#1. Severn Trent: generating steady passive income

Building up a stream of passive income is the most direct way of ensuring regular inflows without as much as lifting a finger. The good news is that many FTSE 100 shares have started paying dividends again. And there are others that will re-start them soon enough. 

In other words, investors have plenty of choice when it comes to buying dividend stocks. 

While it’s a good idea to diversify even among income stocks — especially considering that we are just coming out of a time when many FTSE 100 companies cancelled dividends — there’s one stock I’d like to buy in particular. 

That is water and sewerage services provider Severn Trent, which has a dividend yield of 4.2%. As a utility, I like that it has predictable demand. Its financial performance is also robust. Both put together encourage me to believe that its dividends are more reliable than those of many other FTSE 100 stocks. 

You might  be put off by its high earnings ratio of almost 50 times. I would argue that it is a reasonable premium for a safe growth and income stock. I doubt that its share price will decline sustainably from here. 

#2. JD Sports Fashion: the FTSE 100 king of performance

Besides earning a passive income, another way of gaining financial freedom is by investing in high-growth stocks.

One growth stock I’ve long liked is JD Sports Fashion. There are others too, but I want to make a special mention of JD today because it’s the biggest FTSE 100 gainer today after its robust update. 

Even though 2020 has been a tough year for retailers, JD, with the catchphrase “Undisputed king of trainers”, expects healthy profits, buoyed by online demand and the growing popularity of athleisure products. 

#3. IAG: dirt cheap, high potential

Finally, there’s also another kind of growth stock to consider — the kind that has suffered in the pandemic. Its prospects may not look as definite as those of JD, but I think its current prices are so low that there’s great potential for gains over time. 

A god FTSE 100 example is the aviation company International Consolidated Airlines Group (IAG). Its share price has already nearly doubled once in 2020, between September and November, as the vaccine news came in. 

With the UK in lockdown again, there’s undoubtedly more pain in store for the owner of British Airways. However, I am a believer in the potential for a huge bounce back in aviation over the next couple of years. I reckon the likes of IAG and easyJet could look like savvy investments in hindsight. 

The post 3 FTSE 100 shares I’d buy to achieve financial freedom appeared first on The Twelfth Magpie.

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Manika Premsingh owns shares of easyJet and JD Sports Fashion. 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.

As an example of its wealth-generating power, imagine investing £100 every month for the next 40 years. Based on a 7% average annual return, you’d have a little under £240,000 at the end thanks just the simple practice of earning interest on interest.

Of course, if 40 years sounds like too long to wait, you’ll need to save more. Increasing that £100 by another £100 a month will give you almost £227,000 at the same rate of return. Importantly, however, this will be achieved in 30 rather than 40 years.  

With this in mind, here are three things that could help get you to financial freedom earlier.

1. Pay yourself first

This first move is simple but powerful. Rather than cross your fingers and wait to see how much money you’ve left at the end of the month, get into the habit of transferring money into your Stocks and Shares ISA on payday. 

Better still, set up a direct debit to automate the process, thus ensuring you’re not tempted to go back on your decision to save and instead splurge the money on things you don’t need.

Viewing saving as a typical monthly outgoing — in the same way that you would a council tax or phone bill — may be hard at first. After a few months, you won’t even question it.

2. Create multiple income streams

Having multiple income streams is a great idea, particularly if your main source of income lacks long-term security.

Unless you earn the salary of a professional footballer, it’s also essential if you’re to quit the rat race earlier than everyone else. 

These streams can be anything from renting out a spare room, selling stuff on eBay (Etsy if you’re of an artistic bent) or tutoring someone, perhaps in a subject you’re passionate about or studied at college or university. The point is to start small and save everything you earn to invest. And once you’ve got a second income stream, find a third.

While this process will inevitably involve sacrificing time away from other pursuits, it will also help you realise where you might be wasting your waking hours. Binge-watching yet another (very average) box set on Netflix won’t get you rich, after all.

Remember – the more money you can squirrel away sooner, the quicker you’ll reach your financial goals. Speaking of which…

3. Get a grip on your goals

Investing even a little is clearly better than not investing at all. But investing with absolutely no plan means you’ll never know when you’ve got enough. 

“I want to become financially independent,” you cry! Well, that’s fine. But what exactly does financial independence look like to you?

