It’s been a tough few days for investors in ITV  (LSE:ITV). After changing hands in triple figures throughout 2021 and the first two months of 2022, the ITV share price dropped in March, taking it to penny stock levels. It saw a sharp decline to almost hit 70p per share on Monday. The FTSE 100 media stock has since regained some of these losses. However, its five-year performance is currently standing just shy of -60%.

Let’s explore whether the recent crash in the ITV share price represents a good buying opportunity for me. 

Solid financial results  

The plummeting ITV share price overshadows a strong set of full-year financial results for the UK’s second-largest broadcaster. ITV delivered total external revenue growth of 24% and adjusted earnings per share (EPS) growth of 40% in 2021. Advertising revenue of £1.96bn was a record high for the company and operating profits were up 46% to £519m. 

The board proposed a final dividend of 3.3p per share, in line with previous guidance. Furthermore, ITV announced impressive cost savings and a reduction in the company’s net debt from £545m to £414m.

It’s notable that ITV’s leadership team decided to buy shares this week at under 80p per share, with a total value of just under £300,000. This gives me some confidence in the bullish case for ITV stock at its current price. 

Investors spooked by streaming plans 

Why did ITV’s share price crash though, making it one of the biggest FTSE 100 fallers in recent days? In short, the answer can be found in the company’s spending plans “to supercharge [its] streaming business”, in the words of Chief Executive, Carolyn McCall.

Investment in its digital-first content budget will exceed previous forecasts at £1.23bn for 2022, rising to £1.35bn in 2023. Much of this is due to the launch of ITVX, a subscription-based streaming platform, in Q4 2022. 

There’s logic to this decision. Streaming viewing hours for its media and entertainment business were up by 22% on the year. Revenue for ITV Studios from streaming platforms climbed to 13% of the total for 2021 from 10% in 2020. 

However, many analysts are sceptical of the firm’s ability to compete with US giants that have a big presence in the streaming sector, such as Netflix, Amazon, and Disney. Several streaming companies saw their share prices rally during the pandemic as they benefited from the ‘stay at home’ effect. It appears ITV wants to take advantage of this trend. 

Whether demand for streaming will continue to rise as consumers revert to their pre-pandemic habits is a concern for investors as the broadcaster expands into a potentially saturated market. Bears will argue its spending plans are misfocussed and margins will be tight in the notoriously cash-intensive world of streaming.  

Should I buy ITV shares now? 

While I believe concerns about ITV’s future plans and stiff competition it faces have some merit, the stock looks oversold to me at present. The company currently trades at a modest P/E ratio of 8.7 and its recent financial results bode well for the future, I feel. 

With popular shows in its portfolio, such as Love Island and I’m a Celebrity, ITV seems well placed to make ripples in the digital content sector. Other parts of the broadcaster’s business appear to be in a healthy shape. Accordingly, I see the current share price as a good long-term buying opportunity for me. 

Charlie Carman does not own any shares in the companies mentioned in this article. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Amazon and ITV. 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.

Since Russia invaded Ukraine on 24 February, global stock markets have been volatile. In the past five days, the FTSE 100 index dived by 8.2% and then bounced back by 4.2%. On Monday morning, there were plenty of quality, cheap shares to choose from. Here are three UK shares that I don’t own, but I wish I’d bought during Monday’s meltdown.

Cheap shares 1: Lloyds Banking Group

I should have bought shares in Lloyds Banking Group (LSE: LLOY) on Monday morning. I’m kicking myself that I missed the chance to buy these cheap shares at that day’s low of 38.1p. To me, that would have been a fantastic bargain. As I write, the Lloyds share price stands at 45.18p, over 7p higher. That’s a handsome gain of almost a fifth (+18.6%) in two days. But I still regard Lloyds shares as cheap today, as the Black Horse bank is valued at just £32bn. To me, that’s too modest a price tag for the UK’s leading mortgage lender — a group with over 26m customers. At this level, Lloyds shares trade on a multiple of 6.1 times earnings and an earnings yield of 16.5%. Their dividend yield of 4.4% a year is 1.1 times the FTSE 100’s cash yield. Though this stock has been highly volatile lately, I would like it in my family portfolio.

