Building a portfolio of UK stocks can seem like a daunting task. When trying to build wealth in our 40’s and onwards, there’s a lot for investors to consider. Some will choose to focus on income, others on value, others still on growth. Here are two shares for consideration that could have long-term benefits.
The next destination
Even for an investor who isn’t young, I believe there’s still a place for some allocation to growth stocks. A good example is Trainline (LSE:TRN). I think most of us have used the Trainline app at some point over the year, with it being Europe’s most downloaded rail app.
Over the past year, the stock has jumped by 49%. This has been fuelled by strong financial results. Last month, the half year earnings showed a 44% increase in the adjusted EBITDA versus the same period last year. Operating profit jumped by 117%.
What’s interesting is that even though rail isn’t a new form of travel, Trainline is growing market share and has been increasing revenue for a while now. The use of technology has helped to open up the market to new users. I don’t think we’ve reached peak user engagement yet, so I believe Trainline can keep this growth up for several years to come.
As a risk, the business is reliant on third-party train operators. Strikes, delays and other negative impacts are outside of the control of Trainline. Yet it would still experience some reputational damage (as well as lower revenue) as customers will be disgruntled in these situations.
Income potential
The other angle to help build wealth is via including a dividend stock. Over time, the income payments can be reinvested, compounding gains over many years.
An income stock for investors to think about is Dowlais Group (LSE:DWL). The UK engineering company was listed as an independent firm in 2023 following its demerger from Melrose Industries. So even though it doesn’t have a long track record specifically, Melrose Industries does. The stock is appealing as engineering is a defensive sector that has a proven profitable business model.
The share price for Dowlais has fallen by 36% over the past year, with the dividend yield at 6.64%. This is well above the FTSE 250 average. Although the demerger has allows Dowlais to focus on what it does best (primarily within the automotive sector), the slowdown in demand in this sector hasn’t been great.
However, investors might see this as a good dip to buy, both from a valuation perspective but also for the current yield. A price-to-earnings ratio of 4.5 is less than half of the ratio of 10 that I use for a fair value comparison. As for the dividends, I don’t see any concerns about them being cut. Aside from a brief period during the pandemic, Melrose Industries has been paying out income for years.