If we assume it’s the sort of freedom that allows you to quit work completely, you’ll need to have an idea of how much your new lifestyle will cost and whether the income you receive through your investments — in the form of dividends — will be sufficient to pay for it. 

So, grab a pen and some paper and spend a while thinking about what you want to do, and when and how much money you’ll need to do it.

While a few goals will naturally change over time, it’s far more motivating to have some in mind than none at all. 

The post 3 smart money moves that will help you become financially independent sooner appeared first on The Twelfth Magpie.

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Paul Summers 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.

Thing is, that level of freedom — a.k.a. financial independence — could be achieved by many of us. We either don’t know it or opt not to believe it. 

It requires sacrifices, of course. That daily coffee, expensive holiday, brand new TV… the more you spend, the less you can invest.

To reach financial independence quickly, however, you also need to pick stocks delivering high levels of growth. Here are some examples I like. 

High-growth stars

Keystone Law (LSE: KEYS) has made many friends since coming to the market. The legal company’s share price is now well over 150% higher than back in November 2017.

With a market cap of just £150m, I think there’s room for it to go even higher. 

Back in January, the company announced that it had “continued to trade strongly” in H2 and that it was likely that profits would be “comfortably ahead of current market expectations”.

Confirmation of this is expected on 8 May. Regardless of how the market reacts in the short term (some profit-taking might ensue), I think this is one company that should definitely be on growth-focused Fools’ radars.

Ongoing investment in its infrastructure and ability to attract new lawyers and clients should allow it to continue grabbing share from other mid-market law firms going forwards. 

My next pick is robotic process automation specialist Blue Prism (LSE: PRSM) – a company I bought a stake in not long after it listed.

It’s clear that the AIM-listed company’s software solutions — which help perform boring, repetitive tasks previously undertaken by a human (freeing the latter to do something more worthwhile) — are proving exceedingly popular. Revenue was £55.2m in FY18 — up 125%. 

But it’s not just about the amount of time that companies are able to save. Blue Prism’s ‘robots’ never get sick, never need holidays and, let’s be honest, never complain. 

With firms such as Coca Cola and Lloyds Bank already reaping the benefits of using its services, I continue to think this company will thrive.

Investment platform AJ Bell (LSE: AJB) is my final pick of stocks that I think will go from strength to strength.

The Salford-based business is one of the few IPO success stories in recent times with shares now trading for almost double the price they were back in December.

With interest rates on savings likely to remain low, it’s unsurprising that AJ Bell has more people signing up to its services and investing their money to generate better returns.

Total customer numbers increased 5% (to almost 215,000) in the three months to the end of March. Total assets under administration also climbed 8% to £47.7bn. 

Interim results are due next month with the company predicting its financial performance will be “slightly ahead of current market expectations”.

Warning!

Nothing is guaranteed in investing. That’s why it’s vital to mention that all of the above trade on lofty valuations, making them arguably more risky to hold given that high expectations are easily dashed.

Keystone and AJ Bell trade on 40 and 58 times earnings respectively. Blue Prism doesn’t make a profit but is still valued at £1.5bn.

So, while I rate all three (and own stock in one), that’s not to say I wouldn’t prefer to wait for another general market wobble before buying.

The post Dreaming of financial independence? I think these 3 growth stocks are just getting started appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Blue Prism. 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.

But as far as AIM-listed floor product manufacturer and distributor James Halstead (LSE: JHD) is concerned, I’d argue this simply isn’t the case. 

While I don’t see this situation changing anytime soon (retail investors have a habit of gravitating to exciting ‘story’ stocks over profitable plodders), today’s positive interim numbers were more evidence that the firm is continuing to deliver for those that are aware of its existence. 

Quality stock

At £126m, revenue was unchanged over the six months to the end of December compared to the same period a year ago. Pre-tax profit came in 3.3% higher to £24.5m, leading CEO Mark Halstead to say the company had experienced a “satisfying first half“.  

There was more positive news for shareholders as far as dividends were concerned with the interim payout raised to a record 4p per share.

Before this morning, analysts had penciled in a cash return of 14.5p in the current financial year, which would represent a 7% increase on that returned in 2017/18. Based on the share price at the time of writing (450p), that equates to a yield of 3.2%.

That may not seem great in comparison to some of the high-yielding stocks that can be found elsewhere in the market, but I’d argue that Halstead’s long history of successive hikes to its cash returns is more important for those looking to secure financial independence through their investments.