Discounted stocks 2: ITV

On Monday, I couldn’t believe how low the ITV (LSE: ITV) share price plunged. At their low this week, these cheap shares collapsed to 69.28p. I’d have bought the entire broadcaster at this knockdown price. As I write, ITV shares have rebounded to 82.66p, leaping 13.38p since Monday. That’s a juicy gain of 19.3% in two days. This suggests to me that investors panicked by selling ITV stock below 70p. At the current price, ITV is valued at just £3.3bn, perhaps making it a tempting target for a media giant? The shares now trade on a price-to-earnings ratio of 8.9 and an earnings yield of 11.3%. ITV’s dividend yield of 4% a year is in line with the FTSE 100’s cash yield. Although ITV has struggled since the Covid-19 crisis began in early 2020, I remember its shares topping 200p five years ago. Hence, I’d gladly buy this lowly rated stock today.

Knocked-down stocks 3: Vodafone Group

The third of my cheap shares is Vodafone Group (LSE: VOD). Again, this FTSE 100 share slid in Monday’s selling frenzy. At the day’s low, it fell to 115.88p. As I write, it hovers around 119.32p, up 3.44p (+3%) since Monday’s bottom. At this price, the telecoms giant is valued at £32.1bn. Yet Vodafone has over 300m mobile customers and 27m fixed-broadband customers across 21 markets and 48 partner markets. To me, this business has huge potential, perhaps not reflected in the current share price (down 14.5% since 16 February). What most attracts me to Vodafone shares today is their market-beating dividend yield. Currently, this stands at 6.4%, around 1.6 times the FTSE 100’s cash yield. Despite Vodafone carrying €44.3bn (£37.3bn) of net debt on its balance sheet, I see this Footsie share as a solid and reliable source of passive income. That’s why I’d buy VOD today.

Finally, though I’d buy these three dividend shares today, I know that share dividends are not guaranteed. They can be cut or cancelled without notice, as history has taught me well!

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV, Lloyds Banking Group, and Vodafone. 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 investor Warren Buffett has made billions of dollars simply by buying shares at less than he thinks they are worth – and then holding them for years.

But Buffett does not have some magical technique. Instead, he typically uses the sort of information that is available to any potential investor for free, online, such as a company’s annual report. Then he applies his valuation approach to see whether the shares might be a bargain. I think that same Buffett approach can help me find cheap British shares to buy now for my portfolio. Before I explain how, let’s have a look at the Buffett approach with an example of it in practice.

Warren Buffett on the value of Apple

Back in 2016, Apple had been traded on the stock market for decades. The iPhone had been on the market for nearly a decade. The Apple share price had fallen since its peak the previous year, but that fall was limited and not permanent. Indeed, over the course of 2016, Apple shares became 10% more expensive.

So in 2016 there was a limited number of people who reckoned that the Apple share price was “cheap”. In fact, the opposite was true: some investors believed that a limited innovation pipeline meant the shares were overpriced. But Buffett thought Apple looked cheap. In fact, he was so convinced they did that he started acquiring over $30bn worth of Apple shares. By the end of last year, that stake was worth $161bn. In other words, Buffett’s investment in an already well-known company had increased in value by over five times in just a few years. On top of that, he has received Apple dividends each year.

The Buffett approach

Why did Warren Buffett think Apple looked cheap when other investors said it was expensive? In short, he looked at its value not just its price.

Apple has certain qualities as a business that Buffett — correctly – thought would help it to earn huge profits in the coming years. Those include a large market size, a strong competitive advantage in its business model, and the ability to charge customers premium prices.

Using those criteria, I think a number of cheap British shares could be attractive additions to my portfolio.

Cheap shares to buy now

One example is pork producer Cranswick. Its price-to-earnings ratio of 17 may not look cheap. But the company has a proven business model that supports earnings growth. It has raised its dividend annually for over three decades. Its branding and established supplier network give it a competitive advantage. I reckon that the current share price is attractive given Cranswick’s future profit potential.

The same applies to consumer goods giant Unilever. Its portfolio of premium brands such as Domestos gives it pricing power as well as a competitive advantage against other manufacturers. Customer demand for such products is likely to remain resilient.

Both companies face risks, of course. Input cost inflation could hurt profit margins. That is one reason Buffett likes companies with premium brands that give them pricing power, but even so the risk remains. Looking not one or two years ahead but a decade, however, and I reckon Unilever and Cranswick both have the potential to remain profit generation machines. Applying the Warren Buffett method, I would consider them for my portfolio now.

Christopher Ruane owns shares of Unilever. The Motley Fool UK has recommended Apple and Unilever. 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.

With oil and gas supplies in the news again, there is more focus than ever on the potential for alternative sources of energy. 

Here are three UK renewable energy shares I am watching at the moment to see whether they offer a good fit with my portfolio. For now I am just watching and not buying — below I explain why.

Hydrogen business

In the hydrogen space, one option is AFC Energy (LSE: AFC). The company produces alkaline fuel cells that are fuelled by hydrogen. Over the past year, the AFC Energy share price has fallen by 23%. The company revealed its final results for 2021 today. Although revenue was only around half a million pounds, even that was an important step on the company’s road to commercialisation. The post-tax loss was £9.3m.

As of today, the company’s contracted commercial agreements are worth £5m. So not only is the company starting to generate revenue, but that trend is likely to accelerate in the next year. I continue to think £255m is a heady valuation. But the company had £55 in cash at the end of the year and the prospect of growth. I am waiting to see how fast AFC can commercialise and hopefully generate earnings, so for now am not investing. But the improving business outlook — albeit from a standing start — has caught my attention.

Renewable energy shares

Another hydrogen-focussed share is Ceres Power (LSE: CWR). The market for hydrogen energy is booming, and this fuel cell specialist has a growing order book. Its revenues and other income came close to doubling at the half-year stage and I expect strong continued growth. With its technology and growing customer list, I like Ceres Power as a business. That does not mean that I like it as an investment for my portfolio at the current share price, though.

That is because I think its £1.4bn market capitalisation prices the company for large success. But in fact, any developing company can face setbacks along the way. Given its heavy losses and first half revenue of £17m even after strong growth, Ceres Power continues to look overpriced to me. The shares are down 35% in a year but I still do not see a buying opportunity for my portfolio.

Established business

A far more established business is energy company SSE (LSE: SSE).

The utility is spending an extra £1bn a year as it drives towards a so-called ‘net zero’ target. But this comes at a cost, which is what puts me off SSE as a possible investment for my portfolio. In 2019, the SSE dividend was 97.5p per share. It was then cut to 80p and has crept up a little since then. Those gains may be short-lived, though, as the company plans to “rebase” its dividend again, to 60p per share, in 2023-24.

So SSE is partly funding its growing environmentalism by reducing its shareholder returns. That might be beneficial in the long term, with capital expenditure now setting the scene for higher profits down the road. But in the coming years it means SSE may well pay me smaller not bigger dividends for owning its shares. That is not the direction of travel I look for in dividends, and I will not be buying SSE.

Christopher Ruane 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.

History shows us that investing in UK shares can be a great way to generate passive income streams. I myself have created a diversified portfolio of dividend stocks to provide a steady flow of income. The beauty is that one doesn’t have to stump up a fortune at the beginning to start creating wealth with income shares either.

Building wealth with £5

Let’s say that I have £5 in change sitting at the bottom of my pocket when I come home. That’s less than a cinema ticket or a good bottle of wine. If invested wisely this small sum could make a huge difference to my wealth levels over the long term.

If I were to put £5 aside regularly I’d have about £152.08 sitting in my piggy bank after one month. Over the space of a year this amount would rise to £1,825. With this sort of handy sum I’d have a wide choice of options to try and create wealth with UK shares. Investing that in stocks with 3.9% dividend yields could make me a yearly passive income of around £71.

Two passive income stocks I’d buy

This clearly wouldn’t be enough on its own to make me financially independent. However, sensible share investing involves taking a long-term view. And by regularly saving and investing that £5 a day over a number of years I could build some huge passive income flows. By sticking to this plan I could turn that £71 annual passive income in year one into £710 by my tenth year of investing.

Of course I can make a higher passive income if I buy dividend stocks with yields above that 3.9% FTSE 100 average. Here are a couple of passive income stocks I’d buy today because of their market-beating yields:

ContourGlobal

ContourGlobal of the FTSE 250 develops, acquires, and runs power plants all over the globe. Like other utilities shares, then, the essential services it provides generate strong and steady cash flows. The key to passive income investing is to find dividend stocks that can pay decent dividends over the long term and not just today. And this particular UK share sits firmly in this stable.

I like ContourGlobal in particular because of its increasing focus on renewable energy. Its a strategy could pay off handsomely as the world moves away from fossil fuels. Profits at the dividend stock could take a significant hit if project delivery issues occur. However, I believe the potential rewards of my owning it far outweigh the risks. The forward dividend yield at ContourGlobal sits at 7.9%.

Admiral Group

FTSE 100-quoted Admiral Group is one of the biggest names in the general insurance business. This makes it one of the go-to brands with British consumers. I also like Admiral’s focus on the car insurance market, a segment which is particularly robust during economic upturns and downturns. Driving with insurance is a legal requirement, after all. This gives Admiral the earnings stability and the confidence to pay big dividends year after year.

