St. James’s Place plc: a FTSE 100 stock for growth and dividend investors

St. James’s Place plc (LON: STJ) has lifted its dividend by 300% over the last five years. There’s more growth to come too.

| 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.

The combination of capital growth and dividends may just be the Holy Grail of investing. Share price appreciation combined with a steady stream of dividends can really propel an investor’s portfolio higher over the long term. Today, I’m looking at two FTSE 100 stocks that I believe have the potential to provide this powerful combination.

St. James’s Place

Wealth manager St. James’s Place (LSE: STJ) is a leader in its field. The firm offers bespoke face-to-face advice to individuals, trustees and businesses, through a network of around 3,700 qualified advisers. At a time when high-quality customer service seems to be disappearing from society, St James’s Place, with its focus on longlasting partner/client relationships, is thriving.

A trading update released today revealed strong momentum across the business. For the 12 months ended 31 December, gross inflows were up 29%, while group funds under management rose 20%. The company enjoyed a 96% retention rate of client funds – an indication that it’s clearly offering an excellent service. Chief Executive Andrew Croft stated that the firm continues to see “growing demand for advice.”

One thing that really appeals to me about STJ is the stock’s dividend growth. While the yield isn’t super high at 3.5% (FY2017 estimate), the growth of the payout in recent years has been amazing. Indeed, between 2011 and 2016, the wealth manager hiked its dividend from 8p per share to 33p per share, growth of 33% per year on an annualised basis. You won’t find many other FTSE 100 companies lifting their payout at that rate. Analysts expect growth of a further 30% for the year just gone.

While the stock’s valuation is not cheap on a P/E of 25.2 times FY2018’s earnings, the share price is clearly trending upwards. If St. James’s Place can keep increasing its dividend at a strong rate, the stock could continue to climb higher over the long term, in my view.

ITV

If STJ’s valuation looks too expensive for you, take a look at ITV (LSE: ITV) right now. The broadcaster has seen its share price fall over 30% in the last two years, and now trades on a forward P/E of just 10.8. In my opinion, that’s a bargain valuation.

The share price has suffered because companies have cut their advertising budgets in recent years. As a business that generates a significant proportion of its revenues from advertising, the broadcaster has suffered.

However, what many investors fail to realise is that ITV is not just a one-trick pony. The business is considerably more diversified than it used to be and ITV now generates over 50% of its revenues from sources other than spot advertising. And these areas of the business are growing. A trading update in November revealed that revenue at ITV studios was up 9% for the first nine months of the year, while online, pay and interactive revenues also performed well, with 8% growth. This leads me to believe that the stock’s current valuation is simply too low.

ITV’s dividend prospects also look compelling. An estimated payout of 7.8p per share for FY2017 puts the current yield at 4.6%. Buy the shares now and you’ll get paid to wait for a turnaround in sentiment towards the sector. That’s how I’m playing the stock right now.

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.

Edward Sheldon owns shares in ITV. The Motley Fool UK has recommended ITV. 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 For Beginners

Here’s how I’m trying to prevent a stock market crash from ruining my portfolio

Jon Smith explains which shares he's avoiding and what he's thinking of buying to try and protect his portfolio from…

Read more »

Bearded man writing on notepad in front of computer
US Stock

Call me crazy, but here’s why I’m eyeing up the CrowdStrike share price

Jon Smith notes the carnage caused by Friday's global outage, but flags up why he's thinks the CrowdStrike share price…

Read more »

Investing Articles

What do Hargreaves Lansdown results mean for the share price?

The Hargreaves Lansdown share price has surged in recent months on takeover expectations, but what will the recent results mean…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

Newly minted S&P 500 stock CrowdStrike just crashed! Here’s why

Shares of S&P 500 firm CrowdStrike collapse as the company lies at the centre of a global IT outage. What…

Read more »

artificial intelligence investing algorithms
Investing Articles

Is Nvidia heading for the mother of all tech stock crashes?

Nvidia stock has soared, and the company briefly became the most valuable on the planet. But not everyone’s an AI…

Read more »

Dividend Shares

The BP share price is down 15% in 3 months. Time to buy?

In the space of just a few months, the BP share price has fallen by a double-digit percentage. Is this…

Read more »

Investing Articles

A 5.4% dividend bargain I’ll buy over Lloyds shares

Harvey Jones loves his Lloyds shares but now he's found a high-yielding FTSE 250 stock that may offer even more…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Recommended by Warren Buffett, this top hedge fund’s betting on Rolls-Royce shares

When Warren Buffett ended his previous investment partnership, he recommended Bill Ruane’s Sequoia Fund. Today, its largest investment is in…

Read more »