With a new ISA year starting soon, I have been looking forward and thinking about what FTSE 100 bargains I would scoop up next month, if I had spare cash to invest.
Here are three of them.
For income: M&G
Fund manager M&G (LSE: MNG) pleased shareholders including me this month by increasing its annual dividend by 7%. That is in line with its policy of maintaining, or increasing, the payout each year, but was a bigger rise than I expected.
Not only that, a lacklustre share price right now means the dividend yield on offer here is 10.3%. That is very attractive to me. M&G has a well-known brand, large customer base and will likely benefit from strong long-term demand for asset management services.
What can go wrong? One concern I have about this FTSE 100 share is M&G’s weak track record when it comes to retaining clients. Net client inflow in the wholesale business last year was under 1%, while the institutional division saw net outflows. If M&G sees net outflows in future, profitability could be hurt.
I like the strengths of the business though, and the yield is very attractive to me.
For growth: JD Sports
One of the most impressive FTSE 100 shares of the past decade or so has been retailer JD Sports (LSE: JD).
I also think one of the most impressive FTSE 100 growth stocks of the next decade could end up being… JD Sports. The firm has a simple retail model that has been honed over many years. That makes it easier to scale, something the company has done with its broad international reach.
Many UK companies currently seem to be hunkering down in anticipation of difficult economic times rather than grasping the future with both hands. By contrast, JD Sports has set out ambitious growth plans that include hundreds of new store openings annually.
The business is already handsomely profitable. Last year’s earnings after tax were £460m. But I expect strong revenue and profit growth in coming years.
That could come at the cost of profit margin dilution. I also see a risk to sales if a recession leads shoppers to cut back on expensive clothing/footwerar purchases. But I regard JD Sports as a well-run firm with a proven business model.
For value: Mondi
I am not a value investor in the pure sense of looking for businesses that look cheaply valued. I do like attractive valuations (what investor doesn’t?) but I focus on the quality of the business when investing.
Another of the FTSE 100 shares on my radar for April offers what I think is a strong business at an attract valuation. Packaging company Mondi (LSE: MNDI) is likely to benefit over the long run from robust demand for packaging. It has a prominent position in the industry and is a profit powerhouse. Despite that – and a 4.9% dividend yield – the shares currently trade on a price-to-earnings ratio of under 8.
I see a risk that growing global capacity could push down selling prices and profit margins. But I like Mondi’s operational strength and international exposure.
