It is extremely unlikely that you’ll win the National Lottery. The odds of hitting the jackpot are 45m to one. With each line currently costing £2, I think your money is better spent elsewhere.
Due to widespread and worldwide political uncertainty, the FTSE 100 contains many companies that are trading at a discounted value. Some of these stocks also offer the bonus of a generous dividend yield.
Here are two of those companies:
HSBC
The share price of banking giant HSBC (LSE: HSBA) has taken a hammering recently. Over the past six months, its price has dropped by approximately 11%.
The US-China trade war, mass protests in Hong Kong, and Brexit have all been blamed for its poor performance of late. This is not a surprise, as the bank is highly exposed to these areas, with almost 80% of HSBC’s profit stemming from Asia.
In its latest earnings update, the bank reported that profits before tax in Asia were up over 4% to $4.7b in Q3.
Investors should be excited about the now completed $1b share buy-back. I believe that this indicates the bank is aware that the market has undervalued its business.
Even with the recently completed buy-back, the capital levels at the bank remain above its common equity tier 1 target of 14%.
Despite a challenging global economy, HSBC aims to sustain its dividend, which is due to yield a generous 6.5%.
The recent slump in share price means the price-to-earnings ratio is just 12.
Legal & General
In its most recent half-yearly results, Legal & General (LSE: LGEN) posted an increase in operating profit of 11%.
The insurer and financial services company has grown consistently over the last several years. For example, between 2011 to 2018, its earnings per share increased by a compounded annualised growth rate of 10%.
Over previous years, it has grown its dividend. The shares now offer a prospective yield of 5.5%. This will be welcome news to income investors, who seek stability from a company’s dividend.
Despite this growth and attractive yield, its shares have only grown by roughly 2% in the past six months. This makes the price-to-earnings ratio 9, offering what I believe is a wide margin of safety for investors.
The company is disposing some of its non-core assets, to focus on more profitable areas of its business. The hope for investors is that this supercharges profitability and growth.
As a group, Legal & General is well diversified. Along with its insurance section, other areas include pension risk transfer, investment management, capital investment, and retirement solutions.
Like HSBC, the Legal & General shares have been somewhat dampened by Brexit. However, I think the business is in a good position in this regard, with its investment management arm receiving the relevant authorisation from the EU last year.
With income and a track record of growth, I see many benefits to holding this stock in a portfolio.