2 UK cybersecurity shares I’d buy right now

Cybersecurity shares Avast and BAE Systems are two stocks I’d buy today that look to have both high-growth potential and dividend income.

| 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.

Cybersecurity shares have been somewhat resilient to the Covid-19 pandemic, and for a good reason. Despite the economic slowdown, the situation has pushed many governments, businesses and individuals to go online. As such, the adoption of new security measures against cyber crimes was inevitable.

Two cybersecurity shares in the UK that seem to offer a good value for money right now are Avast (LSE: AVST) and BAE Systems (LSE: BA).

Cybersecurity is a necessity

Avast is a widely known antivirus company with a full range of protection solutions for individuals and large businesses. This dividend-paying stock has been on a great run since its IPO in July 2017, and ever since Covid-19 has taken centre stage, the Czech cybersecurity software company has actually seen an increase in its business volume.   

Avast has a £5.39bn market capitalisation, which means it has a functional role in hedge funds and large-scale investments. Another crucial factor why I’d buy this cybersecurity share right now is that just four months ago, the company joined the prestigious FTSE 100 index.

Overall, Avast has an impressive YTD return of 10% and 1Y return of 30% at the time of writing. Further, as many companies scrapped payouts to shareholders amid the Covid-19 crisis, Avast has proposed to pay a final dividend of 4.8 cents per share in October 2020. These factors make Avast one of the best growth and dividend stocks out there in the market in my opinion.

An opportunity?

BAE Systems is a massive aerospace global company that develops, among other services, cybersecurity and intelligence technology. Its shares have dropped about 15% since the beginning of the year and around 27% from the yearly peak of 669p in February. Plus, it still has debt issues and had to sell $2bn bonds to refinance debt.

Looking ahead, however, it’s not all gloomy for BAE Systems . BAE’s earnings come from long-term military contracts that ensure a flow of steady income. At the same time, the British company also strives to grow its business with new contracts and the development of new technologies. Recently, BAE Systems unveiled the next-generation cyber protection suite for military vehicles, known as the Fox shield. Then, for the fourth consecutive time, BAE Systems was awarded an £87m Archerfish mine neutralizer contract with the US Department of Defense.

What’s more, the company’s P/E ratio of 12.79, which is below the industry average, implies that the stock is trading at a relatively cheap price. And despite the company’s warning of lower Q2 earnings due to the Covid-19 disruption, the results were not that bad – half-year profits dropped by 11% but BAE expects sales to increase by around 5% by the end of the year.

All in all, BAE Systems’ shares looks like a good deal to me.

Is now the right time to buy cybersecurity shares?

Given the current situation of the Covid-19 global pandemic, any work-from-home related-stock has big potential. In my opinion, Avast seems to be the better investment of these two cybersecurity shares, largely due to its healthy balance sheet, the expected increase in users (currently Avast has around 435 million users), and the certainty of dividend income for investors.

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.

Tom Chen 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

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

3 value shares for investors to consider buying in 2025

Some value shares blew the roof off during 2024, so here are three promising candidates for investors to consider next…

Read more »

Investing Articles

Can this takeover news give Aviva shares the boost we’ve been waiting for?

Aviva shares barely move as news of the agreed takeover of Direct Line emerges. Shareholders might not see it as…

Read more »

Investing Articles

2 cheap FTSE 250 growth shares to consider in 2025!

These FTSE 250 shares have excellent long-term investment potential, says Royston Wild. Here's why he thinks they might also be…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

Has the 2024 Scottish Mortgage share price rise gone under the radar?

The Scottish Mortgage share price rise has meant a good year for the trust so far, but not as good…

Read more »

Investing Articles

Will the easyJet share price hit £10 in 2025?

easyJet has been trading well with rising earnings, which reflects in the elevated share price, but there may be more…

Read more »

Investing Articles

2 FTSE shares I won’t touch with a bargepole in 2025

The FTSE 100 and the FTSE 250 have some quality stocks. But there are others that Stephen Wright thinks he…

Read more »

Dividend Shares

How investing £15 a day could yield £3.4k in annual passive income

Jon Smith flags up how by accumulating regular modest amounts and investing in dividend shares, an investor can build passive…

Read more »

Investing Articles

Could this be the FTSE 100’s best bargain for 2025?

The FTSE 100 is full of cheap stocks but there’s one in particular that our writer believes has the potential…

Read more »