I’m far from a DIY-expert. However, I like the idea of home improvement projects, especially the finished result. What I like the look of even more is the FTSE 100 home improvement giant Kingfisher (LSE: KGF).
Here’s why I’m planning on buying some shares next month if I can free up some funds to invest.
DIY king
Kingfisher may not be a well-known name, but I’m pretty confident brand names under its umbrella such as B&Q and Screwfix will resonate with most. From paint and pipework to screws and sockets, the business caters for pretty much all projects and beyond.
The shares have shown great signs of promise across the past 12 months, in my view. They’re up 21% from 236p at this time last year to current levels of 286p.
Why I like Kingfisher shares
I think there’s lots to like about Kingfisher, hence my stance. Firstly, it’s tough to bypass the firm’s extensive presence, past track record, current fundamentals, and future outlook. I’ll caveat the second point by admitting that the past isn’t a guarantee of the future.
To start with, a mammoth presence of approximately 1,300 stores across its multiple brands, spanning nine European countries is a major plus point for me.
From a fundamental view, the shares look good value for money to me on a price-to-earnings ratio of 12. This is lower than the FTSE 100 average of 14.
Next, a dividend yield of 4.3% sweetens the investment case. For context, the FTSE 100 average in this case is 3.5%. However, I do understand that dividends are never guaranteed.
Moving on, the business looks to be on a good financial footing, based on a strong balance sheet, which is positive. This can help current operations continue, as well as navigate growth initiatives and offer shareholder value.
Finally, looking at the future, I reckon the growing population in the UK, its most prominent market, as well as the housing imbalance, could indirectly boost the firm. With fewer properties on the market to buy, people will need to renovate what they have. Furthermore, interest rate cuts could put more money in consumers’ pockets to splurge on home improvement desires. We saw the first cut earlier this month. However, there’s no guarantee more are around the corner. I’d say we’re not out of the woods yet with the current economic malaise. Nevertheless, the long-term outlook is bright, in my view.
Issues I’ll be keeping an eye on
Despite my bullish stance, credible risks threaten the earnings and returns potential of Kingfisher shares.
My biggest concern is economic volatility. When this occurs, as we’ve seen in recent times, consumer spending can take a hit, hurting non-essential spending, including DIY projects. Another aspect of this is inflationary pressure, as we’ve also seen recently, which can impact margins and the bottom line.
Overall, the pros outweigh the cons by some distance for me. A handy presence, strong brand power, attractive valuation, and passive income opportunity helped me make the decision to buy some shares when I’m able to do so.
