2 FTSE 100 growth giants that could help you retire rich

Royston Wild discusses two FTSE 100 (INDEXFTSE: UKX) stars with staggering growth potential.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Supported by the proposed merger of Aberdeen Asset Management (LSE: ADN), I reckon the long-term earnings outlook at Standard Life (LSE: SL) is worthy of serious attention from savvy investors.

The financial goliath sources around half of profits from the life insurance sector, but is looking increasingly towards the asset management industry to deliver future growth.

Some have raised eyebrows at its decision to link with Aberdeen, with severe economic turbulence in developing markets more recently prompting investors to pull their cash out of the Scottish business en masse. But I reckon Standard Life’s merger  could pay off as, over a longer time horizon, the combination of booming population levels and rising personal wealth levels makes Asia an attractive destination for forward-thinking investors.

Besides, Standard Life and Aberdeen have identified £200m worth of cost synergies (to be achieved by 2020) which should give earnings another encouraging kick.

Plenty of upside

And in the meantime, City analysts expect Standard Life to put to bed the extreme earnings volatility of recent years.

For 2017 an expected 57% earnings charge is predicted, building on the 39% rise enjoyed last year. And the insurer is expected to keep the momentum up with a 7% bottom-line uptick in 2018.

Current Square Mile forecasts make Standard Life exceptional value for money too, a forward P/E ratio of 12.3 times falling comfortably below the FTSE 100 forward average of 15 times.

But it is Standard Life’s dividend profile that should really attract investors, in my opinion. A predicted 21.4p per share dividend for this year yields a staggering 5.9%, while an anticipated 23p reward for 2018 drives the yield to 6.4%.

With the Aberdeen merger set to boost Standard Life’s product range considerably, and with it future earnings growth, I expect the enlarged group to deliver stunning investor returns in the years ahead.

A wise investment

I also believe Hargreaves Lansdown (LSE: HL) is a hot growth bet as savers seek to protect themselves from rising inflation.

You see, with the increasing cost of living steadily eroding the value of cash, those stashing away for a rainy day are increasingly seeking alternatives to the rock-bottom interest rates offered on bog-standard savings accounts. And Hargreaves Lansdown’s broad range of services puts it at the front of the queue for those looking to invest wisely.

So just like Standard Life, Hargreaves Lansdown is also expected to enjoy handsome earnings growth during the medium-term at least, City analysts forecasting expansion of 15% and 13% in 2017 and 2018 respectively.

And I believe the investment manager is a wise stock selection despite an elevated forward P/E multiple of 31.5 times. Over the long term I believe Hargreaves Lansdown should prove a profitable growth share returns as private investor activity keeps on surging (assets under administration stood at a record $70bn as of December), helped by the structural opportunities created by an ageing populace.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Aberdeen Asset Management and Hargreaves Lansdown. 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.

More on Investing Articles

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »