I’d forgotten about these 2 FTSE income stocks. Should I buy them now?

The FTSE 100 is so full of top income stocks that it’s easy to overlook companies like these two. It’s time I did some analysis.

| 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.

Asian man looking concerned while studying paperwork at his desk in an office

Image source: Getty Images

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.

Sales and marketing firm DCC (LSE: DCC) is not the most visible stock on the FTSE 100, but that’s no excuse for me to ignore it altogether.

I’ve just spent 10 minutes on its website playing catch-up without quite getting a handle on its operations. I learned only that its energy, healthcare and technology divisions “enable people and businesses to grow and progress”. I guess that’s marketing for you.

Rising dividends

The DCC share price has had a tough time lately, falling 29.66% over one year and 32.31% over five years. Yet this could work in my favour, because this has left the stock trading at just 10.6 times earnings. 

That’s comfortably below the FTSE 100’s forward PE of 13.2 for 2023, although it’s not as cheap as some of my favourite dividend stocks. Legal & General Group, for example, trades at just 7.49 times earning, while Barratt Developments is even cheaper at 5.69 times.

L&G and Barratt offer notably higher yields too, at 7.28% and 7.49%, respectively. DCC yields a solid 3.9%, but its shareholder payout is handsomely covered 2.4 times by earnings and with a forecast payout of 4.1%, there’s more to come.

Its recent dividend history is impressive, as it has been hiked for five years in a row, rising from 122.98p per share in 2018 to 175.78p last year.

Last week’s interim statement included Q3 group operating profit in line with expectations and ahead of last year, which management labelled “a good performance given the challenging macro environment”.

Struggles in health and beauty solutions, where customers continue to reduce inventory levels, were offset by stronger tech performance in North America.

Net debt has multiplied from £54m to £782m lately, but mostly due to acquisitions, which shows confidence in its future. Once recession fears ease the future could look a lot brighter. Wafer thin operating margins of 2.6% worry me but today’s low valuation and a solid dividend history are tempting. I’d like to buy it today ahead of the recovery but as I’m short of cash I’ll stick it on my watchlist instead.

A precious metal opportunity?

Investors in gold and silver miner Fresnillo (LSE: FRES) enjoyed a better year. Its share price is up 25.17% in this period. Yet this follows a lengthy spell of underperformance and the stock still trades 35.83% lower than five years ago.

The Mexico-focused miner has suffered a torrid start to 2023. It’s fallen 11.86% so far, while the FTSE 100 has been breaking all-time highs. Investors have been slowly losing faith after years of operational issues and guidance downgrades.

It’s not the only precious metals miner to struggle this year. Centamin and Endeavour Mining have also underwhelmed as investors play the recovery instead. Yet Fresnillo has one big opportunity. You see, silver is a key component in renewable power, off-grid energy storage, and EV charging. So its recent troubles could make now a nice entry point.

It’s more expensive than DCC, trading at 16.5 times earnings, and its dividend history is up and down. Today it yields 3.7%, covered 1.7 times. Management says 2023 silver and gold production looks positive. I’d consider buying, but only with a minimum 10-year view. I’m struggling to get really excited about it, to be honest. So, for now, it’s another one for my watchlist.

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 Fresnillo Plc. 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

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »