One FTSE 100 giant you may not be entirely familiar with is RELX (LSE: RELX). However, there is a good chance you may have come across one of its products. Here’s why I’m bullish on the shares right now and considering buying some for my holdings.
RELX is a global provider of information-based analytics and decision tools for professional and business customers. It serves more than 180 countries with offices in approximately 40 countries and a workforce of over 35,000 people. Operating across many sectors, one of its best-known products is LexisNexis, a tool used in the legal sector and one I’m familiar with personally.
Let’s take a look at RELX’s share price to start with. As I write, the shares are trading for 2,546. At this time last year, they were trading for 2,393p, which equates to a 6% rise over a 12-month period. Many FTSE 100 stocks have fallen in recent months due to macroeconomic woes that have hampered the markets. These issues include rising inflation and interest rates.
Buy or avoid?
One issue that has reared its head recently is the rise of artificial intelligence (AI) and how it could impact information services businesses like RELX. Some fear it could make them obsolete in the future. This would be bad news for RELX. However, the company allayed fears recently by asserting that many of its products already incorporate AI tools within them and have done so for many years to enhance the product and customer experience. Although it is positive to see REXL is moving with the times, as AI evolves, this is something I’ll keep an eye on.
RELX’s recent half-year update and performance history are positive, in my opinion. In the recent six-month update, it said pre-tax profits rose by 12% and revenue increased by 8% compared to the same period last year. Looking back further, I can see REXL has increased revenue and profit for the past three years. However, I am conscious that past performance is not any sort of guarantee of the future.
Moving on, RELX would boost my passive income with a dividend yield of just over 2%. It is worth mentioning that this is below the FTSE 100 average of 3%-4%. However, RELX management is always looking to boost this and it did so in the most recent interim dividend by hiking it by 8%. Although I feel the dividend could grow, I do understand dividends are never guaranteed.
Finally, RELX’s valuation is a bit high for my liking. The shares currently trade on a high price-to-earnings ratio of 26. If there were to be any trading downfall or other operational issues, the share price could fall.
A FTSE 100 stock I like
After weighing up the pros and cons, I like the look of RELX shares. When I have some spare cash, I would be willing to buy some shares for my holdings.
My decision stems from RELX’s profile and dominant market position as well as its passive income opportunity and the fact it has managed to perform well in recent years, especially against the backdrop of macroeconomic and geopolitical uncertainty.