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Two FTSE 100 growth and dividend stocks I’d buy in October

Edward Sheldon, CFA
·3-min read
Chart showing an upwards trend, possibly in the FTSE 100
Chart showing an upwards trend, possibly in the FTSE 100

FTSE 100 stocks are often classified as either ‘growth’ or ‘dividend’ stocks. The former are those that are growing faster than average and have the potential to provide big capital gains. The latter are those that pay out regular income.

The thing is, though, you don’t necessarily have to choose one or the other. Some FTSE 100 stocks offer the potential for both growth and dividends. Here’s a look at two such shares I like the look of right now.

Growth and dividends

Hargreaves Lansdown (LSE: HL) is a great example of a FTSE 100 growth and dividend stock.

This is a business that has grown significantly in recent years. For example, over the last three years, total assets under management have increased from £82bn to £107bn. Revenue for the latest quarter was £144m, up from £104m for the same period three years ago.

Meanwhile, over the last three years, Hargreaves has lifted its dividend payout substantially. Back in 2017, the company declared a full-year dividend of 29p per share. This year, it declared an ordinary full-year dividend of 37.5p (up 11% on last year) and a special dividend of 17.4p. This dividend increase reflects the quality of this business, especially when you consider that more than 40% of FTSE 100 companies cancelled, suspended, or cut their dividends this year. The ordinary payout equates to a yield of 2.5%.

Hargreaves Lansdown shares are currently well below their all-time highs, set in May 2019. One reason for this is that the UK stock market is lower than it was then, which translates to lower fees for the group. Some investors are also worried about competition from the likes of Vanguard and Trading 212.

I see this share price weakness as a buying opportunity. The share isn’t cheap, on a trailing P/E ratio of 23, however, I think it deserves a premium valuation. I’d buy this FTSE 100 stock today.

Smashing the FTSE 100

Another FTSE 100 stock that has the potential to deliver growth and dividends is Hikma Pharmaceuticals (LSE: HIK). It’s a fast-growing healthcare company that manufactures branded and non-branded generic medicines.

Since I said Hikma shares were a buy in late July, they’ve jumped from 2,160p to 2,646p – a gain of about 23%. That’s an excellent return when you consider that the FTSE 100 index has gone backward since then. However, I think there’s plenty of room for further upside here.

Half-year results, issued in August, were excellent. For the period, core revenue and core operating profit were up 9% and 15% respectively. Meanwhile, the company raised its full-year sales outlook for its Injectables and Generics businesses. Hikma also announced that it has signed a non-exclusive supply agreement with Gilead Sciences to manufacture Remdesivir – an approved treatment for Covid-19 – for injection.

Hikma doesn’t offer the highest yield. Currently, the prospective yield is about 1.4%. However, the dividend is growing quickly. Over the last five years, the payout has been increased from 22 cents per share to 44 cents per share.

All things considered, I think this FTSE 100 growth and dividend stock has a lot of appeal. It’s currently trading on a forward-looking P/E ratio of just under 20, which seems very reasonable. I see Hikma as a ‘buy’ right now.

The post Two FTSE 100 growth and dividend stocks I’d buy in October appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown and Hikma Pharmaceuticals. 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