I’m hoping to have some extra cash I can use to invest in UK shares in the next few weeks. So I’m searching the FTSE 100 and FTSE 250 for the best value stocks to buy.
Here are two UK blue-chips on my radar today. I think they could provide excellent shareholder returns for years to come.
Aviva
Financial services giant Aviva (LSE:AV.) has seen its share price fall heavily this year. This is perhaps no great shock: demand for the sorts of products it sells (with the exception of general insurance policies) often slumps during tough economic times.
But as a long-term investor, I find the FTSE 100 company highly attractive at current prices. It trades on a forward price-to-earnings (P/E) ratio of 9.6 times. Investors can also grab an 8.3% dividend yield today.
One of the best things about Aviva is its cash-rich balance sheet. For one, it provides the financial strength for it to return tonnes of cash to its shareholders. The company raised this year’s half-year dividend 8% year on year, to 11.1p. It also repurchased £300m worth of its shares in the first half of 2023.
Aviva’s strong financial position, thanks in part to the ongoing sale of overseas assets, also gives it the means to make earnings-boosting acquisitions elsewhere. Today the company announced it was spending £460m to bring AIG’s UK protection business into its portfolio.
The FTSE business operates in a highly competitive marketplace. But it still has an excellent opportunity to grow profits (and consequently dividends) over the next decade as demand for pensions, investment services, and protection products steadily rise.
QinetiQ Group
Defence contractor QinetiQ Group (LSE:QQ.) also offers attractive value today. It trades on a forward-looking P/E ratio of 11.8 times, a decent distance below the FTSE average of 14 times.
I think this is great value given the company’s bright revenues outlook. During the 12 months to March, orders rocketed 41% to a record £1.7bn as arms spending continued to grow. As the geopolitcal landscape becomes increasingly tense I’m expecting trading to keep improving, too.
Encouragingly, QinetiQ continues to rack up new contract wins and extensions with major customers since the year’s end. Last month it inked a five-year, $224m contract to support the US Space Development Agency’s creation of a satellite network to track missiles.
The FTSE 250 company certainly expects to grow business strongly in the short-to-medium term. It hopes to grow organic revenues between 11% and 12% in the current financial year. It is also seeking to double annual revenues to around £3bn by 2027 with the aid of additional acquisitions.
The ever-changing nature of warfare is a constant long-term threat for companies like this. However, QinetiQ’s broad range of products and services helps to reduce this risk. Some of its functions include building cyber security systems, making tank sensors and unmanned submarines, and training pilots.
