July’s UK consumer price index (CPI) came in hotter than expected at 10.1%. This is a 40-year high and has the potential to drive share prices further down as consumers struggle with a cost of living crisis. So, here are five shares I’m considering buying.

Lloyds

As the UK’s biggest lender, I believe Lloyds (LSE: LLOY) shares are a sound choice for my portfolio. It earns its money from the difference in providing and earning interest from loans. This is otherwise known as net interest income.

Interest rates are expected to go as high as 3% by 2024 as the Bank of England tries to combat inflation. As a result, the high street bank should get a top-line boost from higher lending costs, while benefiting from lower interest paid to customers. With enough cash to set aside for bad loan provisions, Lloyds doesn’t need to increase its savings rate to bring in more cash, thus allowing it to increase its profits. This was evident in the company’s latest half-year results, which saw it recording excellent numbers.

It’s worth noting, however, that the majority of its income stems from mortgages. With house prices and mortgage approvals starting to decline, it remains a possibility that Lloyds’ revenue could be impacted. Nonetheless, analysts think that the increase in rates should offset any declines for the time being. In fact, Lloyds stock is rated a buy as its dividend is also expected to increase. It has an average price target of 64.33p, or a 40% upside.

SSE

Energy prices have been the main culprit behind sky-high inflation. That’s because energy prices are at their highest levels since 2009. As such, I think SSE (LSE: SSE) is a share to buy for my portfolio given the circumstances.

When wholesale energy prices go up, energy suppliers increases their rates to cover the extra costs. This has allowed companies like SSE to benefit, with its top and bottom lines seeing modest increases. As a matter of fact, its profit and loss account saw its best numbers in FY22, which is why its shares are up 9% this year.

The latest inflation report shows that energy prices rose 3% on a month-on-month basis. And with a higher price cap expected in October, SSE should benefit from this. After all, its latest trading update indicates that it expects adjusted earnings per share (EPS) of at least £1.20 for FY23. This would bring its EPS to its highest level in five years.

Additionally, its dividend yield of 4.7% is rather modest and is expected to rise given its most recent increase in payout, from 25.5p to 60.2p. SSE shares are rated a moderate buy with an average price target of £20.78.

Unilever

Next on my list is Unilever (LSE: ULVR). Its share price has been rather volatile this year. Nevertheless, it has recovered by 5% since its reported its H1 numbers. Its shares are now only down by 1% on a year-to-date basis.

The fast-moving consumer goods conglomerate produces beauty products and personal care, foods and cleaning agents. Its brands include Lynx, Ben & Jerry’s, Dove, and many more. These are household names and have tremendous pricing power, given the inelastic demand surrounding most of its products. This is strongly reflected in the revised outlook given by CEO Alan Jope, when he improved the firm’s guidance.

Our guidance for underlying sales growth in 2022 was previously at the top end of a range of 4.5% to 6.5%. We now expect underlying sales growth to be above that range, driven by price with some further pressure on volume.

Unilever CEO Alan Jope

Nevertheless, it should be noted that Unilever shares are more of a defensive play to protect from potential downside at the moment. Analysts are forecasting an average price target of £40.81, which only means a potential 3% gain if I were to buy shares now.

Burberry

Burberry (LSE: BRBY) shares are a good inflation hedge, in my opinion. The brand’s status as a luxury retailer allows it to pass on many of its costs to consumers given the nature of its target market. This was confirmed by CFO Julie Brown in its Q1 trading update, with a positive outlook for the company.

The FTSE 100 retailer has benefited from the return of global travel, with a substantial amount of its sales coming from tourists. It saw its like-for-like sales numbers grow by 1% on an annual basis, despite lockdowns in key revenue driver, China. Excluding China, sales figures were actually rather impressive. They were 16% higher in Q1 overall, with EMEIA boasting impressive 47% growth. Moreover, the company’s most profitable products (leather goods and outerwear) also saw double-digit growth.

That being said, I should point out that China remains the firm’s achilles heel for the moment. With its government sticking to its zero-Covid policy, I don’t expect sales figures from that region to see an uptick any time soon. This is why its average price target currently sits at £19.34. Therefore, this is more of a long-term investment with a higher upside once China’s retail sales fully recovers.

Tesco

Last on my shopping list are Tesco shares (LSE: TSCO). Given that its core products are consumer staples, I’m expecting Tesco shares to be robust in a recessionary environment. It’s also been steadily increasing its dividend payouts, which should serve as an added benefit.

As the market leader in the UK supermarket sector with more than a quarter of the market share, I think Tesco will be able to outperform its peers. Its Aldi price match across hundreds of items has been a success so far. According to the last several Kantar grocery reports, the supermarket leader has seen its market share remain relatively robust. It has also managed to outperform most if its competitors with higher sales figures. And its Q1 trading update showed its strength in the industry.

