One FTSE 100 dividend stock and one growth stock I’d buy with £1,000 today

These two shares could deliver performance which is ahead of the FTSE 100 (INDEXFTSE: UKX).

| 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.

Generating higher total returns than the FTSE 100 may seem much easier now that the index has experienced a period of volatility. Despite delivering a recovery in recent weeks, it continues to trade around 5% below the all-time high which was recorded in January.

However, beating the index remains a challenge. Uncertain prospects across a number of industries mean that investors may wish to focus on investments with growth and/or income potential which is significantly stronger than that of the wider index. With that in mind, here is one dividend stock and one growth share which could be worth a closer look.

Improving outlook

Reporting on Friday was natural resources exploration and development company Metals Exploration (LSE: MTL). Its quarterly performance has been relatively upbeat, with 10,593 ounces of gold poured during the quarter. It was able to sell 11,338 ounces of gold during the quarter at an average realised price of $1,328 per ounce.

The company also announced that in the last week it has achieved and maintained 100% design throughput at its BIOX circuit. This could prove to be a major achievement for the business, and maintaining this level of throughput could lead to higher gold recoveries.

With Metals Exploration having the potential to deliver further operational progress, its future appears to be relatively bright. It may continue to benefit from a firmer gold price, with the prospect of higher inflation and volatility across global stock markets having the potential to increase demand for precious metals. As such, and while relatively risky, it could prove to be a sound long-term buy.

Dividend potential

Also offering strong total return potential over the medium term is fellow mining stock Anglo American (LSE: AAL). It has experienced a hugely challenging period in recent years, with commodity price falls causing its profitability to come under severe pressure. This caused dividends to be suspended in 2016, although they were reinstated in 2017 as the company’s financial outlook improved.

Contributing to a stronger financial performance has been the decision to restructure the business. It is now more streamlined following the disposal of a number of assets, and appears to have a more competitive position on costs versus sector peers.

With Anglo American forecast to yield as much as 4.9% in the current year, it appears to have a strong income outlook. Dividends are expected to be covered around three times by profit, which suggests that the company’s income prospects are sustainable. It also means that there is likely to be sufficient capital available to reinvest in the business for future growth.

While commodity prices could experience further volatility over the medium term, the prospects for the industry are generally bright. Since Anglo American trades on a price-to-earnings (P/E) ratio of around 11, it seems to offer a wide margin of safety at the present time.

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.

Peter Stephens 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

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Dividend Shares

How I’d try to ironclad my second income before interest rates fall

Jon Smith explains a couple of tactics he's looking to implement in his dividend portfolio to try and protect his…

Read more »

Investing Articles

The FTSE 100 still looks cheap to me. But don’t just take my word for it!

The FTSE 100 (INDEXFTSE:UKX) has increased 7.5% since the start of 2024. But I think there’s evidence to suggest that…

Read more »

Investing Articles

What should the Vodafone share price be? Here are 3 possible answers

Our writer uses a number of popular financial measures to come up with an estimate of a fair value for…

Read more »

Investing Articles

Here’s how much I’d have if I’d bought 1,000 shares in this FTSE 100 defence stock 5 years ago

I could have made a pretty penny investing in this leading FTSE 100 defence stock. Now I’m looking at a…

Read more »

Investing Articles

1 potential millionaire-maker UK stock I’d like to buy for the long haul

For long-term investors, here’s 1 UK stock to consider buying right now with the potential to help power a growth…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

These cheap UK shares look way too good to ignore right now

With the UK stock market reaching new highs recently, this Fool plans to grab these two remaining cheap shares before…

Read more »

Young Woman Drives Car With Dog in Back Seat
Investing Articles

This unloved UK stock could rise 120%, according to a City broker

Some City analysts reckon a once-popular UK stock can recover from its massive recent decline and go on to more…

Read more »

Investing Articles

These FTSE dividend shares all offer 6%+ yields!

Paul Summers highlights three FTSE dividend shares that offer big yields. But is the passive income stream sufficient to offset…

Read more »