Forget a Cash ISA! I’d buy these 2 FTSE 100 growth-and-income shares

G A Chester highlights two FTSE 100 (INDEXFTSE:UKX) dividend stocks he thinks have strong growth and income appeal.

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It’s a good idea to hold some cash for emergencies. However, beyond this, it lacks appeal as a means of growing long-term wealth. The interest rate on the best easy-access Cash ISA is currently 1.46%. This would actually be shrinking your cash pot in real terms, because the cost of living is rising at 2% (or higher on some measures).

For long-term real growth in capital and income, I’d look to invest in FTSE 100 companies in a Stocks & Shares ISA. Here, I’ll explain why Associated British Foods (LSE: ABF) and Coca-Cola HBC (LSE: CCH) are two such businesses I’d happily buy today.

Prudent stewardship

ABF generated sales of £15.6bn last year. The group is geographically diversified, with 60% of sales outside the UK. It’s also diversified by business segment, with operations in grocery, ingredients, sugar and agriculture, but also clothing retail — namely, Primark. The value fashion chain has become the jewel in the crown, responsible for almost half of group sales last year.

As well as its attractive diversification, shareholders also enjoy the benefit of prudent stewardship that comes with a company still majority owned by its founding family. These benefits include a strong balance sheet (net cash of £386m last reported), and a well-covered dividend that’s increased each year for as long as I can remember.

For ABF’s current trading year (ending 30 September), management expects earnings per share (EPS) to be in line with the prior year’s 134.9p, but City analysts expect this to rise 12% to 151.4p next year. At a share price of 2,265p, this gives a price-to-earnings (P/E) ratio of 15. I think it represents very good value for such a high-quality and reliable business.

I reckon investors today can expect dividends of around 48p a share over the next 12 months. At the current share price, this would represent a yield of 2.1%, compared with the aforementioned best-buy 1.46% interest rate from an easy-access Cash ISA.

Defensive and attractive

With sales of €6.7bn (£6bn at current exchange rates), Coca-Cola HBC is one of the largest bottling and distribution partners of The Coca-Cola Company. Operating in 28 countries, its established markets (37% of last year’s revenues) are Austria, Cyprus, Greece, Italy, Northern Ireland, Republic of Ireland and Switzerland. It’s also developing, and emerging markets extend from central Europe to the east coast of Russia, and it also operates in Nigeria.

Backed by a global titan and an array of popular brands, including four of the world’s five best-selling, non-alcoholic, ready-to drink beverages (CocaColaCocaCola Light, Sprite and Fanta), I see Coca-Cola HBC as a strong, defensive business operating in an attractive mix of established and emerging markets.

City analysts are forecasting 8% EPS growth to €1.41 (127p) for its current trading year (ending 31 December), followed by 11% growth to €1.57 (141p) next year. The latter gives a P/E of 19 at a share price of 2,670p. This is a premium rating but fully merited, in my opinion, due to the aforementioned defensive and other attractive qualities of the business.

Buyers of the stock today can look forward to an annual ordinary dividend of 63 eurocents (57p) a share in the next 12 months, according to City analysts. This would give the same initial yield of 2.1% as ABF. However, analysts fancy Coca-Cola HBC will also pay a special dividend that would more than double the yield this year.

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.

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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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