3 Brexit ‘buys’: AstraZeneca plc, Compass Group plc and Severn Trent plc

These three stocks offer stunning long-term growth prospects in a post-Brexit world: AstraZeneca plc (LON: AZN), Compass Group plc (LON: CPG) and Severn Trent plc (LON: SVT).

| 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.

One of the appealing aspects of buying utility stocks such as Severn Trent (LSE: SVT) is their performance during crises. In such periods, investors normally switch from a risk-on attitude to a risk-off one and seek out safer places to invest their capital. Utilities, with their robust earnings outlooks and stable business models, have huge appeal. Therefore, it’s of little surprise that Severn Trent’s shares have outperformed the FTSE 100 since the EU referendum.

Looking ahead, further outperformance could be on the cards. That’s because the outlook for the UK economy is highly uncertain and the trend described above may continue over the medium-to-long term. Furthermore, Severn Trent could also be viewed as a more obvious bid target in the coming months as the value of sterling plummets and it becomes cheaper and therefore more attractive for foreign bidders to acquire the water services company.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

As well as a defensive profile and bid potential, Severn Trent also has a beta of just 0.7. This indicates that it offers a less volatile shareholder experience, thereby increasing its appeal in a post-Brexit world further still.

Navigating through tough times

Also offering a highly defensive profile is food services business Compass Group (LSE: CPG). It’s a highly efficient, well-run company which is able to demonstrate a long track record of having delivered rapidly rising earnings growth. Due to the uncertainty present in markets at the moment, this relative certainty could be worth an even greater premium than usual and Compass shares may significantly outperform the wider index.

One of the main drivers of Compass’ share price in recent years has been its dividend growth. In fact, it has risen at an annualised rate of 11% during the last five years, which is clearly well ahead of inflation. Next year, Compass is expected to grow dividends by around 10% and yet shareholder payouts are still set to equate to just 55% of profit. This indicates that further rapid dividend growth is ahead to boost its current yield of 2.3%.

Post-Brexit shot in the arm?

Living in a post-Brexit world could also be made easier by investing in AstraZeneca (LSE: AZN). That’s because the key driver of its share price in the coming years is unlikely to be the political or economic challenges faced by the UK, but rather the company’s ability to transition from having a strong pipeline to having multiple blockbuster drugs.

Although there’s no guarantee that this will happen, AstraZeneca seems to be doing all of the right things to boost its top and bottom line performance. Its acquisition programme is likely to remain ambitious, while it remains a relatively efficient business that’s investing heavily in its own research capabilities.

Due to its strong cash flow, AstraZeneca has been able to keep dividends at a generous level in recent years so that it yields 4.4% right now, even though its profitability has fallen. This income stability, plus the scope for rapidly rising dividends and a low correlation with the macroeconomic outlook, mean that AstraZeneca could be an excellent ally in an uncertain post-Brexit period.

More on Investing Articles

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

Best British dividend stocks for July

We asked our freelance writers to share the top income stocks they’d buy in July, which included Dividend Aristocrats and…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

How I’d apply the Warren Buffett method to buying shares

Learning from billionaire investor Warren Buffett, our writer explains his own approach to investing in shares for his portfolio.

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

This dividend share yields under 1% — but I’d still buy it

This dividend share has a low yield. So why would our writer consider adding it to his income portfolio?

Read more »

Young lady working from home office during coronavirus pandemic.
Investing Articles

Looking for a good share to buy? Here’s how I do it

Here are two approaches our writer uses when hunting for a good share to buy for his portfolio to aim…

Read more »

man in shirt using computer and smiling while working in the office
Investing Articles

One cheap FTSE 100 share I’d buy for a new bull market

This FTSE 100 share is unloved and starting to look seriously cheap, says Roland Head.

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

How I’d invest £500 in UK shares in 2022

Investing a small amount of capital in UK shares can result in high commission costs. Zaven Boyrazian explains how to…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

2 battered FTSE dividend stocks to buy in July!

I'm still searching the FTSE 100 for the best bargains to buy. I think these two big dividend shares are…

Read more »

Woman pulling baffled face
Investing Articles

Can I trust Lloyds’ 6.1% dividend yield?

The Lloyds' share price has sunk in 2022, causing the bank's dividend yield to leap. But can I really trust…

Read more »