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Forget a Cash ISA! I’d invest £20k in these 2 FTSE 100 dividend champions yielding 5%

Rupert Hargreaves — Tue, 19 Nov 2019 09:35:11 +0000

The best flexible Cash ISA on the market at the moment offers an interest rate of just 1.36%, which pales in comparison against the FTSE 100’s 4.5% dividend yield.

Considering these numbers, I think investing in the FTSE 100 could be a much better idea than opening a Cash ISA, and today I’m going to highlight two FTSE 100 dividend champions that I would buy if I had £20k to invest in an ISA.

Booming market

The global travel and tourism market is booming. Last year the market grew 3.9%, compared to 3.2% for global GDP, marking the eighth successive year when the travel and tourism industry has grown faster than the global economy.

As one of the largest travel companies in Europe, Tui Travel (LSE: TUI) is riding this growth wave. Indeed, between 2013 and 2018, the company’s normalised earnings per share jumped from €0.32 to €1.32, a compound annual growth rate of 26.6%.

I think it is unlikely that this rate of growth will continue, but I’m optimistic that Tui’s size and reputation with customers will help it grow faster than the rest of the market.

Analysts believe the tourism market will continue to expand faster than global GDP for the foreseeable future, as consumers spend more and more travelling the world.

This suggests that TUI’s earnings could grow by at least 4% per annum over the long term. Coupled with the company’s current 4.4% dividend yield that implies investors can look forward to an 8.4% total annual return for the foreseeable future.

The grounding of Boeing’s 737 Max jets is expected to hit Tui’s growth in 2019. However, the company is likely to return to growth the next year, according to the City.

Analysts have pencilled in earnings growth of 43% for fiscal 2020, and the dividend is expected to rise as well, hitting €0.67 per share, giving a dividend yield of 5.5% on the current share price.

Undervalued

Sticking with the travel market, my next FTSE 100 income pick is British Airways owner IAG (LSE: IAG). The airline business can be an unpredictable one, but it looks as if IAG has cracked the code.

By focusing on keeping costs low and growing through acquisitions, IAG’s net profit has surged. City analysts are forecasting a net profit of €2.2bn for 2019, up from just €122m in 2013.

And it doesn’t look as if the company is going to slow down any time soon. At the beginning of November, the group announced that it had signed an agreement to purchase Spanish carrier Air Europa. The €1bn deal will give the group a foothold in the Latin American market, as well as better economies of scale as IAG already owns Spain’s two biggest airlines, Iberia and Vueling.

Management wants to use this stable of carriers to turn Madrid into one of the world’s largest aviation hubs. Considering IAG’s successful track record of buying and integrating airlines into the broader group, I think it will succeed.

Further growth could be great news for shareholders and income seekers. As IAG’s profits have ballooned, so has the company’s dividend to investors. This year the business will distribute €0.33 per share in dividends, up from €0.18 in 2015, according to analysts. That’s a dividend yield of 5.2% on the current share price.

On top of this market-beating dividend yield, the stock also trades at a highly attractive valuation of just six times forward earnings.

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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.

3 ultra-high FTSE 100 dividend stocks I’ll continue to avoid in 2019

Paul Summers — Tue, 16 Jul 2019 08:39:16 +0000

The FTSE 100 is chock full of firms offering dividends to those of us investing primarily for income. That’s not to say all are equally worthy of our cash. For me, three of the index’s biggest payers still carry considerable risks.

Steering clear

On the face of it, housebuilder Persimmon (LSE: PSN) looks a screaming buy, with shares trading at just 7 times forecast earnings and yielding a stonking 12%. Dig a little deeper, however, and some cracks in the investment case begin to appear.

Last night’s Channel 4 Dispatches investigation into allegations of shoddy workmanship, poor customer care and excessive profits at the £6.3bn-cap is concerning for investors. Further complaints could risk the company being expelled from the lucrative Help to Buy scheme that has benefited its bottom line so much over the years and makes up almost half of Persimmon’s sales.

