As the UK stock market outlook continues to improve, I’ve been searching for the best stocks to buy now for my portfolio.
Here are five of the companies I’ve been taking a closer look at, intending to buy.
The best stock to buy now: growth options
In my portfolio, I like to include a blend of growth and income stocks. I think plenty of businesses tick both boxes right now.
For example, paper and packaging group Mondi and homebuilder Persimmon are both expected to deliver impressive growth this year.
Current projections suggest Mondi’s earnings will jump by nearly 10% in 2021. Persimmon is expected to deliver a similar level of earnings growth. As well as this growth potential, the companies support dividend yields of 2.5% and 8% respectively, based on forward dividend estimates.
I should state these are just projections at this stage. There’s no guarantee either company will meet City growth or dividend expectations for the year ahead. So, I’ll be keeping an eye on these firms’ progress throughout the year. Nevertheless, as blue-chip income and growth buys, I’d add both stocks to my portfolio.
Small-cap stocks can be better growth investments than blue-chips. Although this isn’t always the case, there’s always space for small-cap stocks in my portfolio.
Small-cap stocks
Two companies I’d buy that offer both income and growth are Tyman and S&U. The former is projected to report earnings growth of 37% for 2020 and 5% for 2021. Its dividend yield could rise to 3% based on these projections. Meanwhile, according to current projections, shares in S&U could yield as much as 4.4% in 2021.
Both of these companies do face potential risks. As a finance provider, S&U is incredibly exposed to UK consumer balance sheets, which the coronavirus pandemic has badly impacted. This could cause losses for the business in the future.
Supplier of engineered door and window components, Tyman could see a drop-off in demand if the housing market takes a turn for the worst. In both scenarios, City growth estimates could quickly become out of date.
Recovery play
The final organisation on my list of the best stocks to buy now is ITV. All figures suggest this company will report a sharp decline in income for 2020. However, earnings are expected to recover in 2021 as advertisers return to the platform. According to analysts, this could allow the group to reintroduce its dividend payout to investors. They’ve pencilled in a dividend of 5.4p for 2021, indicating a yield of 4.9%.
This projection is by no means guaranteed. ITV’s top and bottom lines have been under pressure for several years now, due to the rise of streaming. As US streaming giants continue to devote billions of dollars to new content every year, the firm’s viewing figures are likely to remain under pressure.
Nevertheless, despite the risks of owning the stock, I think the company could be a good way to play the UK’s economic recovery. That’s why I’d buy the shares for my portfolio today.
