Investors bought Ocado anticipating strong growth tomorrow, rather than profits and dividends today. Yet their enthusiasm has faded, with the Ocado share price down 53% over 12 months. It’s now one of the worst-performing FTSE 100 shares, rather than the best.

There’s no dividend and most years Ocado makes a loss rather than a profit, and now investors are fretting over when those profits will arrive.

I’d buy one of these FTSE 100 shares

UK supermarket rivals are catching up in online fulfilment, and Amazon remains a constant threat. Inflation is also squeezing grocery market profitability. The UK government’s mooted online sales tax wouldn’t help either. 

Most FTSE 100 shares face a list of challenges, but Ocado’s are mounting. It still boasts cutting edge pureplay technology. Bumps in the road were supposed to be expected, but it looks too risky for me to buy right now.

Mining giant Anglo American (LSE: AAL) thrashed most FTSE 100 shares over the last five years. It came in second place with a total return of 283%. The last year has been strong too, as it returned another 16.3%.

Like all commodity giants, this £43.37bn stock is benefiting from today’s soaring raw material prices. However, its share price slumped last week when it reported a 10% drop in first-quarter output. It blamed Covid-related staff absences, high rainfall in South Africa and Brazil, and problems at its metallurgical coal and iron ore operations.

I reckon this could also be a buying opportunity, with the stock trading at just 7.8 times earnings. It also offers a juicy 6.6% yield. 

The strict Chinese Covid lockdown could hit demand and prices, as we’ve seen with the falling copper price. Yet Anglo American remains one of my favourite FTSE 100 shares, and I’m sorely tempted by today’s low valuation.

A company with pricing power

Real estate investment trust Segro (LSE: SGRO) doesn’t always get the limelight. Yet it’s the third-best performer among FTSE 100 shares measured over five years. It delivered a total return of 223% and continues to race along, up 37.9% over the last 12 months.

Segro owns, manages and develops modern warehousing and light industrial property, and recently reported a strong first quarter. Total new headline rents signed during the period jumped to £25m, up from £18m last year,

Supply chain and inflationary pressures could hamper its construction plans and drive up costs. Yet management reckons it can pass this to customers in higher rents. Today’s yield may look low at 1.79% but board recently hiked its full-year dividend by 10%. Further progression seems likely. The downside is that the stock is expensive, at 41.8 times earnings. That’s the price investors pay for buying market-beating FTSE 100 shares like this one.

I wouldn’t buy Ocado, but I would place Segro on my watchlist. Of these three FTSE 100 shares, dirt-cheap Anglo American is the one I’d buy today.

Unilever: FTSE 100 consumer goods giant

Unilever (LSE: ULVR) has had a really poor past year at the stock markets. Its stock price has performed miserably and when I look at its price chart, its trend line is flat. The pandemic of course impacted it and more recently, I reckon that rising inflation could be making investors jittery about it. At the same time, I just cannot overlook its solid performance.

In 2021, its underlying sales growth was the fastest in nine years and its earnings rose too. It also has positive expectations for this year. Its earnings could be impacted by “very high input cost inflation” as it says in its latest update, but it expects things to get better in the second half of the year. And as a big consumer goods company, I think it will continue to perform over the next years as well. I have not bought the stock, but I think 2022 is the year I will. 

Smurfit Kappa Group: FTSE 100 growth stock

In direct contrast to Unilever is the packaging provider Smurfit Kappa Group (LSE: SKG), whose share price has doubled in less than five years, before falling back a bit. Even now, it has come a long way from 2017, though! It was a high performer even before the pandemic, but Covid-19 might just have been the big turning point for it. As lockdowns necessitated e-commerce, we all know by now how the sector boomed. And Smurfit Kappa grew with it too. This year might be a bit tricky for it, considering that it is impacted by high cost inflation too. But, a dip might just be a good time to buy this promising stock that I have long regretted not buying earlier. 

Segro: warehousing biggie

If Smurfit Kappa’s performance is solid, Segro (LSE: SGRO) is even better. Its share price has almost tripled over the past five years. And I think it is quite likely that the best is yet to come. Segro also benefits from the strong surge in online shopping and it is expanding fast as a result. As a real estate investment trust (REIT), it is a bit of a challenge to compare its market valuation with non-finance stocks, but if I do consider its price-to-earnings ratio, it does look incredibly cheap at 3.6 times. There is always the possibility that the company’s growth could slow down when we are finally past the pandemic. But I reckon that would only be a relatively short-term correction. And here I am talking of stocks that I can buy and hold for the next decade. It is one stock I will definitely buy this year.  

