We’re officially in a recession! To say it’s been on the cards for a while would be an understatement. However, I reckon some FTSE stocks should cope well despite the economic uncertainty.
Two of my picks in that category are Centrica (LSE: CNA) and National Grid (LSE: NG.).
Here’s why I’d buy some of the shares the next time I’m able to.
Should you invest £1,000 in Centrica right now?
When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Centrica made the list?
Centrica
Centrica is the supply side of the former British Gas and the shares have been flying recently. They’re up 34% over a 12-month period, from 104p at this time last year to current levels of 140p.
It’s fair to say that Centrica has benefitted from the energy shock caused by the Russian invasion of Ukraine. As prices of energy increased, Centrica passed this on to customers and has reported excellent results and boosted its coffers.
As these types of stocks are cyclical, this is the biggest risk going forward. The business released promising final results yesterday. However, it did mention falling commodity prices and reduced volatility could impact performance in the near future. This could potentially impact investor sentiment and returns, which is something I’ll keep an eye on.
However, I reckon Centrica has a certain amount of defensive ability. After all, everyone needs energy! Plus, the results in the past couple of years have helped Centrica boost its balance sheet and reward investors handsomely.
In 2023 alone, it returned £800m to investors through dividends and buybacks. A dividend yield of 3% today is certainly attractive. However, I’m conscious that dividends are never guaranteed. Furthermore, the shares look good value for money on a forward price-to-earnings ratio of six.
Despite the cyclical nature of stocks like Centrica, I reckon it’s a good option for me with its enticing returns policy, defensive nature, and attractive valuation currently.
National Grid
As the owner and operator of the gas and electricity transmission system, National Grid has some excellent bullish traits I find hard to ignore.
The shares are actually down 3% over a 12-month period, from 1,048p to current levels of 1,012p. However, this looks like a great entry point for me to snap up shares.
The first of these bullish aspects I’m referring to is the fact that National Grid has no competitors. This can help keep performance stable. Plus, like Centrica, it has defensive attributes as providing the country with stable energy output is essential. Next, with the consistent revenue and performance, it looks like it could be a passive income seeker’s dream. A dividend yield of over 5% is higher than the FTSE 100 average of 3.8%.
Looking at some risks, the maintenance of such a large and essential piece of infrastructure could be costly, impacting investor rewards. Plus, the government could curb payouts, which could hurt my passive income aspirations.
For me, the rewards outweigh the risks by some distance and make National Grid shares look a great buy for my portfolio, no matter the economic outlook.