Indeed, research has shown that those companies offering relatively low but consistently rising dividends tend to outperform those whose payouts, while large, hardly budge and are barely covered by profits.

Other things that attract me to James Halstead include a net cash position of £62.8m and the fact that it remains a family-run firm. The latter reassures me that management’s interests should continue to align with those of shareholders. 

At almost 24 times earnings forward earnings, it’s clear the £930m-cap won’t appeal to committed value investors. Nevertheless, I wouldn’t dismiss the stock simply because it trades on a high multiple. Sometimes, it’s worth paying up to acquire the best stocks for your portfolio. 

Powering back to form

Another company that has strongly rewarded shareholders over the long term but remains fairly unknown is critical power solutions provider XP Power (LSE: XPP).

The stock was out of favour during the second half of 2018 on concerns over a temporary shortage of components needed by the company. But recent news suggests that a recovery might now be on.

In its latest set of full-year numbers (released earlier this month), XP revealed 17% rises in revenue and pre-tax profit to £195.1m and £37.6m, respectively. 

Perhaps more importantly, chairman James Peters said the company was “encouraged” by its start to the new financial year alongside its “healthy order book.“

Although weighted to the second half and supported by a recent acquisition, the firm predicts that revenue will continue growing in 2019. 

Despite bouncing back to form in recent weeks off the back of this, XPP’s shares still look cheap on 13 times earnings and come with a secure 3.7% yield.

I’m so confident the company will fully regain its mojo in time, I’ve added it to my own ISA portfolio in March. 

The post 2 unknown but brilliant stocks I think could help you achieve financial independence appeared first on The Twelfth Magpie.

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Paul Summers owns shares in XP Power. The Motley Fool UK has recommended XP Power. 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.

Despite the overwhelming odds against winning the jackpot (45,057,474 to 1), millions of people still play the game habitually. Today, I’ll show you a far more likely way of achieving financial freedom, albeit one that requires patience.

Losing bet

Now, don’t for one minute think I’m knocking those that consider the lottery a harmless bit of fun (as opposed to those who genuinely believe it will be their path to riches). For many people, the mere possibility of winning is enjoyable enough.

However, quite aside from the fact that grabbing the jackpot appears to be more trouble than it’s worth (considering the number of lucky people who’ve gone on to experience a host of problems after picking the right numbers in the draw), it’s worth remembering that the cost of doing so adds up over time. 

A single line in the main Lotto draw costs £2. Let’s say you regularly pick fives lines of numbers when entering. Now let’s assume that you do this twice a week. That’s £20 a week or £1,040 a year. The latter could buy you a nice holiday or a high-end TV.

Let’s take things to the extreme. The National Lottery has been around for 25 years. Let’s say you play for the next 25 years and there’s no increase to the cost of doing so. That’s £26,000 exactly.

Better odds

It won’t surprise you to know that I think there’s a better use for this cash. What’s more, the probability of success is far higher.

Forget what you’ve heard about the stock market being a dangerous place. Over the long term (think decades), stocks are the best performing asset around.

Let’s go back to that example. Instead of using £80 to play the lottery every month, what would happen if you invested this amount and it earned 7% annually (based on the historical performance of the market). Here, you’d end up with a little under £61,000 by 2044.

So, that’s £61,000 vs £0 (if you won nothing, which is likely). Don’t forget, we’re only talking about money you would use for the lottery, not including anything else you might be able to save over the years. 

This is just a hypothetical example, of course. Your return clearly depends on something we can’t predict with absolute accuracy (like the behaviour of the markets). Moreover, it also rests on what sort of strategy you adopt, which in turn should take into account your risk tolerance and how much time you’re willing to keep your money invested.

For younger people, a higher weighting in growth-focused businesses could be the way to go. For those with more moderate risk appetite and/or closer to retirement, strong and stable dividend-paying stocks might be appropriate.

Just remember that whatever investing style you adopt will require patience and a willingness not to meddle. That’s easy to say but it’s actually much harder to do in practice. As experienced Foolish investors know, learning to sit on your hands is a skill that tends to be developed over time. 

In sum, probability suggests that playing the National Lottery religiously is not the best use of your cash. If you’re serious about growing wealthy, I’d ditch the bi-weekly draw.

It ‘could be you’…but it probably won’t be. 

The post Still gambling on the National Lottery? Here’s a far more likely route to riches appeared first on The Twelfth Magpie.

