£5k to invest? Here are two FTSE 100 income giants I’m eyeing up today

Standard Chartered plc (LON: STAN) and Croda International plc (LON: CRDA) are two FTSE 100 (INDEXFTSE: UKX) stocks that merit a closer look, Harvey Jones says.

| 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.

Asia-focused FTSE 100 bank Standard Chartered (LSE: STAN) has given investors a rough ride with the stock still trading 50% lower than it was five years ago. Those who bought recently hoping to pick up a bargain have been punished by a further dismal year. That could now change.

Low Standard

Its stock is down around 2% today after publication of its 2018 final results, despite group chief executive Bill Winters hailing “significant improvement in profitability driven by higher quality income growth with cost and asset origination discipline.” He also bigged up the tremendous progress securing the foundations of the business since 2015,” resulting in a third successive year of underlying profit growth.

There are plenty of positive numbers, with operating income up 5% to $15bn and $3.2bn in gross cost efficiencies, exceeding the target set in November 2015. Net interest income increased 8% while credit impairment fell 38% to $740m. Underlying profit before tax rose 28% to $3.9bn.

Chartered waters

Standard Chartered also strengthened its balance sheet, lifting its CET1 ratio 60 basis points to 14.2%, which should boost its resilience to economic shocks. There could be plenty of those amid fears of a global recession, with China and Asia particularly vulnerable, and the US trade war that has been hurting for some time.

Basic earnings per share increased 14.2 cents to 61.4 cents, and the board rewarded loyal investors by hiking the final dividend 36% to 15 US cents. Standard Chartered now offers a forecast yield of 3.6% with cover of 2.8. It still trades at a bargain price of 9.7 times forecast earnings, which looks promising with forecast earnings growth of 20% in 2019, and 11% the year after.

Like every bank, Standard Chartered remains a work in progress and is also vulnerable to wider economic troubles. However, my colleague Roland Head reckons its recovery could have further to run.

Chemicals reaction

Speciality and industrial chemicals manufacturer Croda International (LSE: CRDA) has had a solid year, rising almost 12% in 12 months, against just 1.8% across the FTSE 100 as a whole. Over five years, it’s up 100%.

Today, it published its results for the year ended 31 December 2018 and the stock fell 3% in response as pre-tax profits rose just 1% to £317.8m, with revenues also up 1% to £1.39bn. Core business sales were 3.8% higher at constant currency at £1.27bn. But it was hit by adverse FX movements, as currency translation reduced sales by £26.2m and adjusted pre-tax profit by £8.7m.

It did grant investors a special dividend of 115p per share, totalling £150m, alongside a 7.4% increase in the full-year ordinary dividend to 87p. Croda is a relative low yielder at 1.9% with cover of 2.1 but at least management policy is progressive. It could also deliver growth over the long term.

Front Foots

Chief executive officer Steve Foots hailed “another year of strong progress” as Croda once again delivered “top line growth at industry leading margins to achieve superior returns.” He also highlighted “relentless innovation and by investing in disruptive technologies and exciting new growth opportunities,” although our old friend “challenging global market conditions” also got a mention. 

Croda looks a bit expensive, though, trading at 24.7 times forecast earnings, with a PEG of 3.1. Forecast earnings growth nonetheless looks steady at 8% in both 2019 and 2020, and a return on capital employed of 34% suggests a well-run operation.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Standard Chartered. 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

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »