Why this FTSE 100 discount retailer is on my best stocks to buy now list

Jabran Khan details this FTSE 100 discount retailer which is firmly on his best stocks to buy now list for 2021 and beyond.

| 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.

I am looking for value FTSE 100 stocks from my best stocks to buy now list. Due to the global pandemic and lockdowns in force, retail is a tricky sector to gauge right now.

Despite the economic uncertainty in retail, one stock I really like is B&M European Value Retail (LSE:BME). It is classed as an essential retailer, therefore its multiple locations currently remain open. Many other non-essential retailers have been forced to shut which has been devastating for an already ailing industry. 

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

FTSE 100 opportunity

More commonly known as B&M Bargains or B&M Homestore, it currently boasts over 600 stores across the UK. BME employs over 28,000 people. BME is known to0 as a discount retailer. In recent years, such stores have become more popular as consumers are moving away from the traditional retailers looking to make their cash go further. It is estimated BME attracts over four million customers each week.

I believe that BME represents excellent value which is one reason why it is on my best stocks to buy now list. As I write, it currently has a forward price-to-earnings growth (PEG) ratio of just 0.3. It also carries a juicy 10.5% dividend yield for this current fiscal year, which is very tempting. To provide some context, the average dividend yield for the FTSE 100 is closer to 3%.

The BME share price has increased over 50% in the past 12 months. As I write, shares are trading for 587p per share. This is nearly 120% higher than last March’s market crash low of 268p per share.

Best stocks to buy now carry risk and reward

The FTSE 100 retailer carries its own risks. BME sells lots of essential goods but also sells discretionary goods that make it a lot of money. If consumer spending weakens as the economy continues to come under pressure, BME could see its performance affected. In addition to this, BME has been hit with higher distribution and transport costs which will have affected its balance sheet. This has been driven by higher inflation. An argument could be also made that BME’s significant share price rise means it could have peaked and may not climb much further. 

Despite these very real risks, I feel last month’s announcement of Q3 results vindicated my choice to have BME on my best stocks to buy now list. The FTSE 100 incumbent announced a 22.5% increase in group revenue. This is compared to 9.9% in the same period last year. BME decided to reward its shareholders with a special dividend of 20p per share. In total, this equated to over £200m.

My verdict

BME is one of my best stocks to buy now as I feel it provides an element of safety in current uncertain times. There is a need for consumers to make sure their cash goes further as budgets are stretched currently. I believe this will benefit B&M. In my opinion, last month’s trading figures are evidence of this.

There is a bright outlook for B&M’s profits which is underlined by the special dividend it surprised everyone with last month. I continue to look at the FTSE 100 to make me a passive income so here is one of my other top picks, which offers a dividend yield of over 5%.

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended B&M European Value. 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.

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 considered, so you should consider taking independent financial advice.

More on Investing Articles

Two hands holding champagne glasses toasting each other with Paris in the background
Investing Articles

Can the stock market make me rich even now?

Here are three ways I'm coping with the stock market's recent bout of weakness and aiming to build wealth in…

Read more »

Cogs turning against each other
Investing Articles

3 top investment trusts to buy right now

Investment trusts offer a wide range of options for investors. And in troubled times, they provide some safety through diversification…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Why hasn’t the FTSE 100 crashed in 2022?

The catastrophic events of 2022 have left investors around the globe fearing the worst for stock markets. And some have…

Read more »

Trader on video call from his home office
Investing Articles

2 inflation-resistant FTSE 100 stocks to buy today

Soaring inflation could dent my returns if I don't take care. Here are two top inflation-resistant FTSE 100 stocks I'd…

Read more »

Tabletop model of a bear sat on desk in front of monitors showing stock charts
Investing Articles

Why a bear market is an investor’s best friend

A bear market can certainly be scary. But any investor tempted to sell might benefit by looking at Warren Buffett's…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

The Rolls-Royce share price could be stuck below £1 for a while. Should I buy?

The Rolls-Royce share price has been trading at penny stock levels since April. Could the stock be a bargain at…

Read more »

Young brown woman delighted with what she sees on her screen
Investing Articles

I’m aiming to make £45,000 in passive income with UK shares and never work again!

Investing regularly in UK shares can generate a substantial passive income over the long run. Zaven Boyrazian demonstrates how.

Read more »

Portrait of construction engineers working on building site together
Investing Articles

Down 30%, are CRH shares a screaming buy?

The CRH share price has slumped this year. Roland Head asks if this overlooked FTSE 100 share could be a…

Read more »