The fact that we’re still no closer to knowing what sort of Brexit we will get at the end of October (assuming we get one at all) is another reason I continue to be wary of cyclical companies such as this.

Should a recession hit the UK and activity in the housing market slow, that ‘bargain’ valuation will quickly disappear and the huge dividend — covered just 1.2 times by profits — could be in danger.

Travel pain

Another firm vulnerable to the ongoing uncertainty surrounding our EU departure is holiday operator TUI Travel (LSE: TUI). With a difficult trading environment already forcing the company to issue two profit warnings so far in 2019, Tui also continues to be impacted by the grounding of Boeing 737 MAX planes around the world following two fatal crashes in only a few months. Investors can probably expect more pain to follow if this issue isn’t resolved soon.

It may not be in the same sorry state as industry peer Thomas Cook but, with such an uncertain outlook, I’m struggling to see the attractions of investing when there are so many, less risky income-generating opportunities elsewhere.

The shares have more than halved in value over the last 12 months and now change hands on a little under 11 times forecast earnings. The dividend yield is 6.8% at the current price, covered 1.4 times by profits.

Slashed payouts?

Third on my list of high-yielding FTSE 100 stocks I’m continuing to avoid is energy supplier Centrica (LSE: CNA). With a yield of approaching 14%, the company is theoretically the biggest dividend payer in the index. As a result of competitors continuing to tempt customers away and onerous pension obligations, however, a slash to the payout looks inevitable.

Of course, I’m not alone in thinking this. Having once predicted it would be reduced by a third, analysts at Credit Suisse now believe a 50% cut to 6p per share is on the cards and could be announced at the same time as the firm’s half-year figures on 30 July. That would leave the stock yielding 6.7%, which some may argue is still too high.

With the share price now at its lowest point in 20 years, it’s quite possible the market will respond positively once this news is announced and Centrica may experience a brief bounce. Factor in the perpetual threat of political interference, however, and I just can’t see the stock — available at 11 times earnings — as anything more than a value trap.

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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.

Could this FTSE 100 income giant be the next Thomas Cook Group?

Rupert Hargreaves — Thu, 23 May 2019 08:35:12 +0000

Package holiday provider Thomas Cook Group (LSE: TCG) is currently battling for survival, and at this point, it’s difficult to tell whether or not the near-200-year-old group, will make it through the critical summer season.

Spiralling out of control

Thomas Cook has been in trouble for some time, but until this year, the group seemed to be dealing with its problems. However, during the past few months, the situation has started to spiral out of control. The travel business reported a pre-tax loss of £1.5bn the first half of its financial year, shaking consumer confidence and raising concerns over management’s plan to divest its airline business.

The company was planning to divest the airline ops and use the money to eliminate its entire £1.2bn debt mountain, accrued through a series of acquisitions. However, it is believed that bids are falling far short of this target, with analysts estimating a final sale value that could be as low as £650m or as high as £1.3bn.

The big problem the company now faces is what one set of analysts has called a “vicious circle” whereby customers stop booking with the group due to concerns about its financial health.

During the past few years, there have been several high-profile bankruptcies in the travel industry, leaving many customers stranded abroad, an experience no holidaymaker wants. To avoid falling into this trap, analysts believe customers will stop booking with Thomas Cook altogether, exacerbating the company’s decline.

The group’s problems date back to 2011 when the company closed the second of two major acquisitions that left it with around 1,300 high street stores selling package holidays. The problem is, consumers are increasingly finding it easier and cheaper to book holidays online, leaving Thomas Cook and its FTSE 100 peer, Tui Travel (LSE: TUI) struggling to catch up.

Brewing problems

Indeed, Tui is suffering from precisely the same issues. Only a few days before Thomas Cook reported its breathtaking loss, Tui reported an underlying loss before interest tax and amortisation of €301m for the first half of its financial year, from €170m in the same period a year earlier.

As well as changing consumer habits, Tui is also suffering from the grounding of the global Boeing 737 Max fleet. The company has 15 of these planes in its 150-strong fleet with a further eight more on order.

