In fact, overall gross margins went up to 37.4% from 36.9% in FY21. 

Supply chain issues are a big concern for supermarkets right now and B&M is no different. Disruptions in Asia could affect operations in the coming months. Also, rising energy costs mean higher transportation costs that the company will have to deal with.

However, I am impressed by B&M’s frugal business model and its commitment to its dividend policy. Its yield stands at 4.3% and the board is confident about maintaining current levels.

Its shares are down 39.7% in 2022 and are trading at a price-to-earnings ratio of 8.9 times. Given the market share and business model, I think B&M is the best bargain option for my portfolio right now. 

Cheap UK defence share

The world is reeling from the war in Ukraine and defence budgets across the globe are shooting up. I think investing in the sector could be a good growth option moving forward. One UK share that has caught my eye is Babcock International Group (LSE:BAB). 

The firm specialises in electric systems for combat vehicles across land, air, and water. Along with engineering, the company also provides training, assistance, and data management services for militaries. 

In FY22, group revenue jumped 3% to £4.1bn with an underlying operating profit of £238m. The company recently signed defence contracts with Australia, France, Indonesia, and the UK. This has boosted its order book significantly.

There is always an underlying threat of trade restrictions when it comes to defence shares. A ban on sales could vastly impact Babcock’s revenue. The company is also dealing with rising metal prices, which is crucial to an engineering firm’s margins.

But I am still bullish on Babcock shares for my growth portfolio. It has fallen nearly 4% in the last month after a 50% rise since January 2021. I think this presents an attractive entry point at 328p. Currently, this UK share looks like a bargain to me given the high interest in defence, the company’s quality, and momentum. 

The post 2 dirt-cheap UK shares that look ready for liftoff appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan has no position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value. 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.

I am looking for the best UK shares to buy that could boost my passive income stream through dividends. One business that has caught my eye recently is Diploma (LSE:DPLM). Should I buy or avoid the shares?

Technical products

As a quick introduction, Diploma is a specialist provider of technical products to a number of sectors. The business is split into three main areas, which are Controls, Seals, and Life Sciences. In Controls, it supplies wiring, connectors, adhesives, and more. In Seals, it sells seals, cylinders, gaskets, and more. Finally in Life Sciences, it offers consumables needed for healthcare and environmental science purposes.

So what’s happening with Diploma shares currently? Well, as I write, they’re trading for 2,412p. At this time last year, the stock was trading for 3,024p, which equates to a 20% decline over a 12-month period. Many UK shares have fallen recently due to macroeconomic pressures.

The bull and bear case

So let’s take a look at some bull and bear aspects of Diploma shares. I’ll start with some positives.

Firstly, I’m buoyed by Diploma’s diverse business model as well as its global profile and presence. By splitting the business into three areas, it is set up to generate revenue from different avenues and sectors through a multitude of products. Furthermore, this diversity offers it a global footprint through all its offerings.

Next, I like the fact that it does not manufacture its own products. In fact, it is more of a value-added reseller. This means it doesn’t have to contend with costly plants or factories and can generate much more cash this way. This is where I believe it can provide consistent and stable returns to potential shareholders.

Finally, I can see Diploma has a good track record of performance growth recently, although I do understand that past performance is no guarantee of the future. Looking back, I can see it has grown revenue and gross profit in three out of the past four years. In 2020, levels dropped slightly due to the pandemic. With performance growing, and the business generating lots of cash, Diploma currently offers a dividend yield of 2%. I am conscious that dividends are never guaranteed, however.

So to the bear case then. One of my biggest concerns for Diploma is that it is currently at the mercy of macroeconomic headwinds. This is because soaring inflation and rising costs could impact its buying price for the products it resells. Rising costs could put pressure on profit margins, which in turn, could affect levels of returns.

Another issue is the current supply chain crisis. Diploma has built a reputation on serving its customers effectively and efficiently. With supply chain constraints, could it lose customers or even experience damage to its brand despite the crisis being out of its control? This is a development I will keep a close eye on.

My verdict

To summarise, Diploma looks like a well-run business with lots of potential to boost my holdings. There are risks to consider but I believe these are shorter term. I’m buoyed by its diverse business model, as well as the fact that the business is cash-rich and has a great balance sheet. I believe this will support growth and boost returns too. For that reason, I would buy Diploma shares.

The post UK shares: could this cash-rich business boost my passive income? appeared first on The Twelfth Magpie.

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• How much would a Stocks and Shares ISA need to replace a £3,064 monthly salary?
• 3 UK shares to consider holding in a Stocks and Shares ISA for a decade

Jabran Khan 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.