Market crashes come and go, but good companies stick around. Each of the FTSE 100 shares I’m going to look at today has a long and successful track record. I think anyone buying at today’s share prices should do very well over the next five-to-10 years.
Always ahead of the game
One of my favourite FTSE 100 shares is fashion retailer Next (LSE: NXT). This high street stalwart has reinvented itself for the internet age and has remained highly profitable while rivals have struggled to cope.
The coronavirus pandemic is no exception. The Next share price bounced after the company released detailed analysis that showed it could absorb a 25% drop in sales this year without any risk of running out of cash.
The group has previously produced similar high-quality analysis on the likely impact of Brexit (which it says will be not much). Next boss Lord Wolfson has also published extensive analysis showing how the group’s store estate might change in the future as internet sales continue to grow.
I like the idea of owning shares in FTSE 100 companies where management is prepared for the worst. Next’s impressive 20% operating profit margin is another attraction. Few retailers are this profitable.
With the stock now trading on just 12 times forecast profits, I see Next as a great long-term buy.
This FTSE 100 share is down 33%
Catering firm Compass Group (LSE: CPG) is having a difficult year. Widespread closures of schools, colleges, factories and offices have left the group facing a huge slump in demand.
Management expects revenue to fall by between 25% and 30% during the first half of this year. City analysts expect the group’s 2020 profits to fall by around 35%, to £1,004m.
However like Next, Compass is a well-run business with a long history of profitable growth. Investors are pricing-in a quick return to normal in 2021, when profits are expected to return to 2019 levels.
At current levels, this FTSE 100 share is trading on about 15 times 2021 forecast earnings, with a dividend yield of 3.4%. Although this year’s dividend has been suspended, I suspect a return to normal is likely next year. I see this share as a profitable long-term buy.
Don’t worry about this dividend
Packaging firm Smurfit Kappa Group (LSE: SKG) issued a strong quarterly update last week, lifting this FTSE firm’s share price. Despite the pandemic, sales volumes rose by 3% in Europe and by 3.5% in the US during the first three months of 2020.
One reason for this is that the firm operates in sectors such as food, internet retail and pharmaceuticals, where demand has remained strong. Indeed, CEO Tony Smurfit says that the company’s facilities have been classed as essential businesses in most countries.
However, the group is taking a cautious approach to the pandemic and has cancelled its final dividend for 2019. This seems sensible to me. Hoarding cash makes sense at the moment — and the company has promised to review the situation later this year.
If Smurfit’s dividend payout is resumed at the same level as last year, the shares would yield around 4.3% at current levels. I see this FTSE 100 share as a good buy today.