The one advantage the Anglo-German business has over its UK rival is its stronger balance sheet. The level of net debt varies throughout the year, but at the end of its financial year following the vital Summer season, Tui’s balance sheet is usually in a net cash position. That said, there has been some speculation that the company is hiding the majority of its obligations in joint ventures, which are not consolidated onto the balance sheet. This is something we should keep in mind when valuing the stock. I’m also worried about its cash generation.

For example, last year, the group produced a free cash flow from operations of around €200m but paid out €381m in dividends to shareholders. This clearly isn’t sustainable, and as a result, I’m sceptical that the company can maintain its current 7.8% dividend yield.

So overall, considering all of the headwinds buffeting the travel industry of right now, I think it might be worth giving Tui a wide berth for the time being.

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Got £2k to invest? I’d take a close look at these 2 turnaround stocks today

Harvey Jones — Wed, 15 May 2019 13:08:40 +0000

Aston Martin Laguna Global Holdings (LSE: AML) has glamour, cachet and James Bond on its side, none of which has helped its share price, which has gone into reverse since last autumn’s high profile IPO.

It’s now down 45% in six months, and has dipped slightly after today’s Q1 results. Could this a buying opportunity for long-term investors?Maybe. If you are of an optimistic bent.

Put your foot down

There’s some good news in today’s numbers, with revenues up 6% to £196m in what was a seasonally small quarter. However, adjusted EBITDA fell a whopping 35% to £28m year-on-year, although management pinned this on planned higher costs to support product expansion.

There was a 10% rise in sales of “wholesale units”, (cars to me and you) with sales hitting 1,057 against 963 a year before. This was driven by 30% growth in demand from Asia Pacific, particularly China, with the Americas up 20%. This offset UK and European softness, down 9% and 4%, respectively.

Margin call

Aston Martin made a gross profit of £83m, in line with last year, but margins dipped 2% to 42%. Net cash from operations rose £37m, as expected, while net debt stood at £590m. Management is optimistic as deliveries are significantly weighted towards the second half.

Investing in Aston Martin was never going to be an easy ride. As Rupert Hargreaves pointed out at the IPO, this is a company that has gone through seven bankruptcies. Luxury car volumes have been falling across the industry, so today’s sales increase is positive, and suggests some resilience to wider automotive trends. A doubling of retail growth in the Americas is a reward for its focus on this key region.

The £1.85bn company isn’t cheap, trading at 21.9 times forward earnings. But City analysts are optimistic, predicting earnings per share growth of 42% across 2019, followed by 90% the following year.

However, these are challenging times, and first half adjusted profits are expected to fall year-on-year, due to the non-repetition of £20m income, more fixed costs, and fewer specials. I wouldn’t rush to buy Aston Martin’s stock today.

TUI, TUI

Brexit hasn’t helped, witness the drop in UK sales, but travel group TUI (LSE: TUI) has taken an even greater hit, with a fall in holiday bookings as Britons worry about how departing the EU might hit flights, as well as their own prosperity.

The group’s share price has more than halved over the last year, despite a recent rebound after the postponed Brexit deadline prodded people into booking a summer escape.

Great escape

Today’s half-year results showed a 1.7% rise in turnover to €3.1bn at constant currency, with summer bookings falling just 3%, which is pretty good in the circumstances, while the average selling price actually rose 1%. Overall it falls into the ‘could have been worse’ category.

As well as Brexit, the group has also been hit by the grounding of Boeing 737 MAX aircraft, last summer’s heatwave (which reduced last-minute bookings), and overcapacity in Spain.

However, TUI is benefiting from its integrated model, with its booming Cruise and Destinations activities offsetting declines in Markets & Airlines.

Earnings forecasts look bumpy but this is reflected in a valuation of just 7.1 times forward earnings. The current yield is a mighty 8.1%, covered 1.6 times by earnings. Royston Wild has previously named it a tasty proposition for income seekers. It may not be smooth sailing, though.

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Harvey Jones 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.

I’d buy these 3 buy-and-forget FTSE 100 stocks yielding 7%+

Harvey Jones — Fri, 26 Apr 2019 07:00:50 +0000

Are you staggered by some of the yields available from top FTSE 100 stocks? I certainly am. The fact that I can pick out three companies yielding more than 7% in the blink of an eye is quite something. That kind of income will quickly roll up.

Compound glory

Let’s say I invest £10,000 in one of them. After five years, I will have £14,026, even if the share price does not grow at all in that time.

After 10 years, my money will have grown to £19,672, excluding all share price growth. If the stock still yields 7% by then, I will be getting a yield of 13.77% based on my original £10,000. These are crude calculations, but they show how yields matter for long-term investors. Just remember, dividends are not set in stone.

Aviva

The first 7% yielder I like is £16.7bn insurance giant Aviva (LSE: AV). I think this is a terrific income stock with a blistering forecast yield of 7.6%, covered 1.9 times by earnings. However, it has been a rotten growth stock, with the share price trading 15% lower than five years ago.

I have repeatedly been underwhelmed by Aviva’s share price, especially since it seems nicely priced to outperform, trading at just 6.9 times forecast earnings. As Kevin Godbold points out, Aviva is a cyclical stock with bumpy cash flow, and debt of £9.42bn in 2018. However, a sky-high yield and dirt-cheap valuation is always a difficult combination to resist. I’m hoping the current leadership shake-up may inject fresh energy.

Tui Travel

Travel giant TUI Travel (LSE: TUI) has seen its share price halving over 12 months, while the yield has shot up as a result. Bargain hunters will be tempted, with the stock now valued at just 7.5 times earnings, which offers plenty of scope for a recovery.

Brexit uncertainty, sterling weakness and Spanish overcapacity hit the group, while last month it alerted markets that it could take a €200m hit from the grounding of its Boeing’s 737 MAX aeroplanes over safety concerns.

That could cast a shadow over its share price for some time while Rupert Hargreaves has warned of a possible share price cut if the problems continue. Right now, it looks riskiest of the three, but travel and tourism will only grow and I’d suggest brave investors buy at today’s low entry price then forget about short-term turbulence, as the TUI share price is ultimately heading for sunnier climes.

British American Tobacco

Tobacco stocks have long been one of the best sources of reliable dividends, and British American Tobacco (LSE: BATS) certainly fits that mould. The £70bn behemoth is up 25% over the past three months, although it still trades 40% lower than two years ago, as it has come under intense scrutiny from US regulators, which have been targeting big tobacco’s vaping and e-cigarettes operations.

The long-term decline of smoking in the West looks set to continue, with US cigarette volumes down 8.8% over the last year, Nielsen data shows. I believe the health message will ultimately spread to wealthy emerging market smokers too, but for now British American Tobacco continues to generate huge revenues, with more than $25bn expected this year.

Earnings are forecast to grow 5% this year and 7% next, and a yield of almost 7% with cover of 1.5 is still hard to resist.

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I’d sell this sliding FTSE 100 dividend stock right now

Rupert Hargreaves — Sat, 06 Apr 2019 08:40:57 +0000

The last time I covered European travel operator TUI Travel (LSE: TUI), I concluded that while the company’s near-term outlook might seem uncertain, over the longer term, the group’s size and experience means it’s well-placed to capitalise on consumers’ ever-growing demand for holidays and holiday packages.

However, while I still think that over the long term this business has a bright outlook, I reckon management is going to struggle to attract investors back to the stock as Tui’s near-term outlook has only deteriorated since I last covered the company.

Falling star

Analysts are now expecting the business’s earnings per share to fall by 28% for 2019, and this target could be revised lower if Tui’s fleet of Boeing 737 Max planes isn’t allowed back into the sky.

Like so many other airlines and tour operators around the world, Tui has been forced to ground its Boeing 737 planes due to concerns over safety. Management expects the grounding to cost the company €200m this year if they’re allowed back in the sky by July. If not, the financial repercussions will be even more severe.

Granted, the enterprise can’t do much about the situation, and it’s not alone. However, from an investment perspective, the uncertainty makes the company uninvestable for the time being, in my opinion. Further profit warnings could force management to slash its dividend, and this will only lead to further share price declines.

