Given the current rampant inflation that we’re facing, I’ve found that savings accounts have long since provided poor returns for my money. While I think there’s some merit to savings accounts (like shielding me from stock market risk), I’ve turned my attention to UK shares for potential growth opportunities. Let’s take a look.
Exposure to the housing market
First, the Taylor Wimpey (LSE:TW) share price is down 12.5% in the last month. At the time of writing, it’s trading at 106p.
For the six months to 30 June, profit margins increased due to shrewd land sales. Furthermore, the FTSE 100 housebuilder declared an interim dividend of 4.62p per share. This represents an 8% increase, year on year.
While I would be investing primarily for growth, it’s good to know that I could also derive income. Although I’m always aware that dividend policies can change in the future.
Over the same period, operating profit was basically flat, coming in at just over £420m.
There has been some debate recently about how rising interest rates might affect the housing sector. This will likely make it more expensive for potential and current homeowners to take on or repay mortgages, according to HSBC.Â
It’s possible that it may lead to a slowdown in the market, which could be bad news for Taylor Wimpey.
On the flip side, the business has little debt and operating cash flow of over £173m. This should allow the firm to overcome any difficulties it encounters in the short term.
Solid cash flow
The second UK share I’m looking at is Smith & Nephew (LSE:SN.), the medical technology conglomerate. At the time of writing, the shares are trading at 1,110p.
For the three months to 30 June, the company reported that revenue grew by 1.2% to $1.29bn.
For the half-year to 30 June, revenue was flat at $2.6bn, while operating profit climbed from $239m to $242m. It’s worth noting, though, that this profit growth is not guaranteed in the future.
However, trading profit fell from $459m to $440m. This reflects the difficult current operating environment and the impact of inflation on the firm’s results.
Despite this, the business has operating cash flow of $721m and is therefore well-positioned to perform in challenging circumstances.
In addition, it declared an interim dividend of ¢14.4 per share. As with Taylor Wimpey, I’m attracted by the fact that I could gain income from these investments while enjoying potential future growth.
Overall, these two companies may provide scope for growth and income, which is far more than I can expect from a savings account. Both are well-positioned to react to any short-term difficulties and to continue their expansion over the long term. To that end, I’ll add both of these businesses to my portfolio soon.