A FTSE 100 bargain for growth and dividend investors

Royston Wild looks at a FTSE 100 (INDEXFTSE: UKX) stock with brilliant investment 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.

In my opinion Ashtead Group (LSE: AHT) is a bargain-basement share that could make investors very rich in the years ahead.

The US economy is going from strength to strength, driving demand for the Footsie star’s rental equipment. At Sunbelt — its Stateside division that sources more than nine-tenths of overall profit — sales boomed 15% during July-September.

And demand for Ashtead’s services is likely to keep increasing as infrastructure spending across the globe clicks higher, whilst the company’s insatiable appetite for bolt-on acquisitions should also keep trade rolling in.

Stateside star

Ashtead has a brilliant record of throwing out double-digit earnings improvements year after year, and with market conditions improving in its most important territory, City analysts do not see this trend ceasing any time soon.

In the current year ending April 2018 the Footsie star is expected to generate a 16% bottom line improvement, and it is anticipated to follow this with an extra 12% rise in fiscal 2019.

Despite its exceptional profits history and strong outlook, however, Ashtead can still be picked up for a song. Whilst a forward P/E ratio of 16.4 times may nudge ahead of the widely-accepted value benchmark of 15 times, a PEG reading of 1 suggests that the rentals giant is in fact a bargain.

Meanwhile, there is plenty for income seekers to set their teeth into, Ashtead is expected to keep its ultra-progressive dividend policy in business. It hiked the dividend 22% last year to 27.5p per share, and more chunky increases — to 31.3p and 34.8p this year and next — are forecast. These projections yield a handy 1.6% and 1.8%.

Build a fortune

Those on the hunt for great growth and dividend shares for a small price should also give MJ Gleeson (LSE: GLE) a close look today.

The massive housing shortage in the UK means that firms across Britain’s housebuilding sector continue to deliver brilliant profits growth, such is the clamour for new-build properties. And MJ Gleeson was the latest such business to underline the positive market backdrop earlier this week.

It advised that the “increasing number of sales outlets, combined with very strong customer demand in all regions, good mortgage availability and attractive levels of affordability means that the outlook for the division remains very positive.”

The division has hiked the number of sales outlets to 58 from 50 at the same time last year, and it has plans for 70 by the middle of next year. A strong forward order book at the end of November, standing more than 30% higher year-on-year, underlines that the business is right to be optimistic.

Indeed, the number crunchers are expecting MJ Gleeson, which also has a knack of grinding out brilliant profits growth year after year, to throw out another 9% earnings rise in the year ending June 2018. And this estimate leaves it changing hands on a mere prospective P/E rating of 14.7 times.

The solid outlook for the housing market should also keep dividends growing at a healthy rate, too, and for this year a 26p per share payout is predicted, up from 24p last year and leaving a 3.5% yield.

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 of the shares mentioned. 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.

More on Investing Articles

Investing Articles

A 25-year-old investing £100 a month in a Stocks and Shares ISA could have this much at 50…

Opening a Stocks and Shares ISA at a young age can be a masterstroke when it comes to building long-term…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Here’s why this FTSE 100 gem still looks a huge bargain to me despite a 94% rise this year

A stock can still have huge value even after a substantial rise in price. To find out if this is…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

Investing £3.33 into an ISA every day from 22 could result in a £60,000 passive income

Millions of Britons use the Stocks and Shares ISA as a way to build wealth and generate an income. However,…

Read more »

Investing Articles

2 resurgent cheap shares that could skyrocket in 2025

Cheap shares can take our portfolios to the next level. Here, Dr James Fox highlights two stocks that appear to…

Read more »

Investing Articles

How much does an investor need in a Stocks and Shares ISA to earn £1,000 a month in passive income?

A Stocks and Shares ISA's a valuable asset for investors. Not having to pay dividend tax can be a big…

Read more »

Investing Articles

9% dividend yield! Could buying this FTSE 250 stock earn me massive passive income?

Assura looks like an outstanding stock for dividend investors to consider. But is the 9% dividend yield the passive income…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Why I think this month could be critical for the Lloyds share price!

Our writer explains why he thinks the bank's 2024 results will have a significant impact on the short-term direction of…

Read more »

British Pennies on a Pound Note
Investing Articles

This former penny share has soared 168%. Is the best yet to come?

When Christopher Ruane saw a penny share as a potential bargain last year, he was spot on. So having not…

Read more »