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UK shares to buy now: 2 FTSE 100 stocks I own

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I own a wide variety of UK shares. However, I’ve recently bought more of my two favourite FTSE 100 stocks, as I believe they’re attractively priced.

Here’s why I’m putting more of my money into these businesses. 

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UK shares to buy now

The first company is British American Tobacco (LSE: BATS). Due to the ethical considerations surrounding tobacco, this stock might not be suitable for all investors. Cigarette sales around the world seem to be in terminal decline. Policymakers are doing everything they can to stop consumers smoking as a public health issue. These headwinds could slow British American’s growth in the long run. 

Ethical considerations aside, I think this stock is incredibly attractive from an income perspective. Although cigarette consumption has been declining for decades, this hasn’t stopped British American’s growth. The company has used a careful combination of steady price increases and operational efficiency initiatives to improve profit margins and increase profits. 

As each cigarette’s production cost is incredibly low compared to the sale price, the company earns fat returns on equity and profit margins. This has allowed management to pay out healthy dividends.

For example, last year, the group returned nearly £5bn to investors, or 210p per share. Current estimates suggest the company will pay investors a dividend of 218p per share this year, implying the stock offers a dividend yield of 7.9%. This is just a forecast at this stage. 

Unfortunately, due to the risks outlined above, there’s no guarantee this level of income will continue.

Still, considering the company’s past performance, I’d buy more of the FTSE 100 business for my portfolio today, considering its income potential.

FTSE 100 growth 

The second company I’m considering buying more of for my portfolio is Reckitt Benckiser (LSE: RB).  This consumer goods company, which specialises in cleaning products, has made several strategic missteps over the past few years. The biggest of these was the $16.6bn deal to buy Mead Johnson in 2017.

The US-headquartered division runs a range of infant formula brands, including Enfamil, Enfapro and Lactum. The deal was supposed to help the company crack the Chinese market for infant formula, but it hasn’t lived up to expectations. As a result, Reckitt’s new management is reported to be looking for buyers for Mead Johnson’s Chinese division. 

Reckitt has also attracted criticism for not investing enough in its brands. It’s planning to rectify this with higher levels of investment as we advance. 

Put simply, it looks to me as if Reckitt is trying to correct its past issues. That’s why I’d buy more of the stock today. 

Of course, the company will face risks and challenges. Even though management is looking to invest more in the group’s product range, that doesn’t mean growth will accelerate overnight.

There’s also no guarantee the company won’t make other mistakes. More costly strategic errors could put investors off the business, weighing on the share price.

But I’m willing to take those risks on board and add to my investment.

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Rupert Hargreaves owns shares in British American Tobacco and Reckitt Benckiser. 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.

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