All in all, I think there are much better investments out there with less uncertain outlooks, such as distribution and outsourcing group Bunzl (LSE: BNZL).

Slow and steady

Tourism can be a volatile business, but when it comes to distribution and outsourcing, sales are a lot more predictable. Over the past five years, Bunzl’s earnings per share have grown at a compound annual rate of 8.7% as sales have risen nearly 30%.

Bunzl’s strategy is simple. It supplies the essential materials for many sectors in the service industry without which companies could not operate. This includes items such as food packaging, cleaning and hygiene products and safety protection equipment.

Because it’s the largest company in the UK offering these services, Bunzl has a tremendous competitive advantage over the rest of the industry. These products are highly commoditised, which means customers only really care about cost and, as a result, profit margins are razor thin (for the past five years the group’s operating profit margin has not exceeded 5.6%).

Competitive advantage

I don’t think Bunzl is likely to lose this competitive advantage anytime soon and should remain at the top of its game for many years to come.

With this being the case, I reckon it’s worth paying a premium for the shares even though earnings growth isn’t particularly exciting. Analysts believe earnings per share will expand 29% in 2019 and 3.6% in 2020. This growth doesn’t justify Bunzl’s current P/E of 19.1 but, in my opinion, its market-leading position and record of growth do. There’s also a dividend yield of 2.1% on offer for income investors.

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Worried about the State Pension? I’d consider these 2 FTSE 100 stocks for their 7% yields

Harvey Jones — Fri, 22 Mar 2019 15:24:05 +0000

If you want to enjoy a comfortable retirement, you have to treat the State Pension as a starting point, then move on under your own steam.

Top it up

You could then consider building a portfolio of income-generating stocks and shares, using your tax-free stocks and shares ISA allowance. These two FTSE 100 stocks could be a good place to start as both offer astonishing dividend yields of more than 7% a year, two of the most generous on the index.

Utility supplier SSE (LSE: SSE) currently yields 7.7%, more than five times the return on a best buy cash ISA. Dividend income is not guaranteed, and there have been questions over whether the SSE payout is sustainable. However, it is currently covered 1.3 times by earnings, which offers some security.

Electric avenue

Management recently re-based the dividend ahead of plans to separate the bulk of its retail division, so next year you will get 6.6%. That is still attractive. Management has a great track record on this front, increasing the dividend every year for the past quarter of a century, and plans to increase it in line with prices over the next few years.

SSE operates in a heavily regulated industry which puts a lid on growth so income is the main draw here. However, its investments in green energy could offer faster growth opportunities. This £10bn company is currently trading at a bargain price of 12.5 times forward earnings, a valuation that reflects the recent price cap and threats that a Jeremy Corbyn Labour government would nationalise utilities.

Ready for take-off

Travel giant TUI Travel (LSE: TUI) is a very different beast. It has been hugely volatile lately, its stock falling 47% in the last year, making it one of the worst performers on the index. If that level of risk scares you, then maybe look elsewhere. However, sharp slumps like this attract as many as they repel, as some investors go looking for bargains.

TUI currently trades at just 7.9 times forward earnings, roughly half the 15 times that is generally seen as fair value. There is a reason for that, though, as it issued a profit warning early in February. It followed this by reporting a sharp drop in first quarter earnings as problems in its markets and airlines division stretched into key the summer bookings period.

The £4.63bn group’s turnover rose 4.7% to €3.7bn but underlying losses jumped from €36.7m to €83.6m. Brexit is also to blame amid fears British airlines could be locked out of EU airspace under no deal. Sterling weakness, the 2018 heatwave and overcapacity in Spain have also hurt.

Brighter outlook

Tui may be heading for sunnier shores, as it will launch three cruise ships and open almost 30 new hotels this year, but first Brexit must be fixed. So again, there are risks. City forecasters predict 3% earnings growth in the year to 30 September, although they reckon they will rise 12% the year afterwards.

The big attraction is Tui’s forecast yield of 8%, with cover of 1.6. Combined with strong turnaround prospects this could be THE buy of 2019.

