Market volatility has thrown up some excellent buying opportunities, in my opinion. Vodafone (LSE: VOD) and National Grid (LSE: NG.) are two FTSE 100 shares I like. Here’s why I’m considering buying shares when I next have some cash to invest.
Vodafone is one of the premier telecommunications businesses in the world, but the shares have fallen by 27% over the past 12 months. The shares are trading for 77p as I write, and for 106p at this time last year.
The enticing valuation and juicy passive income opportunity stand out to me instantly. The shares trade on a price-to-earnings ratio of just two! The average across the FTSE 100 is 14. Next, a dividend yield of 9.9% is enticing. However, I’m conscious the yield has been driven up by a falling share price and that dividends are never guaranteed.
From a growth perspective, Vodafone has an ever growing presence in Africa. This could be key for the business to soar to new heights as the African telecom market is a burgeoning one. With Vodafone’s extensive experience and existing profile, it could become a major player which could boost performance and payouts.
However, there are risks to consider too. Vodafone’s growth aspirations could be hurt by geopolitical instability in the African continent. Plus, when I dig into the passive income opportunity, the business has maintained its dividend for some years now but as performance doesn’t look like it has grown significantly, this mighty yield might be under threat.
To conclude, Vodafone shares look excellent on the surface of things right now. I’m buoyed by their valuation and returns policy as well as growth aspirations. I’ll also be keeping an eye out for interim results later this month.
National Grid shares
Similar to Vodafone, National Grid shares have fallen in recent months. The owner and operator of the UK’s gas and electric transmission system has dropped 16% in the past six months from 1,162p in May, to 969p as I write. Over a 12-month period, the shares have remained constant from 978p to current levels.
National Grid’s defensive ability stands out to me. As the sole operator in its space, it doesn’t have to worry about competition. This can help keep revenues stable, which underpins investor returns. Plus, gas and electricity are essential, so I doubt demand will fall no matter the economic outlook.
National shares trade on a price-to-earnings ratio of just under five. Plus, a dividend yield of 5.6% is also solid and above the FTSE 100 average of 3.9%. Furthermore, analysts reckon the yield is only set to grow in the next few years.
Regulation and maintenance are two big issues that could impact National Grid. Regulation being tightened against huge profits and investor rewards is a looming spectre. Next, maintaining a large and extensive essential infrastructure isn’t cheap or easy. Both of these issues could impact investor sentiment as well as returns.
Overall National Grid’s monopoly on what it does, enticing valuation, and passive income opportunity look too good to miss out on right now if you ask me.