I’d buy these 2 FTSE 100 dividend growth stocks to access the world’s fastest-growing market

Harvey Jones picks out two FTSE 100 (INDEXFTSE:UKX) stocks give you direct exposure to action in Asia.

| 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.

Asia is the world’s fastest-growing region, delivering half of all global GDP growth last year, with one-third coming from China alone.

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.

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.

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.

More on Investing Articles

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

I’m aiming for a million buying unexciting shares!

By investing regularly in long-established, proven and even rather dull businesses, this writer plans to aim for a million. Here's…

Read more »

Investing Articles

3 things to consider before you start investing

Our writer draws on his stock market experience to consider a few vital lessons he would use to start investing…

Read more »

Investing Articles

Will this lesser-known £28bn growth stock be joining the FTSE 100 soon?

As the powers that be plan a reorganisation of Footsie listing rules, this massive under-the-radar growth stock could find its…

Read more »

Investing Articles

Fools wouldn’t touch these 5 FTSE 350 flops with a bargepole – how come I own 3 of them?

Harvey Jones took a chance on three struggling FTSE 350 stocks in the hope that they'd stage a dramatic recovery.…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

How I’m trying to make a million from passive income

Invest as much as possible, regularly, and use the passive income to plough back into more shares. Here's how millionaires…

Read more »

Investing Articles

I’d buy 30,434 shares of this UK dividend stock to target £175 a month in passive income

A top insider has spent over £1m buying this 9%-yielding passive income share over the last year. Roland Head explains…

Read more »

Growth Shares

Should I buy Rolls-Royce shares for 2025?

Edward Sheldon’s missed out on the huge gains that Rolls-Royce shares have generated this year. But should he buy the…

Read more »

Investing Articles

30,000 shares in this FTSE 250 REIT could earn me £559 a month in passive income

Real estate investment trusts can be great passive income investments. And Stephen Wright likes one from the FTSE 250 with…

Read more »