After a hot July for some stocks, my focus is already starting to move towards August. Here are a couple of FTSE shares I am considering adding to my portfolio during the month.
Assura
Healthcare property landlord Assura (LSE: AGR) has several things going for it as far as I can see.
The long-term demand for healthcare is likely to be resilient, which means lots of buildings such as GP surgeries and ambulance depots are still needed. The sorts of tenants that rent those premises often do so for decades on end and can be relied upon to pay their bills. That compares favourably to the scrappier end of the commercial property market.
That helps Assura to generate substantial and fairly predictable cash flows, which in turn can fund dividends. At the moment, the dividend yield on offer is 4.4%. I think that is attractive. I also like the group’s valuation. Its price-to-earnings ratio of 12 looks like fair value to me for a quality business.
What could happen to change my analysis? One risk I see is the political risk of price capping for service providers to the NHS. Even without that, the politically sensitive nature of the sector could limit the profits to be made. But Assura’s large and growing estate looks set to be a long-term money spinner to me. That is why I would consider adding the shares to my portfolio.
Dunelm
Like Assura, Dunelm (LSE: DNLM) is a member of the FTSE 250 index. But unlike Assura, its name is known to millions of people as it has a nationwide chain of homeware stores.
Is now a good time to be in homewares, given the risk that consumer belt tightening could mean less money is spent on home decoration? Obviously some investors are sceptical. That risk helps explain why the shares have plummeted 35% over the past year.
But I think a recession may actually turn out to help sales at Dunelm. It stocks a wide range of items including some at low prices could help it attract new shoppers. Inflation may eat into profit margins, although for now at least the business seems confident it can manage rising prices without hurting profitability.
The shares yield 4%. The dividend is comfortably covered and the company balance sheet looks healthy to me. At the time of its interim results, the company was sitting on net cash of £48m. Free cash flow of £106m in the first half underlined what I see as the attractiveness of Dunelm’s business model. I own the shares in my portfolio and would consider buying more in August.
Buying FTSE shares this summer to hold for years
Both of these FTSE 250 shares strike me as attractive options to add to my portfolio for the long term.
I expect more economic doom and gloom may emerge over the summer, which could offer me an even lower price to buy these two shares. But I already think they offer me attractive long-term value. I like their cash generative business models and would happily buy both.
