Instability has rocked FTSE 100 shares recently as various reasons to pause the unlocking of the UK put the promise of ‘freedom day’ in jeopardy. In the end, despite rocketing cases of Covid-19 around the country, most restrictions have been lifted.
This decision has had a big impact on what I’d be tempted to invest in over the coming weeks and months.
Rolls-Royce will benefit from the return of aviation
I’ve spoken a lot about Rolls-Royce (LSE:RR). Back in April, I described the company as “a little too risky for me at the moment,” but I might have changed my mind since then.
Civil aviation demand is returning. The very fact that you can see planes in UK skies once again is a good sign for many FTSE 100 shares. For Rolls-Royce, it’ll mean more engine sales, and even more crucially, more opportunities to fix engines.
Furthermore, its defense division makes up almost a third of its revenue, and despite the pandemic, this grew by 4%. This makes me quietly confident.
One of the key factors in my decision here is simply share price. At the time of writing, it stands at 96p. During lockdown on 17 March 2021, a share was worth 127p. At the start of 2020 – 233p. On paper, this looks like a worrying decline, but with the company currently now much more operational, that 96p does seem cheap either way.
Of course, with cases rising and the re-opening of the UK likely to only accelerate this, there’s no real way of knowing if we’re out of the woods yet. Another Covid-based blow for the aviation industry could spell disaster for these FTSE 100 shares.
In fact, the company has already started selling assets. It has sold Bergen Engines and is looking to offload its 50% stake in AirTanker. It’s hard to tell whether these decisions are down to panic, or simply smart decisions to help its financial situation in preparation for a post-pandemic world.
SSE: FTSE 100 shares with green credentials
SSE (LSE:SSE) is the third-largest gas and electricity supplier in the UK. Despite this, the company has never really been on my radar. Until recently, that is.
One of my favourite things about SSE is its green credentials. It aims to triple its generation of renewable power and reduce carbon intensity levels by 60%, both in the next 10 years. I think this is a great sign for the long term.
However, there are a multitude of financial reasons to be excited by SSE as well. The company currently offers a dividend yield of more than 5%, which is nearly double the average of most FTSE 100 shares. It also managed to remain profitable during the pandemic, and reported a 4% increase in profit before tax for the year.
But as with any investment, there are downsides. Manika Premsingh went into detail on how the Consumer Price Index could impact the company’s dividend back in May.
More generally, the energy sector is very competitive. This means SSE will have to fend off bigger companies such as British Gas and EDF as it attempts to grow further.
While each of these FTSE 100 shares have their own unique (and quite large) risks, I’ll probably be taking advantage of the low prices of what seem like good long-term investments.
