The FTSE 100 index is full of high-quality stocks to buy, and it’s outperforming the S&P 500 this year. Britain’s leading benchmark has delivered a 6.7% return, against 1.7% for major US stocks.
Supported by low valuations, some UK heavyweights are well-placed to be standout performers over the long run. Here are three worth considering this month.
Centrica
British Gas owner Centrica (LSE:CNA) is a stock that I’d describe as boring but beautiful. However, the company’s very low price-to-earnings (P/E) ratio around 6.3 should spark value investors’ interest.
At first glance, Centrica’s made a poor start to the year. Falling commodity prices are a risk for the company and investors, evidenced by a 44% drop in operating profit in FY24 to £1.55bn and a 26% revenue decline to £26.2bn. Further weakness may follow in the coming quarters.
However, those are comparative figures, relative to 2023’s extraordinary energy market. Surpassing its prior year performance was always going to be a mighty challenge for Centrica. Promisingly, the group seems to have struck while the iron was hot.
The business is more resilient today following operational improvements and a £4bn green investment plan, half of which has already been committed. Additionally, the 13% dividend hike to 4.5p per share and a new £500m share buyback programme fortify the investment case.
At today’s cheap valuation, I think there’s great long-term potential in Centrica shares despite near-term challenges.
Imperial Brands
Next on my list of stocks to consider buying is Imperial Brands (LSE:IMB). The tobacco giant’s particularly attractive to dividend investors thanks to an impressive 6.5% yield.
Tobacco stocks raise ethical concerns for some investors. Furthermore, with smoking rates declining across nearly all countries, there’s uncertainty about the industry’s prospects. Imperial Brands will have to rise to those challenges with a new CEO following Stefan Bomhard’s recent retirement.
That said, the group’s making encouraging progress. Half-year results confirmed it gained cigarette market share in three core markets — the US, Germany, and Australia. Demand for the company’s ‘Next Generation Products’, which include nicotine alternatives such as vapes, is also strong. Net revenue rose 15.4% for this division.
Risks facing Imperial Brands shares look tolerable in light of an attractive P/E multiple of 9.6. Plus, a 4.5% dividend increase and a transition from biannual to quarterly shareholder payouts give passive income seekers reasons to be cheerful.
International Consolidated Airlines Group
Another stock to consider buying in June is International Consolidated Airlines Group (LSE:IAG). This holding company owns major airlines like British Airways, Iberia, Vueling, Aer Lingus, and LEVEL.
Falling oil prices provide a supportive environment for the shares to deliver further growth. Fuel costs are the group’s largest single expense, totalling €7.6bn in 2024. Plus, the company’s well-prepared for any unexpected shocks. Around 65% of its fuel costs are hedged for the rest of the year.
Competition risks should be borne in mind, particularly from low-cost carriers covering short-haul routes. Rivals are snapping at the group’s heels, putting pressure on profitability and efforts to retain market share.
Nonetheless, the company has sufficient confidence in the trading outlook to continue with its strategic expansion. Orders for 53 new widebody aircraft are scheduled for delivery between 2028 and 2033. At a P/E ratio of 7.1, I think International Consolidated Airlines’ shares look tempting today.
