Why I’d buy this 4.5% dividend yield and this palladium ETF in January

Royston Wild talks about two top investments he would consider this month.

| 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.

With risk appetite returning to financial markets, now could be a great time to go dividend shopping. And I would argue that buying shares in SThree (LSE: STHR) in particular could prove to be a brilliant idea.

It’s not just that the recruitment specialist trades on a bargain-basement forward P/E ratio of 10.5 times. Nor that it offers up a huge 4.5% corresponding dividend yield. It’s that its low rating, blended with the possible release of full-year financials on January 27, could help its share price to surge.

It’d be foolish to claim that SThree is immune to the broader slowdown in the global economy, of course. But thanks to the company’s focus on the specialised STEM segments — that is Science, Technology, Engineering and Mathematics — it is still managing to keep growing net fees (up 5% in the 12 months to November 2019). And this is putting it in a strong position to keep offering larger and larger annual dividends.

The FTSE 250 firm claimed in mid-December that “in our key growth markets, the new financial year has started well with good demand, and this gives us confidence that we will continue to outperform materially in our international markets.”

Confirmation that trading remains sunny later this month would surely prompt a flurry of buying activity, helped by a recent weakening in the share price.

Showing some metal

Much has been made of gold’s ascent to seven-year highs in early 2020, but another safe-haven asset that’s also ripped higher of late is palladium. The platinum group metal (or PGM) has just struck record peaks around $2,120 per ounce, a far cry from the $420 it was trading at at the start of the last decade.

There are ways for share investors to get exposure to palladium, for example by buying stock in FTSE 100-listed Anglo American, which owns and operates PGM mines in South Africa and Zimbabwe. However, the fragile supply and demand outlook for some of the company’s other commodities (like coal, iron ore and diamonds) would discourage me from purchasing the share.

On the charge!

A much simpler way to ride the palladium price boom is by buying a financial instrument that’s backed by physical holdings of the metal like an exchange-traded fund (ETF). One such device is the Aberdeen Standard Physical Palladium Shares ETF, which rises and falls in value according to movements in spot palladium prices in London.

The asset surged 58% in value in 2019 as palladium prices rocketed, and as I type, is currently dealing at record tops around $202. And if recent broker commentary is to be believed, it looks as if the ETF should continue to surge — the boffins over at UBS, for instance, have said recently said that “significant upside risks” to their $2,000 forecasted average for palladium prices in 2020 are building.

And it’s easy to see why the number crunchers are so bullish as macroeconomic tension boosts flight-to-safety interest, signs of a US-Chinese trade deal boost hopes of growing industrial demand, and operational problems in South Africa continue to whack supply.

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.

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.

More on Investing Articles

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »

Investing Articles

I’m expecting my Phoenix Group shares to give me a total return of 25% in 2025!

Phoenix Group shares have had a difficult few months but that doesn't worry Harvey Jones. He loves their 10%+ yield…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

14.5bn reasons why I think the Legal & General share price is at least 11% undervalued

According to our writer, the Legal & General share price doesn’t appear to reflect the underlying profitability of the business. 

Read more »