Admiral’s yield for 2022 sits at a meaty 7.5%. I’d buy the business despite the threat that weather-related claims pick up considerably due to climate change.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral Group. 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 the recent stock market rout much of my stock portfolio looks like a sea of red. So it is pretty interesting to note one FTSE 100 stock among them that has consistently been making gains. And it is even more fascinating that the stock in question is a cyclical one, which is more likely to dip when a stock market correction happens. 

Partly by virtue of its sheer placement it jumps out at me more than others, since it appears on top of my alphabetically arranged stock investment portfolio. I am talking about Anglo American (LSE: AAL), which has been a huge source of comfort to me at this time!

What can go wrong with this FTSE 100 growth stock

Of course it goes without saying that prolonged geopolitical stress might halt its rise at some point. Why? Because of the economy. Consistently rising inflation, much above trend levels, is bad news and could bring the already fragile growth to a grinding halt. 

Record profits for Anglo American

But that is still a worst case scenario. It is entirely possible that a resolution is found soon enough, though, and global economic growth can continue. I reckon Anglo American can continue to be a great stock for me to have in my portfolio in that case. There are plenty of reasons for that.

A big one is its earnings. The recent commodity price rally has filled miners’ coffers, resulting in record profits for the company. Its earnings per share grew by 310% in 2021. 

Deeply undervalued

Because of this, the FTSE 100 stock’s market multiple as measured by price-to-earnings (P/E) looks exceptionally attractive at 6.4 times. Here, let me offer two data points that provide perspective.

The FTSE 100 as a whole has a P/E of 14 times, which is way higher. In other words, the stock looks very undervalued. Also, a year ago, the company was valued at a much higher multiple of almost 22 times, based on 2020’s earnings. This means that is has also become far more attractive even by its own past standards. 

While we are at multiples, also consider its price-to-sales (P/S), at 1.2 times, lower than that for its FTSE 100 peer Rio Tinto at 2 times and Antofagasta at 2.6 times. I interpret that to mean that even as a growth stock, it is undervalued right now.

The big screaming point here is that no matter how I look at it, Anglo American looks like a good buy to me. With is dividend yield at almost 6%, it is also a great way to beat inflation, which is currently at 5%+ levels. 

What I’d do

Over the course of 2022, I do expect some correction in its financials. This is because commodity prices are unlikely to be what they were in the last couple of years. And dividends could slow down as a result too.

But going by how deeply undervalued it looks, I think it will still make a great long-term buy. I intend to increase my holdings of the FTSE 100 stock now. 

Manika Premsingh owns Anglo American and Rio Tinto. 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.

Creating passive income is very attainable with focus and consistency. Mathematically speaking, even with a small starting sum, a decent, growing passive income can be created. And over time it can snowball because of compounding – when dividends are reinvested to create more income year after year.

Passive income and compounding

There are four main factors at play when it comes to creating a portfolio of investments that will then pay out income. There’s the starting amount, the monthly contribution, the returns percentage, and time. All are important. It’s easier though to control the monthly contribution and amount of time invested than it is to create a bigger starting amount or increase investment returns. So I’d focus on these. 

Really the main thing is to get started as soon as possible because time in the market is a critical component to allow compounding. It’s why Warren Buffett has made so much of his wealth in recent years. The snowball he started rolling many years ago has gathered pace and got bigger and bigger. This is the power of compounding.

My route to creating £1,000 a month passively

To create £1,000 in an average month I calculate that I’d need an investment portfolio equating to around £300,000. If there’s an average yield of 4%, then that’s £12,000 per year.  This is realistic given the FTSE 100 dividend yield average is only a little below 4%, with many shares yielding in excess of 5%. However, bear in mind dividends are not guaranteed and companies do sometimes cut dividends. 

Nonetheless, getting to this amount of money is achievable. If I start with nothing but add £500 a month and earn a return of 8% (so dividends and share price growth combined, known as total return) then it’ll take 23 years to get to £300,000. Upping the contribution to £650 per month but keeping everything else the same would bring it down to under 20 years. Of course, these variables are not guaranteed and can change as the illustrations prove. 

So my route to generating passive income is to invest every month. I’ll invest in UK shares to try and earn a total return at or above 8% a year.

Particularly to make the investing passive, I’ll focus on higher yielding, high-quality shares. Examples of shares meeting this criterion, in my opinion, are Persimmon, Polar Capital, and CMC Markets. I think the current market sell-off has also created some opportunities for buying great companies at cheaper prices. That includes the three companies just mentioned, which are all on reasonable valuations, but also some AIM-listed companies. Boohoo, GB Group, and Numis are all examples fitting this category.

The crux of my plan to create £1,000 a month passively is to invest in UK shares. The present market volatility potentially creates opportunities for long-term investors and I intend to buy more shares over the coming weeks. This will help me to create passive income for the future and build my investment portfolio up to a value of £300,000, or hopefully even more.

Andy Ross owns shares in Persimmon, Polar Capital Holdings and CMC Markets. The Motley Fool UK has recommended Polar Capital Holdings and boohoo group. 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.

After an impressive run from March 2020 to mid-2021, the Royal Mail Group (LSE:RMG) share price dropped. From the most recent high of 590p in June 2021, the Royal Mail share price has fallen 44% to 332p at writing. Some investors blame the combined special and interim dividend of 26.7p. There have also been rising energy prices and high COVID-19-related absences to deal with.

Also, parcel volumes have decreased as people start getting out and about again, and COVID-19 testing kit orders fall. But, given that the Royal Mail stock price is almost half what it was at its peak, I wonder if the shares are now cheap.

Are Royal Mail Group shares cheap?

Royal Mail shares are trading at a trailing 12-month (TTM) price-to-earnings (P/E) ratio of around five. The average P/E ratios across the FTSE All-Share and FTSE 100 are 14.8 and 15.5. Across the freight & logistics industry, of which Royal Mail is part, the average P/E ratio is 15.3. On this measure, Royal Mail shares look cheap. However, the company’s shares are trading at a discount for good reasons.

Selected metrics for companies in the freight & logistics industry and UK indexes

Source: Yahoo Finance

Royal Mail’s five-year average return on equity (6%) and its five-year compound annual sales growth (6.4%) are below the average for its industry (29.6% and 7.7%). The company’s normalised compound annual earnings growth is lower than the average for its industry and indexes. Royal Mail does offer an above-average dividend yield of 4.7%.

Can Royal Mail Group deliver for shareholders?

Royal Mail collects, sorts, and delivers parcels and letters to UK addresses. Parcelforce handles express parcel deliveries. General Logistics Systems (GLS) handles the group’s European and North American operations. It has a monopoly position on letters in the UK. However, the addressed mail business is in decline.

Parcels are where the growth is, and there is evidence that Royal Mail is handling the shift to parcels, which now account for 72% of its revenues, successfully. The average revenue per parcel grew from £2.82 in the first quarter of 2019 to £3.16 in the third quarter of 2021. GLS also eeked its revenue per parcel from £4.75 to £4.77 over the same period on a constant currency basis. Overall, group operating margins increased from 2.26% in 2020 to 5.76% in 2021, and on a trailing 12-month basis, they are 8.74%. That is encouraging given Royal Mail accounts for 67% of group revenues and has a high fixed cost structure, compared to competitors, and indeed GLS. The fixed costs are mainly staffing. An upcoming pay deal with one of its largest unions will probably raise those fixed costs this year, although laying off 700 middle managers as planned will partially offset this.

On balance, Royal Mail Group is making good progress in transitioning to parcels but has to maintain its parcels market share for this improvement to carry over to the share price. Amazon is the biggest threat to Royal Mail Group’s dominant position in the UK parcels market. According to Statista, Royal Mail had about 34% of the market in 2020 compared to Amazon’s 15%. Betting against Amazon does not typically go well. However, I think that Amazon will take market share from the smaller competitors first. So, for the moment, at least, I do think Royal Mail Group shares look cheap, and I hold them in my Stocks and Shares ISA.

James J. McCombie owns shares in Royal Mail Group. 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.

Hunting down deep-value stocks at present may seem like an easy exercise. If I look across various different industries at the moment, there are many shares that have fallen on hard times. Scottish Mortgage Investment Trust, Ocado, boohoo and many other growth stocks have fallen significantly over the last six months.

However, just because a stock looks cheap relative to its all-time high share price does not mean that it is necessarily a bargain. Indeed, as I have argued elsewhere, Scottish Mortgage and boohoo still look relatively expensive in the present environment.

Identifying deep-value stocks

The key to identifying which sectors represent the greatest value at the moment, one has to have an appreciation of the wider economic forces that are playing out among developed economies.

