However, the HSBC Holdings (LSE: HSBA) share price is in recovery mode today, up around 6%, in a welcome moment of respite for investors. Another Asia-focused bank listed on the FTSE 100, Standard Chartered (LSE: STAN), is up by a similar amount.

Despite this, a long shadow now hangs over their futures. As the Hong Kong clampdown intensifies and Western politicians openly worry about the rising threat from China, HSBC and Standard Chartered are walking a political tightrope. They have to strike a balance between a democratic West and authoritarian China. There are no easy solutions.

New Hong Kong security laws hand sweeping powers to the communist regime in Beijing, and leave bankers operating in the territory open to prosecution. That must concentrate minds. And it looks like both banks have sided with China, backing the new laws to bring stability. Not a good look. Clearly, scarcely-veiled China threats are scarier than Western reputational damage.

I’d think twice about the HSBC share price

Both banks are also following the money. HSBC generates half its profits from China, and most of its growth. Standard Chartered earns around 90% its profits from Asia, Africa and the Middle East.

UK foreign secretary Dominic Raab and US secretary of state Mike Pompeo have both condemned the banks, and life could still get more uncomfortable. The US Congress has unanimously approved legislation that would punish lenders for doing business with Chinese officials involved in implementing the new security law.

Talk about being stuck between a rock and a hard place. If you’re looking to invest in the HSBC or Standard Chartered share prices, you can’t ignore these political threats. They could weigh on growth for years.

This makes domestic Covid-19 threats look like small beer. In fact, the pandemic has brought some positives. Reports suggest UK banks have netted billions in deal fees this year, as crisis-stricken companies look to generate cash to bolster their balance sheets.

Customer impairments are a growing concern though, as the UK plunges into recession, with bad debts on mortgages, credit cards and overdrafts set to rise.

Better FTSE opportunities out there

If you buy HSBC or Standard Chartered, you won’t get any dividends for now. Both have cancelled payouts after pressure from the Bank of England. They won’t be issuing any shareholder buybacks this year either.

It isn’t a good time to be a banker and, frankly, it’s not a great time to be a banking investor either. Standard Chartered mirrors the underperforming HSBC share price. It’s down almost half over three years.

The HSBC share price isn’t even cheap by conventional metrics, trading at just over 15 times earnings. Standard Chartered’s valuation is half that, around 7.5 times earnings. Regardless of price, both carry too much political risk for me.

I’d consider these instead…

The post The HSBC share price is soaring today. Yet I wouldn’t buy this stock, or Standard Chartered appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended HSBC Holdings and Standard Chartered. 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.

You have just such an opportunity today. These two FTSE 100 shares have fallen far during the coronavirus crash, but are flying right now.

FTSE 100 recovery play

After a nervous Friday, investors have rediscovered their appetite for risk. The Standard Chartered (LSE: STAN) share price is up 6% this morning, as bargain seekers decide the potential rewards outweigh the risks.

Like all the banks, Standard Chartered has been hit hard by the stock market crash. Its focus on Asia and China made that inevitable. Unlike many FTSE 100 stocks, it failed to recover during April and May’s rebound. But it’s flying today.

Standard Chartered has also been caught up in rising tensions between China and the West, and concern over the Hong Kong clampdown. Its share price is still 45% lower than before the stock market crash, even after today’s rebound.

Standard Chartered is up today after US President Donald Trump surprised markets by failing to introduce new, more punitive trade measures in response to China’s new security law in Hong Kong. Shares rose across Asia amid relief that the trade war hasn’t further intensified.

Inevitably, the US-China stand-off remains a threat. Along with Covid-19, that explains why the bank trades at just six times earnings. Anybody who buys into the Standard Chartered share price must brace themselves for further political volatility, or even another stock market crash.

Also, there’s no dividend for now. However, the risk seems to be reflected in today’s price. It still looks a strong long-term buy-and-hold at today’s entry price.

Stock market crash opportunity

Standard Chartered is only the second fastest rising share price on the FTSE 100 today. Associated British Foods (LSE: ABF) is up more than 8%. The Primark owner has inevitably been hit hard by the lockdown but, as the government relaxes rules, it should benefit once people get outside and want to smarten up their wardrobes.

Investors have welcomed today’s news that management aims to open all Primark stores in England by 15 June, with openings in Northern Ireland, Wales and Scotland coming later this month.

It’s currently trading from 112 stores across Europe and the US, around a third of its total selling space. Today, it reported that overseas customers are queueing to get in and “once in store, spending on larger basket sizes.” 

Cash flow should improve markedly in the second half of this financial year, although management has yet to reinstate guidance. The share price is now bouncing back from the stock market crash.

The group is also renegotiating lease arrangements to cut overheads at Primark, which contributes around two thirds of the FTSE 100 group’s operating profit. The big opportunity here is that Associated British Foods shares still trade around a quarter lower than before Covid-19.

But one threat is that shoppers now reject fast fashion in favour of more sustainable options. Right now, I think the opportunity outweighs the threat.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods and Standard Chartered. 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 following two FTSE 100 stocks allow you to invest in the region, while benefiting from the security of a London listing. Both are available at bargain prices as well.

Standard Chartered

Standard Chartered (LSE: STAN) generates more than three-quarters of its revenues from Asia, but this has not always been a plus. It suffered its own annus horribilis in 2014, after getting caught up in the Asian credit boom and bust, while the commodity crash wiped out a whole year’s worth of profits, forcing out the group’s CEO, Peter Sands, and chair, John Peace.

The fightback is nicely underway, with the Standard Chartered share price up 30% in the last year, as profits rose and bad debts fell.

It is up another 3% today, as CEO Bill Winters said the £23bn group’s strategy of the last few years has created a “stronger and more resilient business”, as shown by a 16% increase in underlying profits in the third quarter to $1.2bn.

Return on tangible equity increased 160 basis points to 8.9%, while income climbed 7% to $4bn. The bank recorded “broad-based growth across all segments and regions”, but with particularly strong performance in private banking, and corporate and institutional banking.

Management also completed a $1bn share buyback, reducing the total issued share capital by 3.5%. Its common equity tier 1 ratio remains within its 13%–14% target range at 13.5%, having risen six basis points since 30 June.

All of which looks very promising, and belies its current lowly valuation of just 11.3 times forward earnings. Its price-to-book ratio is also priced to go at 0.6, well below the 1 typically seen as matching balance sheet assets.

Standard Chartered’s dividend is lower than some of the other high street banks, with a forward yield of 2.9%, although generously covered 2.9 times, giving scope for progression. It only restarted payouts in February last year, after a two-year hiatus, so we can expect that to continue rising.

City analysts now forecast a yield of 3.7% for 2020 and are optimistic about earnings growth, predicting 24% this year and 16% next. If the global economy slows, then Standard Chartered may take a hit, but otherwise it looks like a buy for those wanting exposure to fast-growing Asia.

Prudential

Insurer Prudential (LSE: PRU) has seen its share price drop 20% in the last six months, and it trades 3% lower than it did five years ago.

Things aren’t as bad as they look, because recent slippage was down to its long-awaited split with UK asset management division M&G, under which each now lists separately on the FTSE 100. Investors who held stock on 18 October received one M&G share for each Pru share they owned.

I think Prudential continues to offer strong growth prospects, as it looks to expand in the fledgling Asian insurance market, where a growing middle class are crying out for pension and protection products, and to build on its position in the US retirement field.

The £5.5bn group is worth investigating for its bargain valuation of just 9.7 times forward earnings, while its forecast yield of 3% is covered 3.3 times. Today, though, Standard Chartered holds the stage. I’d buy that first.

The post I’d buy these 2 FTSE 100 dividend growth stocks to access the world’s fastest-growing market appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential and Standard Chartered. 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.

That task is further complicated by increasing taxes and the potential for regulatory change, which could lead to added pressure on landlord cashflows.

By contrast, a number of FTSE 100 stocks offer high dividend yields that could increase in the long run as their dividends rise. Here are two such stocks that could be worth buying today due in part to their low valuations.

Persimmon

FTSE 100 housebuilder Persimmon (LSE: PSN) released a trading update on Thursday that showed continued progress in improving customer satisfaction scores. This could help to improve its long-term growth outlook, since it lags a number of industry peers in this area.

Although the company’s revenue declined by 4.5% to £1.754bn, it is on track to meet expectations for the full year. Since it is adopting a more targeted approach to the timing of new home sales releases on certain sites in its efforts to improve customer satisfaction levels, a drop in sales is anticipated in the short run.

