Should ISA investors buy this unloved FTSE 100 dividend stock and its 6.6% yield?

Searching for cheap FTSE 100 shares to load up on? Royston Wild runs the rule over a fallen blue-chip with big dividend yields.

| 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.

question marks written reminders tickets

Image source: Getty Images

Marks & Spencer (LSE: MKS) may be the victim of the latest FTSE 100 reshuffle but, for the moment, it’s still clinging on by its fingernails. That’ll change in the next few weeks when the fashion giant falls into the FTSE 250, a chastening experience for a business that’s been a stalwart of Britain’s premier share index since its inception in 1984.

Did I say fashion giant? ‘Relic’ is perhaps more of an apt description for this once-loved shopping institution. A 34% share price slump since the start of May alone has prompted the retailer’s demotion and I’m tipping it to keep sliding as consumers continue giving its clothing lines the cold shoulder.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Triple trouble

It’s not just that Marks & Spencer’s troubles are confined to claims its clothing is over-priced and off-trend. Though, of course, this continues to cause the company huge stress — latest financials showed like-for-like sales at its clothing and homewares division drop 1.6% in the 12 months to March.

It’s also not just that the company is struggling amid broader weakness in the UK retail sector, a problem that’s getting worse amid ongoing Brexit uncertainty. Most recent Office for National Statistics data disappointed and showed retail sales fall 0.2% in August.

It’s that the company’s management, after years of trying and countless aborted attempts, still hasn’t got a clue as to how to bring its flagging fashion arm back to life. Jill McDonald was poached from Halfords in 2017 to oversee a revolution, but brought very little to the party before she was dismissed in July.

Asleep at the wheel?

Even when M&S happened upon a popular product line, it wasn’t able to capitalise because of poor stock control. In the last fiscal year, the Footsie firm noted “encouraging progress in quarter three was constrained by weak availability in quarter four as we sold out of fast-selling lines and experienced supply issues.” And these issues will take some time to solve as well.

Chief executive Steve Rowe has vowed to take day-to-day control of the division which he headed before taking the top post three-and-a-half years ago. But those hoping it will prove to be a much-needed silver bullet for this flagging business are likely to be disappointed. He failed to institute significant change in his first stint at the unit, and market conditions have worsened since then as competition has increased and consumer spending has shrunk.

Meanwhile, the line of people leaving M&S continues to grow, the latest of which, chief financial officer Humphrey Singer, announced his exit on Friday. Speculation is now growing as to whether Rowe could be next to head for the exit.

Now Marks & Spencer’s cheap — it currently trades on a forward P/E ratio below 10 times — while it boasts a monster 6.6% corresponding dividend yield too. This is a reflection of the company’s high-risk profile, however, and the probability that earnings will keep skidding beyond the anticipated 17% drop City analysts have marked for fiscal 2020. I, for one, plan to keep avoiding the high street horror like the plague.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Royston Wild 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

Tired woman sleeping on London underground
Investing Articles

5 steps to monthly passive income streams of £500

Aiming for regular passive income streams, our writer walks through five key steps he would take.

Read more »

Business people shaking hands
Investing Articles

Director dealings: HSBC, National Grid, Taylor Wimpey

Director dealings can indicate whether a company's doing well. So, here are this week's director dealings from three of the…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

2 lesser-known stocks with 10% dividend yields!

With sky-high inflation, sizeable dividend yields can help my portfolio grow. These two stocks are paying 10% on average.

Read more »

Businessman pulling out wooden brick from toppling stack
Investing Articles

Is the Woodbois share price a bargain – or a value trap?

The Woodbois share price has seen big swings recently. Our writer considers why and explains his response.

Read more »

Electric cars charging in station
Investing Articles

Here’s why NIO stock is my top EV pick!

NIO stock had been one of the worst-performing shares over the last year, but it appears to have bottomed out.…

Read more »

Risk reward ratio / risk management concept
Investing Articles

The JD Wetherspoon share price has fallen 45% — should I load up?

The JD Wetherspoon share price has shed almost half its value in the past year. Should our writer buy another…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

Down 50%, is the Scottish Mortgage share price a bargain in plain sight?

The Scottish Mortgage share price has lost half its value in recent months. Is it now a bargain for our…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

A cheap UK share for the cybersecurity boom!

I'm backing this UK share after its share price collapsed this week. In fact, I've recently added this cybersecurity stock…

Read more »