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Paul Summers 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.

In this article, I’m going to explain how I would build that second income stream from stocks and use this income stream to retire comfortably.

Setting the target

The first step is to work out how much income you need. This will vary from person to person. But for this article, I’m going to use the UK’s current median weekly wage of £569, or £29,598 a year, according to the Office for National Statistics. For simplicity, I’m going to round the number up to £30,000 a year. Assuming a 4% yield, I calculate you will need a starting pot of £750,000 to achieve this level of passive income.

For investors just starting on their second income journey, this goal might be a bit unrealistic. So, I’ve tailored the advice below in a way that’s suitable for investors of all experiences and levels of wealth. 

No matter how much money you have to start with, the template below can help you achieve a second income.

Building the pot

As we’re trying to achieve a steady, predictable income stream, I think it’s best to pick blue-chip dividend stocks, companies like Royal Dutch Shell, BP, HSBC, and British American Tobacco. Also, I think a simple FTSE 100 tracker fund will complement this selection of blue-chips perfectly. Together, these slow and steady income stocks should produce a yield on your investment of between 4.5% and 6%.

If you want to build a steady income stream for life, equities are by far the best way because company dividends are usually increased every year. This means your income will rise steadily with inflation, so the purchasing power of your money will be preserved.

I also think if you’re looking to build a second income stream, a small percentage of your portfolio should be in bonds. Bonds don’t have the same attractive qualities as equities, but when it comes to predictable income, they’re unrivalled. If you use a low-cost bond fund get access to this asset class, today you can get a yield of between 3% and 5% on your money.

Lastly, I would recommend including a small number of mid-cap stocks in your income portfolio. 

I think it’s always important to have some mid-caps in a portfolio because they generally have a much higher potential for dividend increases and capital growth. The average dividend yield from these investments is usually lower, but dividend growth over the long term more than offsets the low initial yield. You can probably get a dividend yield of between 2% and 3% without taking on too much risk.

Asset allocation 

When combined, blue-chip stocks, bonds and mid-caps can give you a hands-free income for life. 

Personally, I use an allocation of 70% towards dividend-paying blue chips, 20% towards bonds and 10% towards growth stocks. I calculate this gives me an annual yield on my money of 4.6% from a portfolio that should continue to generate returns in all environments. 

That’s the strategy I recommend if you are interested in building a second income stream.

The post Interested in a second income stream? Here’s how I would build one appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in Royal Dutch Shell and British American Tobacco. The Motley Fool UK has recommended HSBC Holdings. 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.

One company that has served early investors — including myself — particularly well over the last year or so has been advanced materials engineer Versarien (LSE: VRS).

Based on today’s interim report, I’m in no hurry to sell just yet.

Collaboration crazy

Befitting its high-growth credentials and need for ongoing investment, Versarien reported a pre-tax loss of £0.7m over the six months to the end of September, despite revenue increasing 19% to £5.22m. Nevertheless, it’s the operational progress made by the company that’s of more interest to the market right now. 

Continuing a trend that began roughly one year ago, Versarien inked nine new collaboration agreements over the reporting period, as well as capturing the services of Matt Walker and Pete Jay from the Department of International Trade to spearhead the company’s international ambitions.

Highlights since September include the purchase of a controlling stake in Spanish company Gnanomat and the Memorandum of Understanding signings with three Chinese firms — one of which relates to plans to build a manufacturing centre in Shandong Province.

Reflecting on the latter, CEO Neill Ricketts stated that the company’s expansion into China has “attracted a large number of suitors” and that Versarien intended to replicate the process “in other Asian territories“.  These developments, when combined with the £5.15m raised back in September, leaves the company “extremely well positioned for the future“, Mr Ricketts added. 

And Versarien is very much about the future. To be clear, a substantial proportion of the company’s current valuation is based on the potential for graphene to revolutionise our world. As such, it’s therefore absolutely vital that at least some of the firm’s many ongoing collaborations lead to substantial orders to justify the already-lofty market capitalisation of £175m. On this front, things are looking positive. 

Last month, it received an order for 1kg of Nanene — its patented graphene nano platelets — from a major global airline with the intention of using the product in fire-retardant aircraft interior parts. Encouragingly, more orders are “anticipated“.

But there’s more. Today, Versarien also announced that US engineering giant AECOM had placed an order for 50kg of graphene-enhanced polymer material with another 200kg order likely in early January. Should final testing be successful, the next bit of news relating to this project could be very significant indeed. 

Bottom line

Clearly, there’s still a long way to go for the Cheltenham-based business to silence its doubters. Nevertheless, if you believe (as I do) that the mass-market adoption of graphene is only a matter of time, then it is arguably the best horse to back. The fact that its stock still trading almost 40% below the high of 187p achieved almost three months ago suggests that now might be as good a time as any to begin building a position.

If — and it is a sizeable ‘if’ — Versarien is able to capitalise on its pole position in the commercialisation of the wonder material, then I maintain it could help some investors reach financial independence far earlier than they ever imagined.

The post Why I think small-cap growth stock Versarien could still help you achieve financial independence appeared first on The Twelfth Magpie.

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• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
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Paul Summers owns shares in Versarien. 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.

A series of licencing deals with international retail giants have seen loyal holders rewarded with a 350% rise in the share price between late November and late July, helped by a squeeze on short sellers — those who questioned its ability to ever come good and bet that its value would eventually fall. 

This makes today’s Q3 trading update from the Hatfield-based company — covering the 13 weeks to 2 September — all the more fascinating to read.

The robots are here

The £6.2bn cap saw retail revenue rising 11.5% to £348.6m compared to the same three months in 2017.  This was in line with guidance, albeit slightly down on the 11.7% achieved over the first half of the current financial year. 

The average number of orders received per week by the company rose by almost exactly the same percentage to 283,000, with the average value of baskets pretty much identical to that reported from the last Q3 (£106.26). Since the latter has been gradually falling over recent years, this is actually quite encouraging. 

The only other numbers released by the company today related to its balance sheet. Supported by recent placings, Ocado had cash (and equivalents) of £406.1m and borrowings of £281.2m at the start of September.

In addition to these numbers, the market was also treated to an update on the company’s new Customer Fulfilment Centres (or robotic warehouses) at Andover and Erith. The second of these, due to be “the largest automated warehouse for online grocery in the world” when running at full capacity, processed more than 20,000 orders last week, just 14 weeks after opening.

Still speculative

Since last looking at the stock in July — and voicing my concern on its rapidly-approaching-ridiculous valuation based on conventional metrics — it had fallen roughly 17% before today. Clearly, the positive reaction to today’s news will address this somewhat. Nevertheless, I remain wary.

With regard to its licencing deals, the company remained fairly tight-lipped, merely stating that it was “on track to deliver a significant number of new CFCs” for its partners in the years ahead. If I were a holder, I can’t help but think I’d want a bit more information, particularly as so much of the support surrounding the share price rests on these deals.

The fact that CEO Tim Steiner recently relinquished almost 10 million shares for a sum of over £100m is also something of a red flag in my book. Although management disposes of stock for a wide variety of reasons, a sale of this magnitude suggests that even he thinks Ocado’s share price may have peaked for now. In addition to this, the fact that only 2.5% of Ocado’s stock is now being borrowed and sold implies that the days of short sellers running to the hills are very much over.

All this isn’t necessarily problematic if Ocado takes up only a very modest proportion of your portfolio, if you are sufficiently diversified elsewhere and have time on your side.  

However, even if it does deliver on its commitment to change the grocery retail landscape, I still think there are simply far less speculative stocks offering greater value (not to mention seemingly secure dividend streams) elsewhere in the market’s top tier.

The post Can growth stock Ocado still help you achieve financial independence? appeared first on The Twelfth Magpie.

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Paul Summers 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.

While this increase means that the firm now trades on a rather off-putting valuation of 31 times expected earnings for 2018, I still think the stock warrants attention from growth investors keen on achieving financial independence, especially after today’s positive interim update.

Strong order book

Group revenue climbed 12% to a record £37.9m in the six months to the end of June. At constant currency, this rise equated to a 17% improvement on the same period in 2017.

The above included a 4% increase in revenue from its Polyolefin Foams, thanks in part to the firm’s decision to increase capacity at its base in Kentucky, USA.

Even more impressive were sales figures relating to Zotefoams’s High-Performance Products. These jumped 82% over the period and now contribute 24% of total sales, compared to 15% a year ago. 

Collectively, this trading helped the company register a 64% jump in pre-tax profit to £4.6m.