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How UK shares could build a £339,849 ISA

Value investors! Could this unloved, 9%-yielding FTSE 100 dividend stock be THE buy of 2019?

Royston Wild — Tue, 12 Mar 2019 14:27:50 +0000

It’s been a great start to 2019 for much of the FTSE 100 but unfortunately for TUI Travel (LSE: TUI) the ride hasn’t been as happy.

Its share price has actually tanked 31% in the year to date, due chiefly to a shock profit warning in early February. Released against a backdrop of disappointing economic datasets from across its European marketplace too, this mass dash for the exits can be understood to a large extent.

But could this sharp selling pressure present a great dip-buying opportunity for long-term investors? I think so. That heavy de-rating now leaves TUI dealing on a forward P/E ratio of 7.5 times, sitting some way below the generally-regarded bargain benchmark of 10 times.

Profits guidance downgraded

Let’s have a look at that terrible trading statement. In it, the package holiday giant declared its target of growing annual underlying EBITA by 10% in three years to fiscal 2020 was in tatters as it downgraded projections for the current year.

TUI said that it expects underlying earnings to flatline in the 12 months to September from the record €1.18bn achieved last year. This sharp downgrade reflected lower margins as it sought to protect bookings. The Footsie firm was punished by the summer heatwave which caused holidaymakers to book their holidays later, as well as overcapacity in the Western Mediterranean as travellers switched to other sunny climes on the continent.

A subsequent first-quarter update released exactly a month ago saw TUI’s share price sink even further. While turnover swelled 4.4% at constant currencies between October and December, underlying losses at the group galloped to €83.6m from €36.7m a year earlier. As well as those bookings issues, the impact of sterling weakness on margins sold to British customers also took a bite out of the bottom line.

… but the long-term outlook remains compelling

In days gone by I’ve lauded the travel titan’s long-term profits prospects as it expands its operations, and my opinion on this is unchanged. In the current year alone it’s set to open almost 30 new hotels and launch three cruise ships, and shareholders (and holidaymakers alike) can look forward to the business steadily opening up its range of destinations as well.

Clearly there’s a cloud hanging over TUI right now and the deteriorating economic landscape in Europe threatens to prolong this a little longer. As I said though, I would consider these risks baked into the company’s low, low share price right now, and that current levels represent an attractive buying-in for patient investors.

Moreover, I consider TUI a particularly-tasty proposition for income hunters. Thanks to City predictions of a 65p per share annual dividend this year, shareholders can enjoy a jumbo 8.4% dividend yield. And for fiscal 2020, the yield marches to 9.1% because of a projected 70.3p reward. It’s clearly not without risk, but I think that low rating and those smashing dividend yields make it one of the hottest Footsie shares to snap up today.

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Royston Wild 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.

2 top value FTSE 100 stocks I’d buy right now

Rupert Hargreaves — Sat, 16 Feb 2019 10:45:27 +0000

Due to concerns about the impact Brexit might have on the UK economy, shares in some of the UK’s biggest companies are currently changing hands for bargain-basement valuations.

Today, I’m looking at two such FTSE 100 stocks and explaining why I would buy them at the current price.

Soaring growth

International Consolidated Airlines (LSE: IAG) will almost certainly suffer if the UK economy slumps post-Brexit. An economic crash will depress wages, which means consumers will have less money available to spend on things like holidays, so IAG’s sales will fall.

That said, as a global airline business, IAG’s customers come from all over the world, so even if the UK economy does crash, I think the group’s international diversification will help it weather the storm.

The market doesn’t seem to agree. Indeed, right now the stock appears to be pricing in a one-third decline in profits. Shares in the airline are dealing at a forward P/E ratio of 6.5, compared to the airline industry average of around 9.5.

I don’t think the company deserves this valuation for two reasons. Firstly, because I believe it’s unlikely earnings will fall by 30% in the near term and, secondly, the company is one of the most profitable European airline groups. It reported an operating profit margin of 12% for 2017, against the industry average of less than 10%. A better-than-average profit margin usually deserves a premium valuation to the rest of the industry.

