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This FTSE 100 dividend stock will update investors next week! Should you buy it for your ISA?

Royston Wild
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There are several top FTSE 100 shares poised to update the market in the coming days. AstraZeneca, Smith & Nephew and GlaxoSmithKline are just a few of the blue-chips I reckon could surge on the back of upcoming fresh trading numbers, and are therefore shares I consider to be top buys today.

I’m certainly not convinced, however, that stock investors should try to grab a slice of Royal Bank of Scotland before its own financials are released next week. Not even a low forward P/E ratio of 8.7 times or a bulging 11.5% dividend yield are enough to tempt me in right now.

Under pressure

The last couple of trading releases have been less than reassuring, and last time it updated the market in August, it declared that income dropped 1.7% between January to June, reflecting an ultra-competitive landscape (particularly so in the home loans arena) and the steady weakening of the domestic economy.

A wilting top line  wasn’t all that RBS had to swallow, though, the bank also announcing that the number of bad loans had more than doubled in the first half from a year earlier, to £323m from £141m.

Following signs that the UK economy continues to struggle under the weight of Brexit — latest GDP data showed economic output back-peddling 0.1% in August — I’m not expecting anything other than another worrying set of numbers for the third quarter.

Time to sell?

Rising impairments and reversing revenues aren’t the only things I worry about for the days ahead. Six weeks ago, the Footsie bank said that, following a flurry of claims related to the prior mis-selling of payment protection insurance (PPI) ahead of the August 29 deadline, it was setting aside another £600m-£900m to cover the cost of possible penalties.

One piece of good news to come from August’s half-year update was that RBS kept its full-year guidance for 2019 unchanged. Less cheery, however, was that the bank hacked down its expectations for next year.

It advised that “given current market conditions, continued economic and political uncertainty and the contraction of the yield curve,” RBS thinks “it is very unlikely that we will achieve our target return on tangible equity of more than 12% and cost:income ratio of less than 50% in 2020.” Investors should be braced, I believe, for the board’s expectations to be hacked down again for the near-to-medium term and possibly as soon as the days ahead.

The RBS share price is riding the crest of a wave right now. As I type it is dealing at 10-week highs around 230p, boosted by investor hopes that a deal between British and European Union negotiators is edging closer. I consider such optimism to be based on sandy foundations, however, and with those financials just around the corner, I reckon that existing holders of the bank’s stock should use this recent strength as a fresh selling opportunity.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. 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 2019