Continuing the trend of consistent-if-modest dividend hikes, Zotefoams also announced a 3.1% increase to its interim payout this morning (to 1.97p per share). While the forecast 1.1% is hardly tempting, modest dividend increases are more preferable in my book to high yields that can’t be maintained.  

Ultimately, however, Zotefoams remains focused on becoming a far bigger beast. With three projects to expand capacity running to plan, CEO David Stirling stated that the company had commenced H2 with “a strong order book, a differentiated product portfolio and continued growth expectations across all business units“.

Returning to the valuation, it’s true that a lot of growth already appears priced in. Nevertheless, a P/E of 26 in 2019 — assuming expectations are met — looks far more palatable. This being the case, I wouldn’t blame growth hunters from keeping the firm on their watchlists.

Long-term hold? 

Also reporting half-year results this morning was actuator manufacturer and flow control company Rotork (LSE: ROR). Like Zotefoams, the £3bn cap’s shares have been on a roll, rising 52% over the last year and today’s positive numbers were — perhaps inevitably — also greeted with a drop in the stock price.

Revenue rose 14.8% to £331m over the six months to the end of June while pre-tax profit climbed 17.2% to £54.7m. Another reliable dividend-hiker, Rotork declared a 7.3% rise to its interim payout (2.2p per share). 

CEO Kevin Hostetler reflected that the company had witnessed “a continuation of the more favourable market trends” seen in Q4 of the previous financial year and had also received “several large orders” during Q1, contributing to a 13.3% rise in order intake over H1. Rotork expects “high single-digit” growth for the full-year and adjusted operating margins to be “slightly ahead” of those achieved in 2017.

Since the aforementioned orders was already known by the market, today’s fall smacks of profit-taking. That said, the announcement that an investment programme in areas such as service infrastructure and IT has been initiated might have also contributed, particularly as the amount of cash dedicated to this “will continue to increase through the year”.

Based on analyst projections, Rotork’s shares change hands on a punchy 28 times earnings following today’s fall. So long as your time horizon runs to years rather than weeks, I see no reason to jettison the stock as things stand.  

The post These growth stars could still help you achieve financial independence appeared first on The Twelfth Magpie.

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Paul Summers 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.

Here are three financially savvy alternatives to make the most of these funds.

Get out of debt

According to the latest figures from the Office of National Statistics, UK household finances are in a worse state than at any time in history. Last year, UK households took out nearly £80bn in loans (the most in a decade) and deposited just £37bn with banks. These numbers are concerning. Once you get into debt, it can be challenging to get out. High-interest charges can quickly turn a small loan or credit card spend into an unaffordable liability.

So, if you have debt and suddenly come into money, the best thing you can do is pay at least a portion of this debt off. 

With the average interest rate on savings accounts less than 1% and the average interest rate on short-term credit in the double-digits, paying off any debt before saving is the most financially responsible decision.

Use government incentives

If you don’t have any debt, saving a £500 windfall is the next best option. Today there are at least two major government initiatives to encourage saving, both of which offer cash bonuses.

My Foolish colleague Edward Sheldon recommends opening a Lifetime ISA product, which comes with a 25% government bonus on cash deposited, which means your £500 deposit will become £625.

A similar offer is available with self-invested personal pension plans, or SIPPs. These products offer a 20% bonus on your cash. Assets held within both LISAs and SIPPs are not subject to tax, so that is an additional benefit.

The one drawback is that you cannot take funds out whenever you wish. SIPP savings can only be withdrawn after 55, and LISA savings have to be used to buy a first property or boost retirement savings (and cannot be used until age 60 in that case). Still, in my opinion, the extra cash reward far outweighs these drawbacks.

Invest in yourself

Another option is to use this money to invest in yourself. Spending your £500 on courses or books about personal finance or investing may produce a much higher return over the long term than just putting the money away on a savings account. 

The monetary benefits from these actions may not be clear immediately, but don’t let this put you off. Investing in yourself can yield enormous benefits over time. You could master a new skill to help you earn additional income or learn about the intricacies of the stock market.

Personally, my best investment ever was the £15 purchase of Benjamin Graham’s book the Intelligent Investor. Thanks to the knowledge contained in this book, I have been able to build a career out of investing. Put simply, the best investments are not always monetary.

The post 3 financially savvy things you could do with £500 right now appeared first on The Twelfth Magpie.

More reading

• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Rupert Hargreaves owns no share 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.