Having said that, sales figures are expected to come in slightly lower for the year. The grocer no longer enjoys the tailwinds of the pandemic and faces slower sales as a result of high inflation. Even so, I still think Tesco can utilise its strong supply chain and relationship with customers to match last year’s stellar performance. Analysts seem to share the same sentiment, rating Tesco shares a strong buy with an average price rating of £3.19.

The post Inflation hits 10.1%! 5 shares to buy now! appeared first on The Twelfth Magpie.

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John Choong has positions in Burberry. The Motley Fool UK has recommended Burberry, Lloyds Banking Group, Tesco, 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.

The renewable energy lobby has witnessed a massive surge over the last two years. World leaders are finally acknowledging the need to phase out fossil fuels. Latest projections show that over £850bn will be funnelled into the sector this decade via grants and investments, a huge boost for renewable energy firms.

The sector is red hot right now, with many top renewable energy shares across the world gaining momentum even as indexes fall. And I think I have zeroed in on an FTSE 100 name that looks like a winner for my long-term growth portfolio.

Riding the wave

SSE (LSE:SSE) shares have been outperforming the FTSE 100 index for some time now. Since the pandemic crash in March 2020, the Footsie has gone up 36.8% while the SSE share price is up 62%. This is largely due to the EU and the UK focussing on stronger collaborative renewable energy programs. And this revolution is led by wind and hydroelectricity, given the high potential for both in the region. And SSE is a market leader in both. 

The region has lofty ambitions when it comes to fighting climate change. The UK government recently detailed its Energy Security Strategy and the focus is on “homegrown power generation,” which includes a mix with 95% low-carbon power by 2030. This is great news for renewable energy production and distribution companies like SSE.

Is this FTSE 100 share the best growth option for me?

SSE Renewables focuses on onshore and offshore wind and hydroelectric power. SSE already owns nearly 2GW (gigawatt) of operational onshore wind capacity with over 1GW under development. The company also holds hydroelectricity resources capable of generating 1,459MW and an offshore wind portfolio estimated at 579MW across UK waters.

SSE wants to treble its renewable energy by 2030 to 50TWh a year. This includes a fully-funded £12.5bn investment by 2026, that will help ramp up clean power generation. The board also plans to power the increasing demand for EVs (electric vehicles) by supplying 20GW to charging ports across the country. 

In financial year (FY) 2022, the FTSE 100 company recorded total revenue of £8.6bn, up 26% from FY 2021. The board expects increased free-cash generation until 2026 and plans on growing its dividend by 5% per annum to FY 2026. 

These figures point to a business with a large market share operating in a healthy sector. And I consider them strong indicators of future growth. But there are some risks to consider as well. Regulations and currency fluctuations can impact SSE’s operations across UK, Scotland, and Ireland.  Also, analysts expect crude oil price fluctuations to settle in 2023. This could slow down the renewables push, impacting future profits. 

Governmental grants and regulations play a major role in energy prices. And the UK, which is witnessing financial and political turmoil, could tighten current renewable energy budgets if this inflationary period extends beyond 2022. This could increase taxes, stall development projects, and impact SSE’s performance. 

But this FTSE 100 stock looks like a robust renewable energy option for my portfolio right now. Given its strong presence in the UK, plans underway, and predicted jumps in revenue, I could be tempted to make a £10,000 investment if the current share price performance continues. 

The post Renewable energy boom: 1 top FTSE 100 share I’d buy appeared first on The Twelfth Magpie.

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Suraj Radhakrishnan 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.

An energy company 

High energy and gas prices have been a severe issue for many households and companies over the past couple of months. But energy companies offer an exception, as they have, in fact, benefited. SSE (LSE: SSE) is a good example, especially after releasing an excellent set of results. 

For the year ending 31 March 2022, SSE managed to report adjusted profits before tax of over £1.5bn, 23% higher than the previous year. For the forthcoming year, the group also expects earnings to increase by another 25%.

These strong results have been accompanied by a strong dividend, which totals 85.7p per share. At the current SSE share price, this yields around 5%. Although this is not as large as other dividend stocks, this doesn’t bother me due to its sustainability. In fact, the total dividend totals less than £1bn, which is far less than the company’s current profits. 

There are some risks with SSE, however. For example, the government is planning on introducing a windfall tax for energy companies, which would likely hit the group’s profits. With a price-to-earnings ratio of around 17, SSE is also no bargain in comparison to some other energy stocks. For example, Shell has a P/E ratio of just 10. 

However, I still believe that SSE is a great buy. With the company heavily investing into renewable energy, I equally feel that it has a long-term future. This means that, for a great source of passive income, I may add some SSE shares to my portfolio. 

A housebuilding dividend stock 

Housebuilding companies have always offered strong dividends, yet after recent worries, they look more tempting than ever. For example, in the past year, Vistry (LSE: VTY) has sunk around 30%, yet the dividend has been raised in the same period. 

