Growth, value AND dividends. I think this FTSE 100 stock looks attractive right now

Looking for shares to buy right now? This under-the-radar FTSE 100 (INDEXFTSE: UKX) stock offers growth, value, and dividends, says Edward Sheldon.

| 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.

Finding a FTSE 100 stock that offers the combination of growth, value, and dividends is not easy. Most growth stocks trade at high valuations. Many don’t pay dividends.

However, after screening the FTSE 100 index for stocks that are generating revenue growth, paying a dividend, and trading at a reasonable P/E ratio, I’ve found one stock that ticks all three boxes. If you’re looking for shares to buy right now, I’d check this company out.

This FTSE 100 stock flies under the radar

The FTSE 100 company I’m talking about Hikma Pharmaceuticals (LSE: HIK). An under-the-radar healthcare company, Hikma is focused on developing, manufacturing, and marketing branded and non-branded generic medicines. Every day, its products are used by approximately 13m people across the world.

Impressive growth

Hikma is growing at an impressive rate. Over the last five years, revenue has climbed from $1,489m to $2,203m – an increase of 48%. And looking ahead, City analysts expect the company to continue growing. Currently, analysts expect top-line growth of 4.4% this year and 5.4% next year.

It’s worth pointing out that, so far, Covid-19 seems to have had little impact on the company. In late February, the group advised that it wasn’t anticipating any material impact from the outbreak. More recently, on 30 April, the company said that it had made a “strong start to the year” and that it was reiterating its full-year guidance for 2020.

Still paying dividends

Moving on to dividends, Hikma is a reliable dividend payer that has now notched up eight consecutive increases. The payout has been growing at a fantastic rate too. Over the last five years, it has increased from 22 cents per share to 44 cents per share. The FY2019 payout of 44 cents per share equates to a yield of around 1.4% at the current share price. Not the highest yield in the FTSE, sure, but a higher rate than you’ll get on a savings account right now. 

Importantly, Hikma is continuing to pay its dividend in the current environment. Yesterday, it paid shareholders the final FY2019 dividend of 30 cents per share. The company said that its ability to keep paying dividends demonstrates the strength of its balance sheet and its confidence in its ability to maintain strong cash generation and low leverage.

Cheaper than the largest FTSE 100 health stock

Given its growth and dividend track record, you would think that Hikma would trade at a high valuation. Yet that’s not the case. Currently, the forward-looking P/E ratio is a reasonable 19.8. By contrast, the largest healthcare stock in the FTSE 100, AstraZeneca, currently has a forward P/E ratio of 27.8. I think Hikma’s current valuation is attractive.

I’m not the only one who thinks Hikma has appeal right now. Of the 13 brokers covering HIK, 10 rate the stock as a ‘buy’ or ‘strong buy.’

A lot to like

All things considered, I think there’s a lot to like about Hikma. The FTSE 100 company looks attractive from a growth perspective, but at the same time, it also has defensive attributes. People still need medicine in an economic downturn. The dividend payout adds weight to the investment case.

At its current price, I see the stock as a ‘buy.’

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 has no position in any shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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

A 25-year-old investing £100 a month in a Stocks and Shares ISA could have this much at 50…

Opening a Stocks and Shares ISA at a young age can be a masterstroke when it comes to building long-term…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Here’s why this FTSE 100 gem still looks a huge bargain to me despite a 94% rise this year

A stock can still have huge value even after a substantial rise in price. To find out if this is…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

Investing £3.33 into an ISA every day from 22 could result in a £60,000 passive income

Millions of Britons use the Stocks and Shares ISA as a way to build wealth and generate an income. However,…

Read more »

Investing Articles

2 resurgent cheap shares that could skyrocket in 2025

Cheap shares can take our portfolios to the next level. Here, Dr James Fox highlights two stocks that appear to…

Read more »

Investing Articles

How much does an investor need in a Stocks and Shares ISA to earn £1,000 a month in passive income?

A Stocks and Shares ISA's a valuable asset for investors. Not having to pay dividend tax can be a big…

Read more »

Investing Articles

9% dividend yield! Could buying this FTSE 250 stock earn me massive passive income?

Assura looks like an outstanding stock for dividend investors to consider. But is the 9% dividend yield the passive income…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Why I think this month could be critical for the Lloyds share price!

Our writer explains why he thinks the bank's 2024 results will have a significant impact on the short-term direction of…

Read more »

British Pennies on a Pound Note
Investing Articles

This former penny share has soared 168%. Is the best yet to come?

When Christopher Ruane saw a penny share as a potential bargain last year, he was spot on. So having not…

Read more »