This 6%+ FTSE 100 high yielder and 6%+ income stock could help you retire early

Harvey Jones can’t help but admire the juicy income paid by this FTSE 100 (INDEXFTSE: UKX) stock and an emerging markets specialist.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The last six months have been rough for investors in City of London Investment Group (LSE: CLIG), with the share price down around 10% amid emerging stock market uncertainty. They will be smiling today, with the stock up 2.5% in early trading after management announced a 10% increase in funds under management to £3.9bn for its financial year to 30 June.

Come on City

The specialist asset management group, which focuses on emerging markets and closed-end funds, announced a 10% rise in pre-tax profits of £12.8m, slightly lower than expected, while earnings of £10.1m were slightly ahead. Basic earnings per share (EPS) are expected to have risen 7% to 39.5p.

City of London is an attractive stock for income seekers and there was more good news on that this morning, with a 1p hike in the final dividend raising it to 18p, or 27p for the year, a rise of 8%. Dividend cover will be almost 1.5 times for the second consecutive year, above its rolling five-year target of 1.2 times. These positive numbers come despite the recent struggles afflicting emerging markets.

Nice discount

Brokers are impressed by the results, with Hardman and Co pointing out that City of London has proved to be more robust than rival emerging market fund managers, helped by good performance and strong client servicing. It also admired its valuation of 9.9 times earnings, which puts it at a discount to its peer group.

My Foolish colleague Rupert Hargreaves notes that it has no net debt and and £16.4m of cash, enough to cover the dividend for two-and-a-half years. I would also like to point out that it offers an appealing historical yield of 6.6% (forecast to hit 6.8%), while warning that further emerging market volatility could hit performance and drive outflows. Operating margins of 37.6% also encourage, so long as emerging markets hold up.

Viva Aviva

Insurance behemoth Aviva (LSE: AV) has also had a bumpy time lately, the stock trading 10% lower than one year ago, but just look what that share price slippage has done to its yield. The FTSE 100 stalwart now trades at a forecast yield of 6%, covered twice, making it one of the most enticing income plays on the index.

It falls short on share price growth, with today’s 492p just below its pre-crisis levels of a decade ago, when it topped 500p. It is up just 34% in the past five years, whereas a FTSE 100 tracker would have given you 38% over the same period. However, that generous income still gives it the edge, whereas the index currently yields just 3.84%.

Well covered

Peter Stephens reckons now may be the perfect time to buy into Aviva, with dividends expected to rise by 9.2% per annum in the next two financial years. Given current strong cover, that looks sustainable and management is keen to reward its loyal investors.

Aviva’s plan to spend £2bn of excess capital should reward shareholders with £600m in share buybacks, alongside £900m spent on cutting debt and £500m on bolt-on acquisitions. With City analysts forecasting EPS growth of a whopping 68% this year, followed by 8% in 2019, there is new life in Aviva.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

harveyj 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.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »