2 UK stocks with yields of 5%+ to buy today

Key points

  • These UK companies have high profit margins and dividend yields above 5%
  • Both stocks look like good value to me as we emerge from the pandemic

Where would I put my money if I was looking for UK stocks to buy today? I want to invest in companies that can handle uncertain markets and weather the impact of inflation. I am also interested in companies that should benefit from the end of the pandemic.

I think this stock is too cheap

My first choice is a television group TVI (LSE:ITV). While it’s tempting to dismiss this broadcaster as yesterday’s news, I think that’s wrong. Almost a third of ITV’s profits now come from its studio company. This produces content for many other media groups, including streaming competitors such as netflix.

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Over time, I expect the Studios business to become larger and more profitable. But right now, ITV is enjoying a strong recovery in advertising revenue in its broadcast and streaming business. In November, CEO Carolyn McCall said she expects total advertising revenue in 2021 to be the highest in ITV history.

Of course, he will continue to face some challenges. Its streaming operations are tiny compared to giants such as Netflix and Amazon. Broker forecasts also suggest that after a strong recovery in 2021, earnings will stabilize in 2022 and 2023.

May be. But it’s a company with a 15% operating margin, good cash generation and a huge archive of TV content. I think it’s an attractive set.

According to broker forecasts, ITV is currently trading with just 7.5 times 2022 earnings, with a dividend yield of 5.3%. I think it’s too cheap, so I continue to hold the stock in my portfolio and would buy today.

A UK stock I would buy to protect against market falls

FTSE 250 Company IG group (LSE: IGG) is the largest online financial trading operator in the UK. In volatile markets, IG’s CFD and spread betting products have attracted many new clients over the past two years. This took profits to record highs – IG’s profit margin hit 50% in the six months to November 30.

Of course, market conditions should calm down at some point. When this happens, history suggests that trading activity will subside, which will hit earnings. However, IG has a reputation for attracting good quality customers who stay and trade regularly. CEO June Felix says that so far, customers who signed up during the pandemic are being held back at similar rates to older customers.

The group is also expanding its market reach, with growing operations in the United States and Japan, for example.

I think the main risk right now is that, in an effort to drive post-pandemic growth, Ms. Felix could end up spending too much money on shoddy acquisitions. This could lead to a slow decline in IG’s profitability.

Fortunately, there is no sign of this so far. Indeed, as it stands, I think IG stock looks very reasonably priced. Broker forecasts suggest the stock is trading at just 10x forecast earnings for 2022/23, with a potential dividend yield of nearly 6%. If IG wasn’t already one of my biggest holdings, it would be one of the first UK stocks I would buy today.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Roland head owns IG Group Holdings and ITV. The Motley Fool UK recommended Amazon and ITV. The opinions expressed on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we give in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of information makes us better investors.

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