Could the new UK budget spell growth for these 6 FTSE stocks? I think so!

Mark David Hartley considers six UK stocks that could enjoy growth off the back of new measures announced in the recent October budget.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Red briefcase with the words Budget HM Treasury embossed in gold

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

This week the UK government introduced its new budget, aimed at encouraging economic growth and improving the country’s fiscal balance. However, with £40bn worth of tax increases, many UK stocks could be affected.

Announced on Wednesday, 30 October, the budget includes changes in capital gains tax, inheritance tax, corporation tax for various sectors, and increases in taxes on certain goods.

It’s expected to raise GDP growth by 2% in the coming year. But what does it mean for UK companies?

Should you invest £1,000 in Primary Health Properties right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Primary Health Properties made the list?

See the 6 stocks

Breaking down the tax implications

With capital gains tax (CGT) rising from 10% to 18% on the lower rate and 20% to 24% on the higher rate, investors without the benefit of an ISA will feel the pinch.

While corporation tax on large businesses was not increased, there are some changes to taxes affecting certain sectors.

Here are some stocks that could benefit from the changes.

Renewable energy

Benefits for electric vehicles (EVs) are to be introduced in 2028 and there will be increases in duty for non-electric vehicles from April 2025​. Clean energy stocks like Ceres Power Holdings could benefit from increased demand for EV infrastructure and renewables.

Construction

Companies like Balfour Beatty and Kier Group may benefit from a promise of fresh investment into large infrastructure projects like the High-speed Rail 2 (HS2).

Telecoms

With the government keen on increasing digital and tech infrastructure, telecom stocks like BT Group may benefit from additional investment.

Healthcare

Increased funding for the NHS, including the promise of 40,000 additional appointments each week, could benefit healthcare companies and suppliers like Smith & Nephew.

Best of both worlds

Considering the above, there’s one stock I believe could benefit from several of the new policies. 

Primary Health Properties (LSE: PHP) is a real estate investment trust (REIT) that specialises in healthcare premises. Its portfolio exceeds 500 properties with a combined value of £2.8bn. These consist primarily of GP practices and healthcare centres across the UK and Ireland.

Created with Highcharts 11.4.3Primary Health Properties Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Not only could it benefit from the investments in construction and healthcare but it has a dedicated green energy policy. It focuses on designing and managing properties with low environmental impact, targeting net-zero carbon emissions by 2040.

REITs offer a fantastic passive income opportunity as they’re legally obligated to distribute at least 90% of their taxable income as dividends.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Investment thesis

In its latest half-year interim results announced in July, net rental income was up 0.9% on last year with earnings per share (EPS) up 2.9%.

Its balance sheet looks okay but debt is a slight concern.

As a REIT, Primary Health relies on debt to finance its property acquisitions. With a debt-to-equity ratio near 0.97, rising interest rates could impact its financing costs and profitability. Higher rates increase debt-servicing costs, which could strain cash flow and reduce earnings. That’s one risk to keep in mind.

However, the key factor that I find attractive is dividends. It has a 7.4% yield and a solid track record of payments. For the past 10 years, dividends have increased at a rate of 3.4% per year, growing from 4.94p per share in 2014 to 6.9p this year.

With a manageable payout ratio of 67%, I don’t expect any dividend cuts or reductions in the near future.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Mark Hartley has positions in Primary Health Properties Plc. The Motley Fool UK has recommended Primary Health Properties Plc and Smith & Nephew Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »