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Stock market rally: a cheap UK share with BIG dividends I’d buy for the economic recovery

Royston Wild
·3-min read
Image of person checking their shares portfolio on mobile phone and computer
Image of person checking their shares portfolio on mobile phone and computer

There’s a wealth of opportunity for UK share investors to get seriously rich despite the uncertain economic outlook. I’ve continued to buy British stocks for my Stocks and Shares ISA in 2020. And there are plenty more top UK shares on my radar right now.

For instance, I’ve talked about the huge investment appeal of platinum group metals (or PGM) producers like Tharisa (LSE: THS) quite often.

I’m excited about investment demand staying strong in a world of ultra-loose central bank policy undermining the perceived value of paper currencies. The Covid-19 crisis has also exacerbated huge economic and geopolitical uncertainty. And it means safe-haven demand for precious metals should stay robust too.

Car sales to snap back?

I’m also encouraged by the rate at which PGM demand is likely to rocket during the global economic upturn. You see, cars are among the best-selling big-ticket items during early stages of a recovery. This means demand for Tharisa’s product (which is used to reduce harmful emissions in exhaust systems) should surge. And increasing environmental legislation also means more and more metal is required in catalytic converters to drive down pollution.

On top of this, the use of platinum et al for other industrial uses like electronics and dentistry should also rise as the economy improves.

Chart displaying growth
Chart displaying growth

Platinum demand soars

My bullish take on UK shares like Tharisa has been reinforced by fresh research released by the World Platinum Investment Council (WPIC).The latest Platinum Quarterly report showed demand for the white metal rocketed 75% in Q3 from the previous three-month period. This compares with a 40% quarter-on-quarter rise in combined recycled and mined supply.

This means the WPIC expects a colossal 1.2m-ounce deficit in 2020. The body expects the material shortfall to persist in 2021 too, albeit by a reduced 224,000 ounces. The organisation expects bar and coin investment “to remain high by historical standards.” It reckons platinum demand from the auto sector will rise by a quarter year-on-year in 2021. And it says Chinese demand for platinum jewellery will rise for the first time in seven years as well.

A low-cost UK share with BIG dividends

Clearly, Tharisa’s earnings picture remains quite robust for the medium term at least. And this is reflected in the City’s earnings forecasts for the UK share. They predict a 96% earnings rise for the financial year ending September 2021. And this leaves the mining giant trading on a forward price-to-earnings (P/E) ratio of a very small four times.

A rock-bottom earnings multiple isn’t the only reason this UK share is a great buy for value, I feel. Today Tharisa carries a mighty 5% dividend yield as well. This is one top stock I reckon could be too cheap for growth and income investors like me to resist.

The post Stock market rally: a cheap UK share with BIG dividends I’d buy for the economic recovery appeared first on The Motley Fool UK.

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Royston Wild 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.

Motley Fool UK 2020