The firm’s results have also been very robust. For example, in 2021, the group managed to record adjusted profits before tax of £346m, up from £143.9m the year before. This was aided by strong demand for housing, which saw house prices rise. These strong profits also enabled the company to pay a total dividend per share of 60p, equating to a very healthy yield of nearly 7%. With a dividend cover of two, it is also extremely sustainable. 

The Vistry share price has still been struggling recently, however. Firstly, housebuilders have agreed to fix historic safety issues, and this is expected to cost around £3bn over the next 10 years. Vistry is likely to be affected by this. Further, house prices are widely expected to fall soon, especially considering the wider macroeconomic uncertainties. 

However, I already own Vistry shares, and I am tempted to add more of this dividend stock to my portfolio. With a price-to-earnings ratio of only eight, it looks overly cheap.

The post 2 quality UK dividend stocks to buy for passive income  appeared first on The Twelfth Magpie.

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Stuart Blair owns shares in Vistry. 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.

Lloyds

As Lloyds (LSE: LLOY) continues its share buyback programme, the British bank has seen its stock price increase by 3% this week. A hawkish Bank of England has been stoking uncertainty surrounding Lloyds’ future. This arguably led to a number of director dealings happening this week.

Most notably, Lloyds’ CFO William Chalmers and Chief of Staff Janet Pope purchased a large number of shares. However, Group Corporate Affairs Director Andrew Walton and Scottish Widows Chief Executive Antonio Lorenzo also sold a substantial number of shares.

• Name: William Chalmers (Chief Financial Officer)
• Nature of transaction: DRIP shares
• Date of transaction: 20 May 2022
• Amount purchased: 168,865 @ £0.44
• Total value: £74,409.46

• Name: Antonio Lorenzo (Chief Executive, Scottish Widows and Group Director, Insurance and Wealth)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 884 @ £0.43
• Total value: £383.86

• Name: Antonio Lorenzo (Chief Executive, Scottish Widows and Group Director, Insurance and Wealth)
• Nature of transaction: Disposal of shares
• Date of transaction: 20 May 2022
• Amount sold: 250,000 @ £0.44
• Total value: £110,062.50

• Name: Vim Maru (Group Director, Retail)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 31 @ £0.43
• Total value: £13.46

• Name: Janet Pope (Chief of Staff and Group Director, Sustainable Business)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022 and 20 May 2022
• Amount purchased: 85,633 @ £0.44
• Total value: £37,735.00

• Name: Stephen Shelley (Chief Risk Officer)
• Nature of transaction: DRIP shares
• Date of transaction: 19 May 2022
• Amount purchased: 1,563 @ £0.43
• Total value: £678.70

• Name: Andrew Walton (Group Corporate Affairs Director)
• Nature of transaction: Disposal of shares
• Date of transaction: 19 May 2022
• Amount sold: 184,216 @ £0.43
• Total value: £79,986.68

IAG

The IAG (LSE: IAG) share price is up about 4% this week as the group announced a share buyback programme on Tuesday. Apart from that, a number of big director dealings occurred at IAG. Chairman and Iberia CEO Javier Sanchez-Prieto and CFO Nicholas Cadbury made the headlines. The latter had already received 1,473,207 shares as a part of IAG’s executive share plan, which will be vested in three tranches annually. Despite that, Cadbury still purchased more shares.

• Name: Javier Sanchez-Prieto (Chairman and CEO Iberia)
• Nature of transaction: Transfer of shares from one nominee account to another nominee account with no change of beneficial ownership
• Date of transaction: 23 May 2022
• Amount transferred: 181,014 @ Nil
• Total value: N/A

• Name: Nicholas Cadbury (Chief Financial Officer)
• Nature of transaction: Acquisition of shares
• Date of transaction: 24 May 2022
• Amount transferred: 254,979 @ £1.23
• Total value: £312,604.25

SSE

SSE (LSE: SSE) reported a decent set of numbers in its FY22 earnings this week. The firm generated profits of £1.5bn last year, and expects to make even more this year from high energy prices. But a windfall tax from the British government soured investor sentiment, sending the SSE share price down by almost 10%. Still, outgoing non-executive director Dame Angela Strank acquired a respectable number of shares.

• Name: Dame Angela Strank (Non-Executive Director)
• Nature of transaction: Acquisition of shares
• Date of transaction: 25 May 2022
• Amount transferred: 483 @ £18.49
• Total value: £8,929.14

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this article’s instance, Lloyds’ director dealings used the dividends they received on SIP shares to reinvest into further Lloyds shares. It should be noted, though, that dividend shares must normally be held in the trust for at least three years to get full tax relief. On the other hand, IAG’s CFO received free shares as part of his compensation package.

The post Director dealings: Lloyds, IAG, SSE appeared first on The Twelfth Magpie.

More reading

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• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Barclays, NatWest or Lloyds shares: which is the better pick for a UK retirement portfolio?
• Here’s how much I think Lloyds shares will be worth by the end of 2027
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John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Lloyds Banking 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.