With Persimmon having a dividend yield of 12% due to its generous capital return plan, it continues to offer income investing appeal. Since shareholder payouts are due to be covered 1.2 times by profit in the current year, they appear to be affordable at a time when the business has a healthy balance sheet.

While its future prospects could be hurt by continued political and economic uncertainty, the company’s price-to-earnings (P/E) ratio of 6.9 indicates that it offers a wide margin of safety. As such, now could be the right time to buy a slice of it for the long term.

Standard Chartered

While Persimmon’s business is highly dependent upon the performance of the UK economy, Standard Chartered (LSE: STAN) offers investors exposure to a wide variety of international markets. Therefore, it may provide a degree of diversity, as well as growth potential, as a result of its position within fast-growing economies around the world.

Certainly, the company has experienced a challenging period in recent years. Regulatory issues have held back its financial performance, as well as investor sentiment. Now though, the bank is forecast to post a rise in earnings of 18% in the current year. Since it trades on a price-to-earnings growth (PEG) ratio of just 0.6, it seems to offer a wide margin of safety.

While Standard Chartered’s dividend yield stands at just 3.3% at the present time, the company’s earnings growth rate suggests that it could produce impressive dividend growth over the coming years. With dividend payments being covered 2.8 times by profit, the company could raise shareholder payouts at a brisk pace without hurting its financial standing. As such, it could become an increasingly popular income share that delivers an improving total return over the long run.

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Peter Stephens owns shares of Persimmon and Standard Chartered. The Motley Fool UK has recommended Standard Chartered. 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.

This could lead to them paying higher dividends. This may not only boost their income investing prospects, but also increase demand among investors as they price-in improving financial prospects.

With that in mind, here are two FTSE 100 stocks that offer dividend growth potential. While they may not be among the highest-yielding shares in the index, they could generate impressive total returns.

Intertek

‘Total Quality Assurance’ provider Intertek (LSE: ITRK) released a trading statement on Thursday. Revenue in the first four months of 2019 increased by 5.3% to £924.3m, with it recording growth across its various segments. It has been able to maintain its operational discipline on margin improvement and cash conversion, with it being on target to meet previous guidance for the full year.

Although the stock currently has a dividend yield of just 2.1%, it has an excellent track record of dividend growth. For example, over the last four years it has increased dividends per share at an annualised rate of 19%. Despite this rapid rate of growth, dividends are set to be covered over twice by net profit in the current year. This suggests that there could be further growth ahead over the medium term.

With Intertek’s bottom line expected to rise by over 8% in the current year, it seems to be performing well. This could translate into a rising share price, as well as further dividend growth that may produce a high yield for holders of the shares over the coming years. As a result, the stock could be worth buying today for the long term.

Standard Chartered

Also offering the potential to deliver impressive dividend growth is emerging markets-focused bank Standard Chartered (LSE: STAN). The company is expected to increase dividends per share at an annualised rate of 26% over the next two financial years. This puts it on a forward yield of 3.6%. With dividends due to be covered 2.7 times by profit, so there could be scope for further fast-paced growth in shareholder payouts over the coming years.

Clearly, Standard Chartered has experienced a difficult period. Its performance has been held back by regulatory risks, while the uncertain outlook for the world economy could hurt its future business performance.

However, with the stock appearing to offer a wide margin of safety, its risk/reward ratio could be appealing. It trades on a price-to-earnings growth (PEG) ratio of just 0.5, which indicates that its shares could be undervalued given their growth prospects.

With what appears to be a sound strategy, low valuation and improving dividend growth outlook, the company could offer an impressive total return relative to the wider FTSE 100 over the long run. As such, now could be the right time to buy it after a difficult period.

The post 2 FTSE 100 dividend growth stocks I’d buy in a Stocks and Shares ISA today appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Standard Chartered. The Motley Fool UK has recommended Intertek and Standard Chartered. 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 that in mind, here are two FTSE 100 income shares that could be worth buying today and holding for the long run.

Standard Chartered

Standard Chartered (LSE: STAN) released an interim management statement on Tuesday, with its first quarter performance being relatively impressive. Its underlying profit before tax increased by 10% to $1.4bn. During the period, it announced a number of digital initiatives across Africa, Hong Kong and India, which have the potential to increase its customer base. They could catalyse its performance in an increasingly digitalised banking sector.

