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With a new ISA year starting soon, I’ve been looking ahead and thinking about what FTSE 100 deals I’d get next month, if I had the extra money to invest.
Here are three of them.
For income: M&G
fund manager M&G (LSE: MNG) pleased shareholders, including me this month, by increasing its annual dividend by 7%. That’s in line with his policy to maintain or increase the payment each year, but it was a bigger increase than he expected.
Not only that, a lackluster share price right now means the dividend yield on offer here is 10.3%. That is very attractive to me. M&G has a well-known brand name, a large client base and is likely to benefit from strong long-term demand for asset management services.
What can go wrong? One concern I have about this FTSE 100 stock is M&G’s weak track record when it comes to customer retention. Net customer inflows into the wholesale business last year were below 1%, while the institutional division posted net outflows. If M&G sees net outflows in the future, profitability could suffer.
However, I like the strengths of the business and the performance is very attractive to me.
For growth: JD Sports
One of the most impressive FTSE 100 stocks of the last decade has been the retail Sports (LSE: J.D.).
I also think one of the most impressive FTSE 100 growth stocks of the next decade could end up being… JD Sports. The company has a simple retail model that has been perfected over many years. That makes it easier to scale, something the company has done with its broad international reach.
Many UK companies today seem to be cowering in anticipation of difficult economic times rather than grasping the future with both hands. By contrast, JD Sports has set ambitious growth plans that include hundreds of new store openings annually.
The business is already handsomely profitable. Last year’s after-tax profit was £460m. But I expect strong revenue and profit growth in the coming years.
That could come at the cost of profit margin dilution. I also see a risk to sales if a recession leads shoppers to cut back on expensive clothing and shoe purchases. But I view JD Sports as a well-run company with a proven business model.
By value: Mondi
I am not a value investor in the pure sense of looking for businesses that appear to be valued on the cheap. I do like attractive valuations (what investor doesn’t?) but I focus on the quality of the business when investing.
Another FTSE 100 stock on my radar for April offers what I think is a solid deal at an attractive valuation. packaging company worlds (LSE: MNDI) is likely to benefit long-term from strong demand for packaging. It has a prominent position in the industry and is an earning powerhouse. Despite this, and a dividend yield of 4.9%, the stock is currently trading with a price-earnings ratio of less than 8.
I see a risk that increasing global capacity could drive down selling prices and profit margins. But I like Mondi’s task force and international exposure.
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