Next time I have some cash to invest, I plan to buy Vodafone (LSE: VOD) and Diageo (LSE:DGE) shares.
This is why!
Vodafone
As one of the largest telecommunications companies in the world, Vodafone's day-to-day life has not been easy in recent months. An announcement to increase dividends has not been well received by investors and the market.
I assume this is reflected in the share price. Vodafone shares are down 2% over a 12-month period from 77p this time last year to current levels of 75p. However, the meandering chart below shows the up-and-down journey the company has been on recently.
My attraction to the stock is primarily related to the long-term growth prospects that could generate excellent value and returns for shareholders.
A big part of this is the deployment of 5G, which is increasing. Furthermore, Vodafone's foray into the African market, as well as its already established presence, is exciting. Demand for mobile services has taken off in recent years and there is still plenty of room to grow. This could mean increased profits as well as juicy profitability.
The natural risk here is that a complex geopolitical landscape with the potential for trouble could prevent Vodafone from moving forward and, in turn, making profits. This is something I will keep a close eye on in the future.
Otherwise, Vodafone is a profitable business, with extensive presence and brand power. From a fundamental perspective, the stock appears to be good value with a price-to-earnings ratio of 10. Additionally, a dividend yield close to 7% is attractive. However, I understand that dividends are not guaranteed.
Diageo
If you like to have a drink from time to time, there is a good chance that you have consumed one of Diageo's popular brands. The spirits maker is a dominant player in the market and has a global presence.
The stock hasn't had the best time lately, falling 21% in a 12-month period. This time last year they were trading at 3,332p, compared to current levels of 2,630p.
I think a big part of this is due to weakening consumer spending due to economic uncertainty. The company has noted this in its Latin American, Caribbean, and even the United States segments in recent updates. Since most of its brands are premium, consumers buy less or turn to cheaper alternatives. This is an ongoing risk and I will be vigilant moving forward.
From a bullish perspective, I find it difficult to ignore Diageo's brand power as well as the return policy for investors. The company, known as Dividend Aristocrat, has been raising payouts for 37 years. However, I understand that past performance is no guarantee of the future.
Diageo's dividend yield currently stands at 3.1%, which is not the highest. However, I believe that once economic volatility dissipates, the company could deliver increasing returns in the years to come.
Finally, Diageo shares are trading at a price-to-earnings ratio of 19. While not the lowest, it is significantly downgraded from its historical average of around 24 in recent years.
The post 2 Wonderful FTSE 100 stocks to Buy in June appeared first on The Motley Fool UK.
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- Should I buy Diageo shares or not touch them with a barge?
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- Why does Diageo's share price continue to fall?
- Vodafone's share price looks very cheap. I still wouldn't touch it with a barge.
Sumayya Mansoor has no position in any of the stocks mentioned. Motley Fool UK has recommended Diageo Plc and Vodafone Group Public. The opinions expressed about the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make on our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that Considering a wide range of knowledge makes us better investors.
