Imagine being able to buy only one FTSE 100 stock in the whole of 2025. I try to think like that every time I make an investment choice. I imagine I’m just starting and can pick only one. It helps me focus on making the very best choice.
If I pick one I already hold, I just rule that out and choose what I think is the next best from the rest, and so on…
Favourite stocks
I’ve always liked financial stocks, such as banks and insurance firms. Right now, I’m eyeing up NatWest as a possibility. I bought Aviva a few years ago, and I like the look of Legal & General too.
But the risks they face, coupled with the frequent volatility of finance stocks, counts against them to some degree as a stock choice in 2025. Besides, I already have enough in finance stocks, so that would turn me away from them too.
Investing company M&G, with its forecast 10% dividend yield, is also attractive. But I’m not going to buy that as I put it in the same risk basket as banks and insurers right now.
Best dividend stock?
I’ve often thought of National Grid as the best dividend stock I’ve never bought. The forecast 5.8% yield’s attractive. But more importantly, the company has a clear view of its near-monopoly future. And that boosts my confidence in long-term dividend rises.
Still, National Grid shocked the market with a new equity issue to raise cash this year. And that’s changed my outlook a bit, adding risk that the same thing could happen again. It’s one I might buy some day, but do I like anything better?
I think I might. And it’s Taylor Wimpey (LSE: TW.).
Safety first
The housebuilder’s stock hasn’t done well in the past few months, giving up all its earlier 2024 gains, and then some. It’s down 15% in the past 12 months.
Part of the problem is our stubbornly high mortgage rates, with the Bank of England slowing its rush to help get them down.
But then, the fall has pushed the forward dividend yield up to 7.7%. And that would be a cracking annual return if it can be maintained.
We face a chronic housing shortage, which the new government’s trying to address. And for me, that makes the housebuilding business one of the safest for the long term.
Individual risk
It doesn’t mean an individual stock can’t go bust, of course. But Taylor Wimpey has what looks like a strong balance sheet to me, so I see minimal risk of that.
The mortgage situation does make me think the shares could remain weak for some time, or even fall further. And that raises something important. I might buy Taylor Wimpey shares in 2025, but I’d be buying for the long term.
Will I buy them? It depends on what comes top when I have my first 2025 investment cash ready. But right now, it’s a strong candidate.