With Standard Chartered having resolved its legacy conduct and control issues, it can now manage its capital position more dynamically. This may lead to improving growth prospects after what has been an uncertain period for the bank. With the world economy continuing to grow rapidly, the bank could deliver a fast-growing bottom line over the medium term.

With Standard Chartered yielding 3.4% at the present time from a dividend that is covered 2.8 times by profit, it seems to have scope to raise shareholder payouts over the medium term. Its bottom line is expected to rise by 18% in the current year, with its price-to-earnings growth (PEG) ratio of 0.6 suggesting that it has a wide margin of safety. Therefore, it could have investing appeal from a growth, income and value perspective, and may be worth buying today.

RSA

Also experiencing a challenging period in recent years has been RSA (LSE: RSA). However, it has been able to turn its performance around, with its dividends per share increasing at an annualised rate of 80% over the last four years. Further growth in its dividend is expected in the current year, with it on track to yield 6.1% in the 2019 financial year.

Since RSA’s dividend is due to be covered 1.6 times by profit in the current year, there could be scope for it to rise further. Its increase could be boosted by a forecast rise in net profit of 12% for 2019.

With RSA’s recent updates having been somewhat mixed, the company’s share price has experienced a disappointing year. It has fallen by 17% in the last 12 months, which means it now trades on a price-to-earnings (P/E) ratio of 10.1. This suggests that it offers a wide margin of safety, and could post a successful share price recovery over the long run. Alongside its high and growing dividend, this could lead to an impressive total return over the coming years. As such, now may be the right time to buy a slice of it for the long term.

The post 2 cheap FTSE 100 dividend stocks I’d buy right now appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Standard Chartered. The Motley Fool UK has recommended Standard Chartered. 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.

Low Standard

Its stock is down around 2% today after publication of its 2018 final results, despite group chief executive Bill Winters hailing “significant improvement in profitability driven by higher quality income growth with cost and asset origination discipline.” He also bigged up the “tremendous progress securing the foundations of the business since 2015,” resulting in a third successive year of underlying profit growth.

There are plenty of positive numbers, with operating income up 5% to $15bn and $3.2bn in gross cost efficiencies, exceeding the target set in November 2015. Net interest income increased 8% while credit impairment fell 38% to $740m. Underlying profit before tax rose 28% to $3.9bn.

Chartered waters

Standard Chartered also strengthened its balance sheet, lifting its CET1 ratio 60 basis points to 14.2%, which should boost its resilience to economic shocks. There could be plenty of those amid fears of a global recession, with China and Asia particularly vulnerable, and the US trade war that has been hurting for some time.

Basic earnings per share increased 14.2 cents to 61.4 cents, and the board rewarded loyal investors by hiking the final dividend 36% to 15 US cents. Standard Chartered now offers a forecast yield of 3.6% with cover of 2.8. It still trades at a bargain price of 9.7 times forecast earnings, which looks promising with forecast earnings growth of 20% in 2019, and 11% the year after.

Like every bank, Standard Chartered remains a work in progress and is also vulnerable to wider economic troubles. However, my colleague Roland Head reckons its recovery could have further to run.

Chemicals reaction

Speciality and industrial chemicals manufacturer Croda International (LSE: CRDA) has had a solid year, rising almost 12% in 12 months, against just 1.8% across the FTSE 100 as a whole. Over five years, it’s up 100%.

Today, it published its results for the year ended 31 December 2018 and the stock fell 3% in response as pre-tax profits rose just 1% to £317.8m, with revenues also up 1% to £1.39bn. Core business sales were 3.8% higher at constant currency at £1.27bn. But it was hit by adverse FX movements, as currency translation reduced sales by £26.2m and adjusted pre-tax profit by £8.7m.

It did grant investors a special dividend of 115p per share, totalling £150m, alongside a 7.4% increase in the full-year ordinary dividend to 87p. Croda is a relative low yielder at 1.9% with cover of 2.1 but at least management policy is progressive. It could also deliver growth over the long term.

