Here’s a FTSE 100 stock I’m buying and holding for returns and growth

·3-min read
Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Image source: Getty Images

I’m constantly on the lookout for stocks that could boost my portfolio. One FTSE 100 incumbent that I assessed recently is B&M European Value (LSE: BME). Allow me to explain why I’m bullish on the shares.

More bang for my buck

I love discount retailers and often frequent B&M stores when I can. Recent economic volatility has led to many consumers turning to discount retailers to make their budgets stretch further. In turn, more traditional retailers and supermarkets have suffered as they deal with less footfall and higher costs.

B&M’s growth story to date is a fascinating one. Opening in 1978 and slowly growing until 2004 with 21 locations, a takeover by an investment firm accelerated its growth and success. Eight years later saw it trading from 300 locations by 2012. In 2020 it was admitted into the prestigious FTSE 100 index, and today the company operates internationally and has over 700 stores.

Why I like B&M shares

So, I’ve explained that I shop at B&M, and a bit about a remarkable growth journey, but is that enough to make me want to buy its shares? In part, yes. Allow me to elaborate.

I passionately believe that the primary driver of growth is driven by success. In three of the past four fiscal years, B&M has grown revenue and profit. In its most recent year of reported trading, ended 31 March 2022, both figures dipped slightly but the reasoning behind this was aggressive expansion coupled with increased costs due to a tougher macroeconomic backdrop. Full-year results for the period ending 31 March 2023 are due in the coming weeks and I’ll be keeping a close eye on these.

B&M’s growth shows no signs of slowing down, and as one of the fastest-growing retailers it is targeting 950 locations in the coming years.

Aside from growth and excellent performance, B&M is a great passive income opportunity, in my opinion. At present, B&M offers a juicy dividend yield of close to 7.5%. This is higher than the FTSE 100 average of close to 4%. Of course, it is worth noting that dividends are never guaranteed and paid at the discretion of the business.

A FTSE 100 stock I will be buying

At present, I would be buying B&M shares for 479p per share. This is 2% lower than this time last year. Furthermore, the shares have gained 62% from October 2022 levels of 294p when the market was struggling and economic volatility was rife. I would expect the shares to bounce further upon FY results being announced.

All stocks possess risks and B&M is no different. The company is currently at the mercy of soaring costs that will squeeze margins, and this could impact shareholder returns and growth. In addition to this, I note that long-term CEO Simon Arora — who played a significant role in B&M’s growth in recent years — has stepped down. This change in the boardroom could negatively impact performance, further growth, and investment viability.

After doing my research, I’ve decided to shortly open a small position in B&M. I believe its recent trading success, great growth story, and future aspirations, as well as the passive income opportunity, make it hard to overlook.

The post Here’s a FTSE 100 stock I’m buying and holding for returns and growth appeared first on The Motley Fool UK.

More reading

Sumayya Mansoor does not have a position in any of the shares mentioned. The Motley Fool UK has recommended B&M European Value. 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 2023