An investor might choose to buy stocks for both capital appreciation and dividends for several reasons. Aiming to strike a balance between potential long-term growth and income, here are four companies our contract writers own in their portfolios…
Coca-Cola HBC
What it does: Coca-Cola HBC makes, bottles and distributes leading drinks labels like Coke, Sprite and Monster Energy.
By Royston Wild. Consumer staples shares like Coca-Cola HBC (LSE:CCH) can be brilliantly boring, as demand remains broadly stable at all points of the economic cycle.
This can in turn make them rock-solid dividend shares. This has certainly proved the case at this particular FTSE 100 company. It’s raised annual dividends each year since 2014, including an 11% hike last year.
Yet I believe this makes Coca-Cola HBC’s more exciting than most other consumer goods products. This is thanks in part to huge exposure to fast-growing European and African economies.
Collectively, these emerging and developing markets now account for two-thirds of group revenues.
Coca-Cola HBC’s strong record of innovation also makes it highly attractive to me. Its successful launch of Monster Green Energy Zero Sugar in several markets in 2024, for instance, continued its success in developing no-sugar variants of its popular drinks.
This blend of winning products and geographical diversification has helped the firm’s earnings almost double over the past five years. I think it’s a top ‘all-rounder’ to consider, even though competition from other famous drinks brands remains an ever-present threat.
Royston Wild owns shares in Coca-Cola HBC.
Jet2
What it does: Jet2 is the UK’s no.1 tour operator and third largest airline, flying from 13 airports across the country.
By Dr James Fox. Jet2 (LSE:JET2) is a FTSE AIM-listed airline and tour operator that looks incredibly undervalued at the current price. The stock currently trades at 7.1 times forward earnings, representing a modest discount to global peers. However, unlike many other airline stocks, Jet2 has a lot of cash. In fact, Jet2 has a net cash position of £2.1bn, which is huge relative to its market cap of £2.8bn. As such, it’s currently trading at 1.1 times EV-to-EBITDA, and this is a huge discount to peers like International Consolidated Airlines Group at 3.3 times. This alone suggests potential for vast price appreciation.
The risks? Well, rising costs, landing fees and wages hikes may have an outsized impact on Jet2 given its relatively narrow margins. However, this isn’t a dealbreaker for me. Travel demand has remained relatively resilient since the pandemic and there’s evidence that fuel prices could retreat further – jet fuel is a major expense for airlines. Dividends are modest at 1.2%, but are forecasted to rise.
James Fox owns shares in International Consolidated Airlines Group and Jet2.
Prudential
What it does: Prudential is an insurance and asset management company operating solely in Asia and Africa.
By Andrew Mackie. When you can smell the fear, then more often than not it’s a great time to buy into a stock. This is the case with Prudential (LSE: PRU) whose share price chart over the past couple of years looks truly awful.
You want growth then they don’t come much better than operating in China, India, Indonesia and Malaysia where GDP continues to accelerate at a blistering pace. As the middle class continues to swell, provision of healthcare and savings have sky-rocketed up their agenda. The penetration rates of such products are in single digits today in some of its regions, and the vast majority of people pay for healthcare provision out of their own pockets.
Over the past two years, new business profits have grown at a compound rate of 21%. Little wonder, therefore, that the business hiked its dividend yield by 13% last year. That is on top of a $2bn buyback programme. This year dividend per share is expected to grow by 10%.
Of course, there are massive risks here. The recent collapse of the Chinese property market bubble continues to cause severe economic pain. And the medium term impact of 104% tariffs by the US is to a large extent unknown.
However, its depressed share price (which is still below its Covid lows) more than reflect the risks to me.
Andrew Mackie owns shares in Prudential.
Tesco
What it does: Tesco is the UK’s largest supermarket chain. It also has a presence in Ireland and central Europe.
By James Beard. Despite the threat from the so-called discounters, over the past five years, the Tesco (LSE:TSCO) share price has increased by an average of 9.5% a year. And by February 2027, analysts are expecting a 37% increase in earnings per share compared to 2024.
Its dividend is pretty good too. Based on amounts paid over the past 12 months, the stock’s yielding slightly more than the FTSE 100 average. Although payouts are never guaranteed, there’s plenty of headroom should earnings get squeezed.
I’m aware that a volatile bottom line could be an issue as the grocery sector is highly competitive with very thin margins. Even a small drop in market share can have a big impact on profit.
But Tesco has been the market leader for 30 years now. Even if it doesn’t grow as I anticipate, I’ll be content with the above average dividend currently on offer.
James Beard owns shares in Tesco.