Front Foots

Chief executive officer Steve Foots hailed “another year of strong progress” as Croda once again delivered “top line growth at industry leading margins to achieve superior returns.” He also highlighted “relentless innovation and by investing in disruptive technologies and exciting new growth opportunities,” although our old friend “challenging global market conditions” also got a mention. 

Croda looks a bit expensive, though, trading at 24.7 times forecast earnings, with a PEG of 3.1. Forecast earnings growth nonetheless looks steady at 8% in both 2019 and 2020, and a return on capital employed of 34% suggests a well-run operation.

The post £5k to invest? Here are two FTSE 100 income giants I’m eyeing up today appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Standard Chartered. 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.

Of course, no one really knows what will happen. With employment levels high and interest rates low in most developed markets, the global economy may continue to steam along quite happily.

In my opinion, stock market investors should focus on companies with modest valuations and improving performance. This approach will hopefully provide a margin of safety that allows for any future bumps in the road.

An overseas opportunity

One company that should be untouched by Brexit is Asia-focused bank Standard Chartered (LSE: STAN). This £21bn group has struggled to return to growth after a difficult period caused by reckless lending and rapid expansion.

Most of these problems have now been cleared up. The bank returned to profit in 2017 and restarted dividend payments. Broker forecasts suggest that earnings per share will have risen by about 50% in 2018, with further growth expected this year.

The only remaining risk is a US investigation into the bank’s alleged breach of sanctions on Iran. It admits that the financial impact of any fines could be “substantial,” with analysts’ estimates suggesting the total figure could be around $1.5bn.

I’m a buyer

The risk of a big fine on Iran is already known by the markets. I think it’s already reflected in the price of the shares, which currently trade at a discount of around 40% to their book value.

The big challenge for chief executive Bill Winters is to improve the bank’s return on equity, a key measure of profitability for banks. Winters is targeting a return on equity of 10% after reaching 6.7% during the first half of 2018. I think it’s fair to expect further progress, even if it’s slow.

I already own shares of Standard Chartered and may buy more if this month’s full-year results show continued progress. With the stock trading on 10 times 2019 forecast earnings and offering a 3.5% yield, I continue to rate the shares as a buy.

This challenger may be too cheap

Shares in UK challenger bank CYBG (LSE: CYBG) are up by almost 15% at the time of writing, after the bank said profit margins for 2018/19 would be at the top end of expectations.

The bank — which merged with Virgin Money last year — warned in November that demand for new lending might fall. Management said that the bank’s net interest margin, a measure of profit on lending, would fall from 2.2% in 2017/18 to between 1.6% and 1.7% in 2018/19.

Better than expected

Today’s first-quarter update suggests that the current year is shaping up better than expected. Management now expect a net interest margin of 1.65-1.7% for the full year.

Demand for new mortgages and small business lending has also remained healthy. Mortgage lending rose by 1.5% to £60bn, while loans to businesses rose by 1.2% to £7.6bn. Although these figures are lower than last year, the bank’s performance seems stable.

Broker forecasts for 2019 suggest the stock is trading on about eight times forecast earnings, with a 4% dividend yield. That looks fair to me. I rate the shares as a hold.

The post Have £3k to invest? One FTSE 100 dividend stock I’d buy today appeared first on The Twelfth Magpie.

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Roland Head owns shares of Standard Chartered. The Motley Fool UK has recommended Standard Chartered. 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.

Instead of relying on the cash ISA, I would invest a portion of my savings in Santander (LSE: BNC).

Buying growth

In my opinion, the Santander share price has plenty going for it. For a start, at the time of writing, shares in the bank support a market-beating dividend yield of 5%. What’s more, I think the stock looks cheap right now as the shares are dealing at a forward P/E of only 8.5.

It’s difficult to understand why investors are not flocking to buy this stand-out financial enterprise. Usually, investors reward banks with a low multiple if there’s something that doesn’t look right on the balance sheet, such as rising loan defaults, or a poor capital ratio. However, I can’t see anything wrong with the group’s most recent set of results. 

Earlier this week, Santander reported an 18% year-on-year increase in profits for 2018, to a total of €7.8bn. Net interest income grew 5.3% to €9.1bn, the non-performing loan ratio declined from 3.9% to 3.7% in the fourth quarter, and is down 164 basis points since June 2017. At the end of 2018, Santander’s tier one capital ratio was a healthy 11.3%, above its own target of 11%.