But I’m not worrying too much. In fact, if there is a crash, I’d snap up shares of this company as it becomes cheaper. Let’s take a closer look.

An investment company

The stock I’ve got high on my watchlist is Segro (LSE: SGRO). It’s actually a real estate investment trust (REIT) that specialises in managing a portfolio of industrial properties. REITs have benefits that generally means a good stream of dividends for shareholders.

One of the reasons I’d buy shares of Segro is due to its diversified property portfolio. It has a good mix of urban buildings that are generally smaller and used for ‘last mile’ deliveries and data centres. Segro also owns big box warehouses that are used for bulk storage and act as large-scale distribution facilities. The portfolio is weighted more towards urban properties, which offer greater scope for increased rental growth. This is because of the increasing demand for local delivery hubs as e-commerce continues to grow. Not only this, but our growing digital economy requires more  data centres.

I also like how Segro is diversified across the UK and mainland Europe too. So there’s less concentration on any one economy.

Segro released its full-year results to 31 December last week. The company achieved record levels of rental growth, and said the demand for industrial and logistics properties remain “very favourable”. As mentioned, e-commerce and an expanding digital economy are excellent growth drivers for its property portfolio. I only see this demand increasing from here.

I’m buying if there’s a stock market crash

I’ve held back from buying the shares in recent months because of the valuation. On a forward price-to-net-asset-value ratio (taking into account the valuation of Segro’s properties), the shares are valued on a multiple of 1.2. This is higher than it has been historically.

Also, the shares are highly valued based on the rental income it earns too, in my view. Using the forward price-to-earnings ratio, Segro is valued on a multiple of 39 based on next year’s earnings from rental income.

As well as the price, there are other risks to consider. For one, occupancy rates can decline if there’s a recession. This would really impact Segro’s rental income. REITs also use debt to purchase properties. One way to track this is by looking at Segro’s loan-to-value ratio, which is currently 23%. It’s below the company’s target of 30% right now, but I should monitor this to watch how much debt it’s using.

Nevertheless, I’d buy shares of Segro if it became cheaper in any stock market crash.

Property boom

Segro is a UK real estate investment trust (REIT) that is one of the largest warehousing and industrial property players in the UK. REITs are designed to return a good chunk of profits back to investors as dividends. These dividends help potential investors like me make a passive income.

As I write, Segro shares are trading for 1,309p. At this time last year, the shares were trading for 973p, which is a 34% return over a 12-month period.

Risks of investing

The obvious risk with any dividend stock is that dividends can be cancelled at any time. This could be due to poor performance or market issues as well as a number of other factors. Dividends are not guaranteed.

Segro’s focus on warehousing space is one of the main reasons I like it. This is due to the burgeoning demand for industrial and warehousing space.

There are many more firms attempting to capitalise on this lucrative market and lots of money is being pumped into industrial and warehousing property in the UK. The risk with any market that could be oversupplied is that performance and returns, of a firm like Segro, could be hurt and affected. This could mean shareholder returns could be affected, and thus, any passive income I hope to make.

Under the radar passive income option

There are many dividend stocks out there that boast an enticing dividend yield. But sometimes, a high yield can be deceiving, and it can be an indicator of a company in trouble. Instead, I like to look at a stock’s fundamentals when looking for passive income options. In regards to Segro, I can see it has a yield of just below 2%. But, it has a good record of dividend payments and growth year on year. Between 2016 to 2020, the dividend has increased from 13p per share, to 20p. I do understand that past performance is not a guarantee of the future, however.

Is Segro currently performing well enough for me to believe dividend payments will continue in the future? Well, a Q3 update released in October made for good reading. It reported that rent was up compared to the same period last year. As were pre-let rent agreements. Vacancy rates had also dropped and customer retention was up.

The main reason I like Segro is the growth market it is operating in. The e-commerce explosion, especially since the pandemic, has seen the demand for warehousing and industrial property outstrip supply. Segro is one of the biggest operators in this market and can capitalise on this growth sector. This should help boost performance and any passive income I hope to make.

Overall, I think Segro could be a good addition to my portfolio. It is a leading player in a burgeoning growth market. Furthermore, at current levels, the shares look cheap with a price to earnings ratio of just 6. A dividend yield of less than 2%, operating in a boring but lucrative market and its cheap price lead me to class it as under the radar. I would add the shares to my holdings now to help me make a passive income.

Here are my two favourite income stocks I would acquire for my portfolio right now. 

Dividend shares to buy for growth

The first company on my list is wealth management group Schroders (LSE: SDRC). This is one of the City’s most storied and established wealth managers. And now the organisation is trying to take on the world. 

The FTSE 100 corporation is trying to expand across international markets with a combination of acquisitions and organic growth. The company’s well-known brand and its strong balance sheet are both helping to support this strategy. 

Assets under management have expanded from around £300bn in 2016 to more than £717bn today. I think this growth is the strongest indicator of the company’s expansion potential. 

Unfortunately, there is no guarantee this group will continue. Competition for client assets is incredibly competitive in the wealth management sector. Additional regulations could also hit the company’s profit margins. And as assets managed by the enterprise have expanded, so have management fees.

But overall earnings per share have risen from 179p in 2016 to 226p today. And as income has expanded, so has the firm’s dividend. The per share payout has grown at around 7% per annum since 2016. At the time of writing, the stock supports a dividend yield of 5.5%. 

As the business expands, I think the payout will grow further. Considering this potential, I would buy the FTSE 100 company for my portfolio. 

FTSE 100 champion

The second blue-chip dividend stock I would buy is Segro (LSE: SGRO). Some investors might avoid this company because, at first glance, it does not look as if it is a dividend champion. Indeed, at the time of writing, the shares support a dividend yield of 1.9%. 

However, what I am interested in is the firm’s growth potential. Segro owns and develops warehouse facilities, which retailers and fulfilment companies lease. The market for these assets is currently exploding as online retail grabs an ever-larger share of the overall retail market. 

As one of the largest operators in the sector in the UK, the enterprise has the scale and resources to capitalise on this market growth. But it is not the only business chasing this market. Money is flooding into constructing warehouse facilities across the country. If this leads to a situation where the market is oversupplied, Segro’s outlook could begin to deteriorate. This is the most considerable risk to the company’s growth. 

I would buy the FTSE 100 stock for my portfolio today despite this risk. As its portfolio has grown, management has increased the dividend rapidly. It has risen from 13p in 2016 to 20p today. Although past performance should never be used as a guide to future potential, considering the company’s growth potential, I believe it will remain a dividend growth champion. 

The e-commerce boom

This should be no surprise. E-commerce-related stocks have done well in recent times. Thanks to lockdowns, many more people have discovered the wonders of online shopping. And the e-shopping experience has evolved over the last couple of years to meet the fast-growing demand seen during the pandemic. Analysts have said the shift towards online buying and selling, which was already happening, was speeded up because of the unusual situation we found ourselves in. So prospects for stocks in the industry might just have improved for good. 

Cheaper compared to other FTSE 100 stocks

As a result, I think that even after the pandemic is over, both Segro and Royal Mail stocks could continue to grow. They might not grow at as fast a clip as we have seen recently, but they could keep rising nevertheless. And this is particularly so considering how low their prices still are relative to other FTSE 100 index firms. 

Segro, for instance, has a price-to-earnings (P/E) ratio of only seven, while Royal Mail’s is six. This compares to the P/E for the FTSE 100 index of almost 18. In other words, compared to the average stock in the index, these two are far more affordable. Admittedly, with Segro there is the question of whether a REIT’s price should even be measured using the P/E. But it does give me a comparison against other FTSE 100 stocks, for lack of an alternative. And even if I ignore the valuation measure for Segro, that still leaves me with Royal Mail, which is glaringly cheap as well. 

Their dividends

I like that the stocks pay dividends. Royal Mail stands out in this case as well. It has a dividend yield of almost 3.3%, which is close to the average FTSE 100 yield of 3.5%. Segro’s yield is much lower at 1.3%. But I think this could be because of the steady rise in its share price over time. In any case, it still stands out as a growth stock for me to buy. 

What I’d do

I bought Royal Mail recently, and it has already been a rewarding stock for me to hold. And Segro has been on my investing wishlist for some time. I am braced for potentially smaller gains from both stocks in the next year, as the pandemic moderates further and people can step out even more freely than before. But I think their real potential will be realised over the next decade when online shopping becomes an even bigger phenomenon than it is today. 

