With the FTSE 100 having a dividend yield of around 4.3%, there are numerous income investing opportunities available to investors at the present time.
In the long run, many of those companies could offer improving financial performance that boosts their share prices. And, since their valuations continue to be low in many cases, now could be the right time to buy them.
Here are two prime examples of dividend stocks that could outperform the FTSE 100 in the next decade.
Healthcare companies such as GSK (LSE: GSK) could experience strong earnings growth over the next 10 years. Demand for a range of healthcare services and drugs is likely to increase as the world’s population grows in size and also continues to see its average age rise.
GSK’s recent updates have shown that it is making progress in implementing its current strategy. This includes a joint venture within its consumer health brands portfolio, as well as M&A activity within its pharma sector. These changes could catalyse its financial performance and increase its appeal among investors.
The company’s dividend has been frozen on a per share basis over recent years. This has been a positive move in terms of the overall financial health of the business, since it now means that dividends are covered 1.5 times by net profit. There may now be scope for shareholder payouts to increase at a brisk pace, while a dividend yield of 4.5% is competitive compared to other FTSE 100 stocks.
With GSK trading on a price-to-earnings (P/E) ratio of 15, it seems to offer good value for money given its long-term prospects. As such, now could be the right time to buy a slice of it.
Another FTSE 100 share that could be worth buying and holding for the next decade is Berkeley (LSE: BKG). The prime housebuilder, which focuses on the London market, has experienced a challenging set of trading conditions in recent years.
Planning difficulties and lower demand following the EU referendum have contributed to weaker levels of profitability. However, the company is placed favourably to benefit from an improvement in the London housing market, where it has a large market share compared to many of its sector peers.
Encouragingly, Berkeley has a strong balance sheet and an ability to focus on long-term projects. This strategy is performing relatively well according to its recent updates, with the company on track to meet its medium-term financial guidance.
With the stock forecast to pay a dividend yield of 3.5% in the current year and 4.1% next year, it continues to offer sound income opportunities. And, with the London property market having the potential to gain ground as political risk subsides, now could be the right time to buy a slice of the stock and hold it for the long run.
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Peter Stephens owns shares of Berkeley Group Holdings and GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020