It’s been party time for plenty of FTSE 100 stocks in the first half of the calendar year. Though for some stocks, the prospect of a strong finish to the period (not to mention a robust second half) look a little less secure.
Tesco is one share that’s gushed higher in recent months but is one which I’d be reluctant to splash the cash on today, though. Instead I’d much rather buy the dividend stocks I discuss below.
A better buy
Like Tesco, Barratt Developments (LSE: BDEV) has seen its share price rise by more than a fifth since the start of January, though sentiment towards the homebuilder has moderated since the middle of May.
Why? Well, the recent bout of Tory in-fighting over Brexit in recent weeks, one which has prompted the resignation of premier Theresa May and one which raises the spectre that an advocate of an economically-disastrous no deal exit will become prime minister, hasn’t helped. As the process to select a new leader continues through June it’s quite possible Barratt’s share price could continue to sink.
That said, I’m sticking to my guns and continuing to say that the newbuild specialists remain great stocks to buy today for long-term investors. The scale of Britain’s homes shortage means that sales and profits keep rising at the likes of Barratt and, given government inaction to solve the crisis, I fully expect it to keep impressing on the trading front long into the future.
The InterContinental champion
Right now, Barratt deals on a forward P/E ratio of 8.1 times and boasts a brilliant 8% dividend yield, numbers which make it a great buy despite the possibility of some share price stress in the next few months at least.
For those concerned about the impact of European Union withdrawal on their shares portfolio, another white-hot income share from the Footsie might be a better pick instead… InterContinental Hotels Group (LSE: IHG).
This mega-cap has seen its share value boom 21% since the start of 2019 and I wouldn’t be surprised to see it end the half with a final surge in June. Firstly, the business reports in US dollars, giving it an extra boost when sterling comes under pressure. Secondly, the UK only represents a small proportion of total profits, making it a popular pick with those seeking to minimise the impact of Brexit on their investment portfolio.
I won’t pretend InterContinental is a share that will make you rich instantaneously as its dividend yield for 2019 sits at a modest 2%, far below the FTSE 100 corresponding average of 4.5%.
However, I reckon the hotel operator is a great income share for patient investors given the rate at which it’s hiking annual dividends. Last year, it hiked the total payout 10% to 114.4 US cents per share, and it’s predicted to lift the reward to 128 cents in the current period too.
Now InterContinental’s forward earnings multiple of 21.1 times doesn’t make it cheap, but I would argue this is a small price to pay to tap into its great earnings record and gigantic hotel development pipeline. I would happily buy it today and hold it for many years to come.