With the FTSE 100 having experienced a decade-long bull market, many investors may feel that now is not the right time to buy large-cap shares. After all, a bull run often leads to high valuations that offer modest margins of safety.
However, the FTSE 100 appears to offer a number of stocks that could produce high returns in the long run. In some cases they offer low valuations, while in others their growth prospects may lead to rising shareholder payouts.
With that in mind, here are two FTSE 100 shares that could offer investment appeal. They could improve your financial prospects and help you to retire early.
The general election result could have a significant impact on SSE’s (LSE: SSE) share price. The threat of nationalisation across various utility companies could mean that investors have priced in a discount to the company’s intrinsic value, which may provide a more favourable risk/reward opportunity for investors.
The recent half-year results from SSE showed that the company is progressing in the delivery of its overall strategy. For example, it is proceeding with the sale of its Energy Services division, while investing in renewables. This could be a sound move, with its Renewables division having a strong pipeline that could catalyse its financial performance in the long run.
The company’s shares currently offer a dividend yield of 6.1%. It plans to raise dividends per share by a similar rate to inflation over the next few years, which could make the company appealing to income-seeking investors. While there may be less risky and more diverse stocks in the FTSE 100, SSE’s margin of safety and high yield could make it an attractive purchase for the long run.
Smith & Nephew
The 4% growth in medical technology company Smith & Nephew’s (LSE: SN) revenue in its most recent quarter suggests that its strategy is being delivered. This follows an upbeat performance in the first half of the year, which means that the company is on track to meet guidance for the full year.
The company’s exposure to emerging markets could act as a catalyst on its long-term outlook. In its third quarter, the business reported a mid-teen percentage rise in sales across emerging markets. Continued growth in wages and demand for healthcare products and services may enable the business to experience a tailwind in the coming years.
A recent change in CEO may pose a threat to Smith & Nephew’s near-term outlook. However, with a strong market position across various territories and growth segments, the company’s long-term prospects appear to be sound. Certainly, its price-to-earnings (P/E) ratio of 21 may be relatively high. But this may be justified by the consistent growth rate offered by the company as it benefits from demographic change and emerging market growth over the long run.
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Peter Stephens owns shares of SSE. The Motley Fool UK has no position in any of the shares mentioned. 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