For the first time in four decades, inflation is beginning to rear its ugly head. Anybody under the age of 50 will have no real inkling what runaway inflation can mean for the economy, let alone an investor’s portfolio.

Buying the dip, the mantra of retail investors over the last couple of years, has been a profitable strategy to employ. But that was then and this is now.

Today, the cost of capital is beginning to creep up. That matters to companies with bloated balance sheets that have borrowed heavily to fund their growth. It matters to the mega-cap tech stocks in the US that will find it hard to justify their lofty valuations. It also matters to bank stocks too. None of these sectors look cheap to me.

The deep-value opportunity at the moment is in precious metals. Gold is now near an all-time high at over $2,000 an ounce. The last time it reached that price in 2020, gold mining stocks were significantly higher than they are today. If I exclude Polymetal, which is down 90% due to its Russian connections, the likes of Centamin and Hochschild Mining are half the value they were back then.

My top pick

Although gold is flying, its cheaper cousin, silver, has only seen modest rises. At the moment it is trading at $26 an ounce. In the last bull market for precious metals in 2011, gold reached $1,800 and silver, $50. A more comparable set up in relation to today (with high inflation) was 1980. There, silver topped at $50. This implies that silver has some catching up to do.

Fresnillo (LSE: FRES) the world’s largest primary silver miner is set to benefit from any explosive increase in the price of silver. Its all-in sustaining cost (AISC) for silver for 2021 was $15.6. Given that its total production of silver for the year was 53moz, that helped to contribute to an EBITDA margin of 45%.

Set against these impressive margins, the company is still facing significant headwinds. The labour reforms in Mexico have restricted its ability to subcontract labour. This has resulted in a surge in vacancies and a higher workforce turnover. The ability to attract and retain a highly skilled labour force is absolutely critical to any miner. In addition, wage price inflation is hurting the business too.

However, I remain convinced that the price of silver is heading upward over the coming decade and have been adding to my position in the company while the share price remains at low levels relative to its future growth prospects.

Andrew Mackie owns Centamin plc and Fresnillo. The Motley Fool UK has recommended Fresnillo. 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.

Since the Russian invasion of Ukraine, Russian stocks have been plunging. Shares in companies such as Evraz and Polymetal International have fallen sharply over the last week or so. I’m not looking for opportunities in Russian stocks right now, though. There are two reasons for this. The first is that I think that the risk in Russian stocks outweighs the reward. The second is that I think that the best UK dividend stocks right now are better opportunities for me.

The risks of Russian stocks

The danger with Russian stocks, as I see it, isn’t that the underlying businesses might underperform. That’s certainly a possibility, but it’s a possibility with any stock investment. And while I accept that sanctions, currency inflation, and the geopolitical situation more generally might exacerbate this risk in the case of Russian stocks, I think that the sharp drop in price offsets this. 

In other words, as a straightforward investment, I like the returns that Russian stocks are offering relative to their business risk. The trouble is, there’s another risk. The real risk with Russian stocks is that I might not be able to realise the gains on my investment. This might not happen and it might turn out that I’m missing the bargain of a lifetime. But I don’t see the risk as worth it from an investment perspective.

One risk is that the London Stock Exchange might delist Russian stocks or prevent trading in them. Another is the possibility of the Russian central bank banning dividends being paid to foreign investors. Either of these risks threatens my ability to realise the gains on my investment.

UK dividend stocks

Russian stocks might seem attractive because of their high dividends and low prices. But I think there are some opportunities for high yields at decent prices in the UK market at the moment. The Russian invasion of Ukraine has exacerbated the problem of inflation and heightened the risk of interest rate rises. UK stocks have reacted negatively. This has resulted in some opportunities right now in UK dividend stocks that I like the look of from an investment perspective.

One company that I own in my portfolio is Legal & General. I’ve been thinking of adding to this over the last few weeks, as the share price has struggled. I view Legal & General as one of the best UK dividend stocks on the market. I first invested in the company during the pandemic and have been waiting for an opportunity to invest further. This might be it. 

A second company that’s been catching my eye is Games Workshop. This isn’t an obvious choice for investors looking for dividends, but I view this as a great company and it’s rare to see it trading at its current valuation. So Games Workshop has also been attracting my attention. 

Russian stocks have been hit hard. But the risks, for me, outweigh the rewards and I do think that market volatility is creating opportunities in UK dividend stocks right now. As a result, I’m looking for opportunities closer to home.

Stephen Wright owns Legal & General shares. The Motley Fool UK has recommended Games Workshop. 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.