Why I’d invest £1,000 in FTSE 100 dividend stock St. James’s Place today

Edward Sheldon explains why wealth manager St. James’s Place plc (LON: STJ) is a top FTSE 100 (INDEXFTSE: UKX) dividend stock.

| 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.

While the FTSE 100 index is home to a number of dividend stocks, some clearly have more momentum than others at present. Today, I’m looking at two dividend stocks that I believe could be worthy of a £1,000 investment right now.

St. James’s Place

Wealth manager St. James’s Place (LSE: STJ) offers bespoke face-to-face financial advice to individuals, trustees and businesses, through a network of around 3,700 qualified advisers. Despite the rise of software-based ‘robo-advice’ in recent years, the demand for personalised, trusted financial advice shows no sign of slowing down due to the complexities of today’s financial environment. And the firm looks well placed to capitalise.

A trading update released this morning suggests that the group enjoyed strong momentum for the first three months of the year, despite the financial market volatility we have experienced since late January. The firm benefitted from net fund inflows of £2.6bn for the quarter, up 31% on the same period last year, and retention of client funds was strong at 96%. Group funds under management climbed to £89.9bn, up from £79.8bn this time last year.

CEO Andrew Croft was upbeat about the future. He said: “We continue to see a growing market for trusted face-to-face financial advice and believe St. James’s Place remains ideally placed to meet this need.” The group’s objective is to achieve 15%-20% growth in gross inflows during 2018 and beyond.

The business has an excellent record of rewarding its shareholders with dividends. The wealth manager has paid a dividend every time for over 20 years now, and with the exception of the period between 2002 and 2003, has always lifted its payout. Last year, the group declared a dividend payout of 42.9p per share, which equates to a trailing dividend yield of 3.8% at present. Looking ahead, City analysts expect 13% dividend growth this year, taking the prospective yield to 4.3%.

The shares aren’t particularly cheap, trading on a trailing P/E ratio of 21.1, however, I believe that’s a fair price to pay for a slice of this high-quality business.

easyJet

When studying Warren Buffett’s portfolio recently, one thing I noticed was a sizeable allocation to airlines. Buffett owns shares in Delta, American Airlines, and Southwest Airlines and that got me thinking about airline stocks here in the UK. Could easyJet (LSE: EZJ) be the best way to play this theme?

It hasn’t had the best run over the last couple of years. Issues such as Brexit uncertainty, currency fluctuations, fuel costs and the impact of terrorism have all taken their toll on profitability. Earnings dipped significantly last year and the group cut its dividend by 24%. However, recent updates from the company have been positive, so could easyJet be on the cusp of a turnaround?

Analysts’ estimates for this year certainly look promising. Revenue and earnings per share are anticipated to climb by 12% and 24% respectively this year, with EPS of 102p currently expected. Given that the group’s policy is to pay out 50% of earnings, that means that the dividend could potentially jump from 41p per share last year to 51p per share this year. At the current share price, that equates to a yield of 3.2%.

The shares have bounced 25% over the last six months, however, the current valuation (forward P/E of 15.8) doesn’t look stretched. I think now could be a good time to take a closer look at the stock.

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 St James's Place. 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

Up 51% in 2024, this FTSE 250 stock is flying!

This writer takes a look at one high-flying FTSE 250 share that still looks good value despite surging to an…

Read more »

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 »