Have £1,000 to invest? I’d check out this 7% yielding FTSE 100 bargain for a stocks and shares ISA

Harvey Jones reckons the generous dividend from this top FTSE 100 (INDEXFTSE: UKX) stock has staying power.

| 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.

I have found a plethora of top FTSE 100 companies I think are trading at bargain valuations while dishing out generous dividends right now.

These two big name blue-chips both yield more than 9%. Alternatively, here’s a couple more FTSE 100 dividend stars, each yielding more than 10% and trading at a discount.

Imperial might

Recent stock market volatility has driven share prices down and yields up, creating bargains galore for long-term investors who can withstand short-term share price swings. Tobacco giant Imperial Brands Group (LSE: IMB) is another tempting opportunity.

Should you invest £1,000 in Carlsberg Britvic 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 Carlsberg Britvic made the list?

See the 6 stocks

It currently trades at just 10.1 times earnings while offering a juicy forward yield of 7%, more than eight times the average cash ISA, which currently pays just 0.85%. The dividend is covered 1.4 times by earnings which is pretty solid, although of course, stocks are inherently riskier than cash.

Brands power

Where Imperial Brands has disappointed is share price growth, with the stock down 30% in the last two years. Over five years, it has grown just 15%. Big tobacco is traditionally seen as a defensive sector but may offer less protection than before, as the war on smoking continues.

And now regulators are looking to crack down on vaping, which they view as a backdoor route to nicotine addiction. Last month, Imperial Brand’s Fontem Ventures vaping initiative, whose brands include blu and Reon, was one of 21 manufacturers of electronic cigarettes to receive a letter from the US Food and Drug Administration. The FDA wants to see “robust” plans to curb the rise in youth vaping, backed by threats to remove the products from the shelves.

Lower volumes

You can decide for yourself whether you want to invest in this industry, but if you do, you will be interested to know that Imperial Brands recently reported that it is on track to hit revenue and earnings growth targets in the year to 30 September, as stronger pricing offsets slightly weaker tobacco volumes.

Big tobacco is undoubtedly in retreat. Imperial Brands highlighted a 2.1% fall in tobacco sales volumes in the six months to 31 March but this looks comparatively good against a drop of 5.7% across the industry. Naturally, it is cutting costs too, with savings expected to top its original £100m target. The group is also pinning hopes on its planned heat-not-burn tobacco product which should be launched early next year and is supposed to emit fewer poisonous fumes.

Lighting up

Earnings growth is expected to be flat in the year to 30 September 2018, then pick up by 3% the following year. By then, the dividend is expected to stand at 203.81p per share, against earnings per share of 275.86p, giving ample cover of 1.35. At that point, the yield is forecast to hit an even dizzier 7.6%. 

Management is working to drive down net debt which stood at £12.7bn at 31 March. This is a reduction from £13.9bn one year earlier and a fraction of rival British American Tobacco’s hefty £45.7bn debt pile. Imperial Brands still generates plenty of cash and its dividend payout looks more secure than many of those other FTSE 100 high-yielders to me.

Should you buy Carlsberg Britvic shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy now

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.

harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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

Man smiling and working on laptop
Investing Articles

3 FTSE 250 shares with low P/E ratios and sky-high dividend yields!

Searching for the best bargains that London has to offer? Here's a handful from the FTSE 250 I think are…

Read more »

Investing Articles

Why is Apple stock lagging the S&P 500 in 2025?

Our writer is wondering whether now might be an opportune time to snap up shares of the largest company in…

Read more »

Investing Articles

Here’s how an ISA investor could build a £20k passive income with UK shares

Looking to make a five-figure passive income in retirement? Here's how a blend of UK shares and cash savings could…

Read more »

Investing Articles

£10,000 in savings? Here’s how an investor can target £3,560 in annual passive income

Paul Summers explains how an investor could target making thousands of pounds in passive income by holding great dividend stocks…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Up 490%, Lion Finance Group is a new name on the FTSE 250… but what is it?

Many investors won’t be familiar with Lion Finance Group, but the FTSE 250 stock has surged 490% over five years.…

Read more »

Growth Shares

I think this is the most punished FTSE stock in the market right now

Jon Smith talks through a FTSE company that has endured problems but is one he believes has a brighter future…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Stock market correction! 1 growth share down 53% to consider buying now

This writer highlights a growth stock that has hit a rough patch in recent weeks. Here's why it might be…

Read more »

Investing Articles

Here’s why the Tesco share price has dropped 18% in a month!

Tesco's share price has lost nearly a fifth of its value since mid-February. Is this FTSE 100 dividend stock now…

Read more »