We’re getting into results season for our FTSE 100 stocks. And we had a few in the past week that investors might want to consider buying.
I’ll start with NatWest Group (LSE: NWG), which could be my top pick of the whole Footsie right now.
Big dividend
The share price gained a few percent in 16 February, on the back of a solid set of FY 2023 results. An attributable profit of £4.4bn and a 17.8% return on tangible equity were both ahead of the board’s guidance.
Bad debts still mean risk, and the bank made an impairment charge of £578m for the year. It did describe defaults as low and stable. But I fear we could see more in 2024. A sale of the government’s stake could hold the share price back too.
Still, two things make NatWest’s long-term returns look good. One is the 17p dividend for 2023, for a 7.5% yield. The other is a new £300m share buyback, just announced with the results.
I reckon 2024 could be a great year to buy FTSE 100 bank stocks.
Cheap gas stock
I think the market has passed Centrica (LSE: CNA) by, though FY results on 15 February gave the share price a small boost.
Even though the shares have been gaining since the Covid slump, they’re still largely flat over the past five years.
Broker forecasts put the stock on a price-to-earnings (P/E) ratio for the coming year of 6.5, which looks low. They have the 2024 dividend yield at 3.4%, and rising.
The firm recorded a whopping £6.5bn operating profit for 2023, from a loss the previous year. In adjusted terms, though, we saw a fall from £3.3bn to £2.8bn.
Energy prices
The year was driven by a booming year for British Gas, on the back of soaring fuel prices.
That’s likely to be the cause of the long-term share price weakness, and the low stock valuation. If Centrica shares only seem cheap when gas profits are soaring, what will they look like when prices fall?
But, on balance, I still see a long-term cash cow here.
Water bargain?
The third FTSE 100 stock I’ve had my eye on this week is United Utilities (LSE: UU.). We had a trading update on 14 February, which gave the share price a modest boost.
I see things that could push the United Utilities share price either way in the next few years.
I like its earnings growth forecasts. And there are rising dividends on the cards, with yields nudging 5%. The long-term visibility of revenues also adds a bit of safety to the equation, I think.
Mind the debt
On the other side, there’s a lot of net debt here. As much as £8.5bn at the halfway stage, in fact. And we’re talking about a company with a market cap of only £7bn.
With its earnings visibility, I don’t think the debt is as big a danger as it might be with other companies. But it is a risk, and investors need to weigh it carefully.
