I already hold these FTSE 100 shares in my Stocks and Shares ISA. And I’m considering which one to buy more of when I next have cash to invest. Which one would be the better buy?
Barratt Developments
I first bought Barratt Developments (LSE:BDEV) shares in 2020 because of the company’s ultra-generous dividend policy. In fact, the entire housebuilding sector has a long history of delivering market-beating payments.
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The UK housing sector is currently experiencing its biggest slump since the 2008 financial crisis. But despite this, City analysts still expect dividends from Barratt to beat those of most other FTSE 100 shares. For this financial year (to June 2024) the builder carries a 5.1% dividend yield.
But despite this big yield I’m not tempted to top up my holdings in the company. The housing market is still declining at an alarming pace (latest Nationwide data showed average property values slump 5.3% in September). And conditions are tipped to remain difficult as the UK economy slows and high inflation keeps interest rates at elevated levels.
This casts a shadow over dividends this year and beyond. Alarmingly, fiscal 2024’s expected reward is covered just 1.6 times by expected earnings. This is below the minimum safety benchmark of two times and leaves little wiggle room if profits disappoint.
Fortunately, Barratt has one of the strongest balance sheets in the business. It had net cash on the balance sheet of £1.1bn as of June, basically flat from a year earlier.
However, a healthy cash pile didn’t prevent the company from cutting the full-year dividend 8.7% last year. Back then it said it would retain surplus cash in spite of “current market uncertainty”. With housing demand still weak it’s possible that the builder will continue to prioritise holding cash over paying dividends.
I plan to keep my Barratt shares given the bright long-term outlook for Britain’s homes market. But I’d prefer to buy other shares to guarantee a solid passive income in the short-to-medium term.
Coca-Cola HBC
I also own Coca-Cola Hellenic Bottling Company (LSE:CCH) in my Stocks and Shares ISA. But unlike Barratt Developments, this is a FTSE 100 share I’d happily buy more of today.
That’s not to say that the soft drinks giant doesn’t face its own problems. High cost inflation, for instance, could remain an issue going forwards. Intense competition from fellow industry giants like PepsiCo will definitely continue to provide an ongoing threat.
However, Coca-Cola HBC has proved (at least so far) that it has the mettle to still grow profits. This is thanks to the stunning brand power of its beverages like Coke, Fanta, and Sprite.
Customers buy these products in huge volumes even when times are tough. Indeed, consumer loyalty is so strong that the firm can even effectively hike prices to offset rising costs. These qualities are why net sales and pre-tax profits jumped 19.3% and 125% respectively during the six months to June.
Today Coca-Cola HBC shares yield a healthy, if unspectacular, 3.5% for 2023. However, the company’s brilliant track record of dividend growth still makes it an exceptional income stock to buy.