Black Friday initially started in the US. But in recent times, the shopping trend has grown in the UK. In fact, forecasts for 2021 show that consumers are expected to spend £9.4bn over the full weekend, with online shopping at around £5.7bn.

Here are three top stocks to buy for my portfolio that I think could benefit from a Black Friday surge.

Online behemoth

I have to consider Amazon when thinking about Black Friday. It’s revolutionised the shopping experience, firstly online, but now in its growing number of till-free stores. Amazon has a section on its website dedicated to Black Friday sales and is a past master at capitalising on the event.

Amazon is forecast to grow revenue by 22% in 2021, but net profit is set to dip by almost 2%. In the most recent quarterly earnings report, the CEO said the company is expected to take on “several billion dollars” of extra costs due to supply chain constraints.

But I consider these costs a one-off. Amazon is still growing revenue at an impressive rate, and net profit is set to rebound by over 30% next year.

So I think Amazon is a top stock to buy to make the most of Black Friday sales.

Black Friday logistics

Another great way to gain exposure to the shopping surge is through e-commerce logistics. There’s a lot that goes on behind the scenes when we click ‘buy’, and Clipper Logistics (LSE: CLG) is a company that manages it all. It offers end-to-end logistics solutions for the e-commerce sector, including e-fulfilment and returns management.

Just yesterday, Clipper Logistics announced a joint venture with US-listed Farfetch. This combination will create a global luxury brand service that uses Clipper’s specialist fulfilment capabilities. 

I have to consider the valuation before I buy the shares. The price-to-earnings ratio is now 24 for this year, which is quite high for a company that only achieves an operating margin in the low single-digits.

But with growth continuing and the new global joint venture, I think the shares are a buy for my portfolio.

Critical warehousing

The final company I’m looking at is Segro (LSE: SGRO). It’s the largest real estate investment trust in the FTSE 100. It owns a property portfolio split between smaller urban logistics warehouses, and larger big box warehouses. This diversifies the company across the whole delivery process for online shopping, from longer storage requirements, to last-mile delivery services.

The company has a large development pipeline that will be in high demand as e-commerce continues to grow. Indeed, the share price has performed very well over the pandemic, and is up 47% this year alone at time of writing.

I have to balance this against the current valuation. The shares are now priced at 1.4 times the net asset value of the portfolio. This has risen from around a multiple of one before the pandemic.

Nevertheless, I think the company will continue to benefit from the accelerating e-commerce sector so I’d buy.

Ashtead: FTSE 100 stock that could win big in 2022

The first is the FTSE 100 industrial equipment supplier Ashtead (LSE: AHT). I have long liked the stock for its solid performance. And this shows up in its stock price as well. Consider this. It is up 135% from its pre-pandemic highs as I write! In other words, not only has it been largely unaffected by the pandemic, it is at record highs. In the past year alone, it has doubled. 

And better times could be ahead for it. Of its business, 80% comes from the US, which is about to embark on a huge infrastructure development drive. This should hold the stock in good stead in 2022. Its dividend yield is a downer at 0.7% if I intend to hold it only for a couple of years or so. Over time, though, the dividend growth makes it a rewarding stock to hold from a passive income perspective. Also, at 28 times, its price-to-earnings (P/E) ratio is higher than the 20 times level for the average FTSE 100 stock. Still I think that is the price for buying a valuable stock. I intend to buy it soon enough. 

Segro: gains from e-commerce boom

I also like the warehousing real estate investment trust (REIT) Segro (LSE: SGRO), which has gained over 50% in the past year. I like its long-term prospects, since space for storing goods has acquired a premium at a time of booming e-commerce. The company has reported good earnings for some time now, and its outlook is positive too. It also has a ridiculously low P/E of 6.6 times, though as I wrote at length in an article on it last week, there is debate on whether it is a good measure for such companies. 

As per an alternative measure, which is price as a proportion of net asset value, it is overvalued, which is a bit of a disappointment. Also, like Ashtead, its dividend yield is an underwhelming 1.4%. So, maybe it is not one for a short to even medium-term investment. But we at the Motley Fool like long-term investments, and I believe this is one stock whose true value could be realised over the next decade. I will buy it soon too. 