Some analysts have questioned whether these results are as good as they seem because there were some hidden nasties in the numbers. For example, Santander was only able to grow profit in some regions due to cost reductions. 

These concerns are valid, but I don’t see them as a risk to the entire investment thesis. The group is trying to cut costs and improve its digital offering, which is generally cheaper to operate. According to Santander’s own numbers, a third of its products sales are currently made through digital channels and the number of digital customers increased by 6.6m to 32m during 2018.

Brexit worries 

So, financially at least, it looks as if Santander is a great investment. One thing that I think could be holding the share price back at the moment is Santander’s exposure to the UK and European economies, where a dark cloud in the form of Brexit is hanging over economic growth. 

A no-deal divorce will almost certainly impact the bank’s profitability. However, Santander is better positioned than most European financial institutions because more than a quarter of its profits are generated in Brazil. This exposure also helped the group escape the worst of the financial crisis, and I think it could provide a backstop once again in 2019 if Europe’s economy grinds to a halt or starts to contract.

As the Santander share price is currently trading at discount valuation, I believe the risk of a messy Brexit is already reflected in the bank’s share price. And with that being the case, I’m a buyer of the shares today because not only does the Santander stock offer a market-beating dividend yield, but there’s also the potential for significant capital gains if the business continues to grow in 2019 and defies its doubters. 

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Rupert Hargreaves does not own any 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.

This isn’t the place to discuss politics, but it’s worth noting that a number of business leaders have made positive statements about the PM’s deal. This suggests to me that they believe it would allow international business to continue as usual.

I share this view, but I could be wrong. I certainly think it makes sense to own a handful of shares that aren’t dependent on UK-EU trade.

This 6% yield looks safe to me

October’s stock market correction was mirrored by an oil market slump that saw the price of a barrel of Brent Crude fall from $85 to $65 in just six weeks.

Oil majors such as BP (LSE: BP) saw their share prices fall sharply during this period. BP stock is worth 12% less than it was at the start of October, but I share my colleague Harvey Jones’ view that this could be a buying opportunity.

Here’s why. Management at companies such as BP were not budgeting for prices to stay above $80. If it happened, then profits would have received a boost. But profit forecasts for the current year are based on much lower average prices.

October’s oil market sell off hasn’t changed the firm’s expectations for 2018, or indeed for 2019. In fact, broker consensus forecasts for BP have actually risen by 5% over the last month.

Analysts now expect the FTSE 100 firm to generate adjusted earnings of $0.59 per share in 2018, and of $0.65 per share in 2019. These forecasts put the stock on a forecast price/earnings ratio of 11.3 for 2018, falling to a P/E of 10.2 in 2019.

Meanwhile, BP’s recent share price slide means the stock now offers a dividend yield of 6%. I rate the shares as a safe buy for income at current levels.

Big improvements in Asia

One business whose fortunes are unlikely to be affected by Brexit is Asia-focused bank Standard Chartered (LSE: STAN). The FTSE 100 bank’s shares are down by about 20% this year, but have risen by more than 15% since 31 October.

The trigger for the gains seems to have been the bank’s third-quarter results, which showed that underlying pre-tax profit rose by 25% to $3.4bn during the first nine months of the year.

Bad debts were down by 56% to $408m, and the bank’s return on equity — a key measure of profitability — rose 1.5% to 6.6%. Although this remains well below the 10%+ level investors would like to see, it’s certainly welcome progress and suggests the bank’s turnaround is continuing.

It wasn’t all good news. The bank’s income from Africa and the Middle East was down 5% on the same period in 2017. Chief executive Bill Winters warned that international trade tensions were affecting sentiment in some emerging markets. However, I don’t see this as a serious concern, given that income is still rising in the group’s core Asian markets.

The right time to buy?

Standard Chartered stock currently trades at a 40% discount to its book value of 1,048p per share. If performance continues to improve, I expect this discount to close.

In the meantime, the stock looks affordable to me, with a 2018 forecast P/E of 10 and a 2.8% dividend yield. I remain a buyer at this level.

The post 2 FTSE 100 dividend stocks I’d buy in case of a no-deal Brexit appeared first on The Twelfth Magpie.

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Roland Head owns shares of Standard Chartered. The Motley Fool UK has recommended Standard Chartered. 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.