This FTSE 100 growth and dividend stock is too cheap to ignore

Buying this FTSE 100 (INDEXFTSE:UKX) company right now could be a shrewd move.

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The FTSE 100 may have soared in recent years, but there are still a number of growth and dividend opportunities. Although they may offer reduced margins of safety in some cases after share price growth, they could still generate total returns which are relatively high in the long run.

Improving performance

One example of such a stock is easyJet (LSE: EZJ). The company has experienced a hugely challenging period in recent years, with demand for its services falling due to fears surrounding terrorism. Alongside this, a lower fuel price has encouraged greater competition in the European short-haul airline industry. This has meant that sales for many of the major players across the industry have come under pressure. As such, easyJet has delivered two years of falling profitability.

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This year though is set to see a return to strong bottom line growth. The company is forecast to post a 17% rise in earnings following the adoption of a refreshed strategy. This has seen it focus on increasing passenger numbers, which seems to be having a positive impact on its overall performance. Despite this, it trades on a price-to-earnings growth (PEG) ratio of just 0.9, suggesting there could be upside potential on offer.

Dividend prospects

As well as strong capital growth prospects, easyJet also has impressive income potential. It currently has a dividend yield of around 2.9%. With dividends being covered 2.2 times by profit, they seem to be highly sustainable at their current level. With profit growth expected to be recorded in future years, it would be unsurprising for dividend growth to maintain a similar pace to the rise in earnings. As such, it could become an increasingly popular income stock over the medium term.

Low valuation

Also offering a mix of capital growth and income prospects is pub operator Mitchells & Butlers (LSE: MAB). It released a positive trading update on Friday which showed that trading through the core three-week festive season was strong. The company was able to deliver like-for-like (LFL) sales growth of 3.9% during the period. In the seven weeks since its last update, LFL sales were 1.6%, which gives a figure of 2.2% in the financial year to date.

With a price-to-earnings (P/E) ratio of 8, the stock appears to be cheap at present. Of course, this is for good reason, since the outlook for the leisure industry in the UK remains challenging. Higher inflation has caused consumer confidence to decline, and this may put the sector’s sales growth outlook under pressure.

However, with such a wide margin of safety, investors appear to have priced in potential difficulties for Mitchells & Butlers. Alongside this, the company has a dividend yield of 3.6%. With dividends being covered 3.7 times by profit, they could rise rapidly in the long run.

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Peter Stephens owns shares in easyJet. 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.

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