I’d buy the soaring Burberry share price and this FTSE 100 dividend stock today

Harvey Jones would buy these two FTSE 100 (INDEXFTSE:UKX) stocks today, but for different reasons.

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Luxury fashion brand Burberry (LSE: BRBY) is trading more than 8% higher this morning after it shrugged off retail-hit civil unrest in Hong Kong to post a 5% increase in year-on-year revenues to £1.28bn.

Putting on the style

The £9bn FTSE 100 company also delivered an 11% rise in interim pre-tax profits to £193m, while retail comparable store sales rose 4%. New collections delivered double-digit growth, although this was knocked by a softer performance of replenishment product lines.

This is nonetheless an impressive performance, and investors are rushing to buy into the Burberry share price as a result.

Mainland China led the way with growth in the “mid-teens”, where it has just announced a social retail partnership with tech giant Tencent. Growth was mid-single digit percentage for Asia Pacific as a whole, despite a double-digit drop in Hong Kong. Solid growth in the UK and Europe offset slower growth in the Americas and a dip in the Middle East.

The right balance

Hong Kong notwithstanding, Burberry is in a good place right now, boasting healthy operating margins at 16.3% and a strong return on capital employed, currently 32.7%. It also has a healthy balance sheet, with net cash standing at £670m in September, up slightly from £647m last year, despite returning £129m to shareholders as dividends and £15m via share buybacks.

Today, it announced a 3% hike in the interim dividend to 11.3p. The forward yield is just 2.2%, against an average of 4.53% for the FTSE 100 as a whole, although it’s covered twice by earnings, giving it plenty of scope for future progression.

So would I buy into the Burberry share price today? I’m a little deterred by its pricey valuation of 23.2 times forward earnings. On the other hand, today’s results would have been even better without the “considerable disruption” in Hong Kong, and the outlook looks solid. I’d label it a buy.

Macro misery

Distribution and outsourcing group Bunzl (LSE: BNZL) has long been a FTSE 100 favourite of mine, but the past year has been a disappointment, with the share price falling 13%. 

Last month’s market update reported 4% growth in Q3 revenue, but underlying revenues fell 1%, due to previously-announced lower sales to a large grocery customer in North America. The group reaffirmed full-year expectations against “continued mixed macroeconomic and market conditions” in its main countries and sectors.

Bunzl nonetheless remains an impressive long-term income and growth play, delivering an average total return of 13.8% a year over the past decade, with 26 consecutive years of dividend hikes. It has grown through acquisition, and has already spent another £100m this year, with further takeover discussions ongoing.

Contrarian buy

As an international business-to-business group, the Bunzl share price is inevitably vulnerable to a slowdown in the global economy. But it also has plenty of resilience, as well as high cash conversion and solid dividend growth. The forecast yield is 2.5%, covered 2.5 times, lower than the FTSE 100 average but with a great track record of growth.

A forward valuation of 16.3 times earnings is relatively low for this £6.87bn group. So instead of being deterred by recent weakness, you might view this as an opportunity to snap up a strong long-term buy and hold at a moment of weakness.

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.

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Burberry. 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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