It’s no secret that rising energy bills and inflation have drained a lot of disposable cash from bank accounts recently. With my savings account dry, I’m turning to these two UK stocks to aim for long-term growth. Let’s take a closer look to see why I find them so attractive.
Strong operating cash flow
The first company I’m looking at is Associated British Foods (LSE:ABF). The business – a food and ingredients specialist and fashion retailer – has seen its share price fall 20% in the past three months. At the time of writing, it’s trading at 1,279p.
An interesting aspect of the company is its dividend policy. For the year ended September 2021, it paid 40.5p per share. This equates to a yield of around 1.61% at current levels. While this isn’t the highest on the market, it’s still competitive.
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Dividend policies may be subject to change in the future.
The firm recently released its full-year expectations for the year ended September 2022. It forecasts that revenue will be “well ahead” of last year’s results.
In addition, adjusted operating profit may be higher than last year, while its fashion retail chain Primark could have year-on-year sales growth of 40%.
However, operating profit and earnings per share (EPS) are expected to fall in the coming year. This is largely due to inflation and supply chain issues.
Despite this, the business has operating cash flow of £2.03bn, meaning that it should be able to navigate through any short-term problems that arise.
Surging profits
Second, I’m drawn to Glencore (LSE:GLEN). In the past three months, the shares have climbed 14% and currently trade at 494p.
The mining firm also has an attractive dividend yield of 4.39%. Last year it paid $0.26 per share.
The business has benefited from elevated commodity prices over the last couple of years. Much of this has been caused by the economic reopening following the pandemic.
For the six months to 30 June, interim core profit increased by $10.3bn. Furthermore, the company will return $4.5bn to shareholders through a share buyback scheme and a special distribution. It’s good to know that I could gain income in addition to dividend payments.
There is, however, the real threat posed by supply chain issues. In addition, a recession may lead to a downturn in demand for many of the commodities that Glencore produces.
Despite this, the firm is still a major player in the liquefied natural gas (LNG) market. It’s widely expected that the price of LNG will continue to rise as demand increases through the winter. This could be good news for Glencore.
Overall, both companies offer growth prospects and a potentially stable income stream. With these things in mind, I’ll be adding both businesses to my portfolio soon as I steadily rebuild my cash reserves.