As well as its sector-leading profit margins and discount valuation, shares in IAG also support a dividend yield of 4.3%.

Considering all of the above, I think the stock is oversold, and patient investors could be well rewarded buying IAG today — with a 4.3% dividend yield, investors will also be paid to wait for the recovery.

Long-term growth

Shares in travel business TUI Travel (LSE: TUI) are suffering from the same kind of negative investor sentiment. Unfortunately, the company’s recent trading updates have done little to reassure investors that they should be investing in this business.

Still, as my Foolish colleague Peter Stephens recently pointed out, while Tui’s near-term outlook might not be attracting investors to the stock, the company’s long-term potential is more attractive.

As one of the biggest holiday and tour operators in Europe, Tui has unrivalled buying power and economies of scale, meaning it can offer discounts and experiences other holiday companies cannot. With this being the case, I’m optimistic about the firm’s long term potential. Consumers will always be looking for holidays and holiday packages, which tells me that while the industry might have to navigate some choppy waters, over the long term, demand should only increase.

On that basis, I think the stock’s current valuation of just seven times forward earnings offers a lovely opportunity to buy into this long term growth story. Only adding to the appeal is a dividend yield of 8.3%, which means that investors in Tui, just like those of IAG, will be paid to wait for the share price recovery.

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Can you afford not to buy these FTSE 100 dividend stocks next week?

Royston Wild — Sat, 09 Feb 2019 09:15:54 +0000

Ignoring the housebuilders is a classic case of looking a gift horse in the mouth, in my opinion.

Sure, FTSE 100 index’s firms such as Persimmon (LSE: PSN) may have spiked since the turn of 2019 — this particular firm is up around 25% over the past five or so weeks — but they’ve much further to go, in my opinion.

The business still deals on a bargain-basement forward P/E ratio of 8.5 times despite the rock-solid trading environment that brokers expect to keep driving earnings northwards. Trading updates across the sector remain bullish and Persimmon itself remarked in mid-January that “robust employment levels, low interest rates and a competitive mortgage market… have supported confidence and customer demand across the regions.”

News that these helpful conditions are still alive and well when full-year financials are released on February 26 could propel its share price still higher, helped again by that dirt-cheap earnings multiple. It’s a great buy right now, in my opinion, and especially so because of its giant 9.7% dividend yield.

Ready for lift off?

Buying up some TUI Travel (LSE: TUI) stock could also be a wise decision before it releases first-quarter numbers on February 12. Demand for the travel giant’s breaks is ripping higher and I expect this to be reflected in the upcoming release.

The strength of sales over at TUI remains impressive despite signs of slowing economic growth in some parts of the continent. The Anglo-German company announced in mid-January that the new year bookings surge it has experienced at weekends in recent years has continued in 2019, and in response it has expanded the wide range of summer destinations it already offers for some of its continental customers.

It’s no shock to me at least, then, that City analysts are tipping more earnings rises in the near-term and for dividends to keep increasing as a consequence, too. This results in a jumbo 5.4% prospective yield and, allied with a low corresponding P/E ratio of 11.1 times, makes it a terrific share to snap up today.

FMCG star

Reckitt Benckiser Group (LSE: RB) is another brilliant share to think about buying before it unveils full-year numbers on February 18.

Why? Well, back in October, the household goods colossus in a resilient statement reiterated its revenues guidance for 2018, despite manufacturing troubles in the third quarter. News that it has hit these targets later this month could help the Durex and Dettol maker’s share price arrest a downtrend that kicked off in autumn and move higher, assisted by its forward P/E rating of 16.8 times that sits well below its historical average.

What’s more, signs of more ripping sales growth in lucrative emerging markets — territories which make Reckitt Benckiser such a compelling growth pick — could also prompt waves of fresh buying. It’s a top purchase right now, helped by its inflation-smashing 3.1% prospective dividend yield.

The post Can you afford not to buy these FTSE 100 dividend stocks next week? appeared first on The Twelfth Magpie.

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