Retirement saving: AstraZeneca is a FTSE 100 dividend stock I’d buy today

AstraZeneca plc (LON: AZN) could deliver impressive long-term growth versus the FTSE 100 (INDEXFTSE:UKX).

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

FTSE 100 dividend shares could prove to be worthwhile buys for the long term. Not only do they offer the potential for investors to obtain an inflation-beating income return, in many cases they may offer protection against the prospect of difficulties for the UK economy as Brexit moves ahead.

One company offering an improving dividend outlook is FTSE 100 pharma stock AstraZeneca (LSE: AZN). Set to experience rising profitability over the medium term, this could boost its dividend prospects.

Also offering an impressive income outlook is a smaller company which reported positive news on Tuesday.

Impressive outlook

That company in question is real estate investment trust (REIT) Capital & Regional (LSE: CAL). The shopping centre specialist released news that it’s received formal consent for its extension and development plans at The Mall Walthamstow. It will transform the Walthamstow town centre, according to the company’s update, with an 86,000 sq ft extension planned for the existing shopping centre as well as up to 500 new residential homes.

Looking ahead, the plans could help to boost Capital & Regional’s bottom line growth rate over the medium term. The company is expected to report a rise in earnings of 7% in the current year, followed by additional growth of 6% next year. This suggests its strategy is performing well, with the slowdown in the UK economy not seeming to have affected its financial performance.

With a dividend yield of around 8.5%, the stock has significant income appeal. Its price-to-earnings (P/E) ratio of around 12 indicates it offers a margin of safety, which suggests that significant total returns could be on offer over the long run.

Changing business

AstraZeneca’s income potential also appears to be positive. Certainly, a glance at its track record of dividend growth indicates that it lacks appeal. However, the company has faced major challenges in recent years from the loss of patents that has resulted in rising generic competition and a lack of income growth. This has forced it to freeze dividends for a number of years.

In future, though, the company’s aggressive acquisition activity is set to yield positive results for its income profile. AstraZeneca is expected to deliver bottom-line growth of 12% in the next financial year. This puts it on a price-to-earnings growth (PEG) ratio of 1.8, which suggests that it could offer good value for money. Moreover, it means that dividend growth could begin to improve from 2019 onwards. This could help to boost its dividend yield of 3.6%.

With AstraZeneca also having a defensive business profile, it could perform well in a variety of market conditions. For investors who are concerned about the outlook for the UK economy, this attribute may make it more appealing. As such, now could be the right time to buy it ahead of what may prove to be a period of stronger financial performance that leads to rising dividends.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of AstraZeneca. The Motley Fool UK has recommended AstraZeneca. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »

Investing Articles

I’m expecting my Phoenix Group shares to give me a total return of 25% in 2025!

Phoenix Group shares have had a difficult few months but that doesn't worry Harvey Jones. He loves their 10%+ yield…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

14.5bn reasons why I think the Legal & General share price is at least 11% undervalued

According to our writer, the Legal & General share price doesn’t appear to reflect the underlying profitability of the business. 

Read more »