Spirax-Sarco Engineering: meteoric rise

Last but not least, I like Spirax-Sarco Engineering. When I first started writing here a few years ago, it was a FTSE 250 stock. Now, it is the priciest FTSE 100 stock. That says something about its progress, which is underpinned by strong business performance. In the past year alone, its share price has risen over 40%. With such robust growth, it is pricey even in relative terms, with a P/E of a huge 60 times. Still, I like it and ideally, would like to buy it on a small dip. 

This bodes well for the entire e-commerce ecosystem. But specifically, I will focus on one such company that is also a real estate investment trust (REIT) specialising in warehouses. While the tilt towards e-commerce means that there is less need for brick-and-mortar stores, it has increased the demand for storage solutions for these goods. As a result these kinds of REITs have seen booming demand. 

Segro booms on solid earnings

I am talking about the FTSE 100 stock Segro (LSE: SGRO). The company saw an impressive increase in profits last year, and has continued to maintain a robust performance this year as well. Its share price has been inching up as well. Over the past year, it is up by around 50%. And in the past five years, it has risen by 230%.  Going by the promise of the sector, I expect its share price will continue to rise. 

Why its low P/E matters

Moreover, its price-to-earnings (P/E) is at a dirt-cheap 6.3 times, which convinces me that it can rise further. Now, not everyone believes that a traditional valuation metric like P/E is a good one to assess REITs. This is because earnings’ calculations could include large depreciation costs. This can skew the results, even though depreciation is a notional number, where nothing is really being bought and sold. I do, however, still like to consider it because it gives me an invaluable assessment of how the stock compares to other FTSE 100 stocks. 

Considering alternative valuation measures

But, keeping its drawbacks in mind for REITs, I also consider another metric. This is the price-to-net asset value (P/NAV) estimate. The net asset value (NAV) is assets minus liabilities. When a stock trades at a premium to NAV, it is considered already highly priced. And when it trades at a discount, then the stock can be expected to rise some more. I am inclined to take this measure with a pinch of salt too. This is because it does not explain why the Segro share price has been rising for much of this year, despite being at a premium to NAV. 

My assessment for the FTSE 100 stock

So, in my assessment of the stock, I consider the returns it has given in the past, the outlook for the sector it functions in, the P/E to compare it to all other FTSE 100 stocks, and the P/NAV to understand how much higher or not it could rise in the foreseeable future. Three of these four ways to assess the stock indicate that it is likely to rise more. Segro is on my list of stocks to buy next.

Warehouse spaces in demand

This means that for now at least warehouse spaces are at a premium, till more capacity comes in. Companies best poised to benefit from this trend are existing warehousers like the FTSE 100 real estate investment trust (REIT) Segro (LSE: SGRO). In fact, this trend of a booming warehousing market is evident in its latest trading update as well.

Company CEO David Sleath says, “We head into the final months of 2021 with confidence in our ability to drive further sustainable growth in rental income, earnings and dividends.” This of course is based on the strong growth witnessed in the year so far. In the third quarter of the year, the new headline rent increased by 62.5% from last year. Headline rent refers to the rent payable after any free-rent period or any other incentive has expired. For the first nine months of the year, the rent has also increased at a healthy rate of 28%. 

Further, vacancy rates have also declined to 3.2%, down from the end of the second quarter when they were 4.3%, reflecting strong demand for properties. Segro has also completed £25m of new developments, of which 93% have been let. This too indicates that the company’s demand levels are strong and it is capitalising on the opportunity presented by growing its business as well. This is likely to continue adding to its financial strength. 

FTSE 100 stock’s price touches all-time highs

Unsurprisingly, the FTSE 100 stock’s price touched all-time highs in September and is still trading at around those levels. That does not make it an expensive stock, though. Its price-to-earnings (P/E) ratio is a mere 6.1 times, which is quite low compared to many other FTSE 100 stocks in favour. 

I reckon there is still a fair bit of upside to the stock. The big risk to it is an over-estimation of how much online spending can grow in the future. It could happen that as the world normalises even more from the pandemic, online shopping may stop growing as fast. Or even if it does, I suspect that there could be greater competition for this fast-growing sector. This could reduce rentals as well as Segro’s potential profits. But we will know that only over time. For now, I maintain that the stock looks like a good one for me to buy.