NatWest (LSE: NWG) may not be recommended by many as one of the prime FTSE stocks to buy for both dividend and share price gains. But as Super Hans in iconic TV series Peep Show put it: “People like Coldplay and voted for the Nazis; you can’t trust people.”

Actually, despite strong profits and aggressive buybacks, the shares continue to trade at a discount to their underlying earnings power. And the bank has a whopping forecast dividend yield of 7.1%.

That combination of income strength and mispricing makes NatWest a compelling candidate for long‑term investors, in my view.

So, how much could be made here?

Double my money?

Discounted cash flow analysis is the best way I have found to work out where any stocks should be priced. It achieves this using forecast cash flows of the underlying business and then discounting them back to today.

Various inputs into the formula vary from analyst to analyst. But my calculations (including a discount rate of 8.3%) show NatWest is a stunning 51% undervalued at its current £6.27 price.

Therefore, the ‘fair value’ of the stock could be around £12.80 — more than double where it trades now.

Crucial for long-term investors to note here is that share prices typically gravitate towards their fair value in the long run. So this price-value gap suggests a potentially terrific buying opportunity to consider today if these calculations prove accurate.

Dividend bonanza?

Analysts expect NatWest’s dividend yield to rise to 5.8% this year, 6.5% next year and 7.1% in 2028, though payouts can fall as well as rise. By comparison, the FTSE 100’s present average is only 3.1%.

So, a £20,000 holding in the bank (the same as mine) would make £20,595 after 10 years and £147,244 after 30 years. This is based on the 7.1% forecast as an average and on the dividends being reinvested back into the stock (‘dividend compounding’).

Including the original £20,000 investment, the holding’s total value would be £167,244 by then.

And this would deliver an annual income of £11,874!

How’s the core business look?

A risk here is increasing competition that may squeeze NatWest’s margins. Another is any surge in the cost of living that may worsen its loan book.

However, analysts forecast that its earnings will grow by a solid annual average of 4.2% a year over the medium term at minimum. And it is growth here that supports both share price and dividend gains over the long run.

Indeed, its latest (annual 2025) results suggest they may grow a lot more than that, in my view. Operating profit before tax soared 24.2% year on year to £7.7bn, while income jumped 12.3% to £16.4bn.

My investment view

Taken together, the rising earnings, hefty dividends, and deep valuation gap paint a far more attractive picture than many in the markets may realise.

Over time, as earnings grow, the price-to-valuation gap should close. And in the meantime, investors should continue to be paid handsomely in dividends to wait. 

I will certainly be adding to my holding in the stock soon. And I believe the shares are well worth considering — even for investors as sceptical as Super Hans.

The post A 7.1% forecast yield and 51% below ‘fair value’! 1 of my top FTSE stocks to buy right now appeared first on The Motley Fool UK.

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Simon Watkins has positions in NatWest Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

A £20,000 lump sum invested in HSBC (LSE: HSBA) shares two years ago would today be worth £45,864, with dividends included. That is a gain of £22,321 on the share price, plus a further £3,543 in dividends, giving a total return of 129%!

One risk to the bank is the intense competition that may squeeze its margins. Another is a sustained global recession, which could reduce its customer base.

But HSBC’s profits look set to rise on two key factors. First, interest rates in several of its key global locations continue to supercharge its net interest income. Second, its Asian operations are delivering faster loan growth, stronger fee income and richer margins. On the other side of the accounts, ongoing cost cuts have resulted in leaner, more efficient operations.

So, what sort of gains could investors be looking at here?

More share price gains?

A discounted cash flow analysis (including an assumed 8.3% discount rate) shows the shares are 37% undervalued at their current £13.63 price.

Some analysts’ DCF modelling is more bearish than mine, depending on the variables used. However, based on my DCF assumptions, this undervaluation implies a fair value for the stock of £21.63 — significantly higher than where they trade now.

Given the relationship between price and fair value, this suggests a potentially terrific buying opportunity today, if those DCF assumptions hold good.

And because share prices tend to converge towards their fair value in the long run, this price-to-valuation gap suggests a potentially superb buying opportunity to consider now if those DCF assumptions prove accurate.

Rising dividend payouts?

The dividend story looks just as compelling to me. HSBC is already one of the FTSE 100’s biggest income payers, and its rising profits, disciplined capital allocation and hefty surplus capital position give it plenty of firepower to keep lifting the payout.

Analysts forecast its dividend yield will be 4.6% this year, 5% next year, and 5.4% in 2028. By contrast, the average for the FTSE 100 is just 3.1%.

So, investors considering a £20,000 holding in the bank (the same as mine) would make £14,279 in dividends after 10 years. And after 30 years — the end of the standard investment cycle for long-term investors — this would rise to £80,695.

These numbers assume the forecast 5.4% yield as an average, although this can go up and down. It also factors in the dividends being reinvested back into the stock to harness the turbocharging power of ‘dividend compounding’.

By the end of 30 years, the holding’s total value would be £100,695. And this would pay an annual income from dividends alone of £5,438.

My investment view

Consensus analysts’ forecasts point to average annual earnings growth of 10.2% for HSBC over the medium term. This is ultimately what powers any firm’s share price and dividend higher over time.

The projection looks well-supported by its full-year 2025 results, released on 25 February. Adjusted profit before tax increased by $2.4bn (£1.78bn) year on year to $36.6bn.

And management raised its return on tangible equity target — a key profitability benchmark for banks — to 17%+ through to end-2028. The previous target was mid-teens for the three years through to end-2027.

Given all these factors, I will be buying more of the stock very soon.

The post £20,000 invested in HSBC shares 2 years ago is now worth… appeared first on The Motley Fool UK.

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HSBC Holdings is an advertising partner of Motley Fool Money. Simon Watkins has positions in HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings. 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.

Oxford Biomedica (LSE: OXB) started out as a trailblazing FTSE cell and gene therapy specialist. Some people might remember it as the firm that manufactured over 100m doses of AstraZeneca’s adenovirus-based vaccine during the Covid crisis. It did so at a record pace for such a vaccine and without a hitch in the process.

Today, it is a focused, cash‑generating biomanufacturing specialist with long‑term contracts, rising revenues, and exceptionally strong earnings growth prospects. Yet despite this transformation, the market still values it like a speculative biotech research outfit.

Over time, share prices tend to converge to their true value; so, how great a potential opportunity is this for savvy investors?

Tremendous earnings growth potential

Sustained earnings growth drives any firm’s share price over the long run. A risk here is any operational hiccup in the ongoing scaling up of its large manufacturing capabilities. Another is increasing competition, which could squeeze its margins.

Nonetheless, analysts forecast its earnings will grow by a whopping average of 74% a year over the medium term at minimum. This looks well supported by several drivers highlighted in its recently released (26 March 2026) results. These saw a 20% year-on-year jump in contracted client orders to £224m and a 36% increase in revenue backlog to £204m.

Production soared 32% and development revenues rose 27% on more client programmes being rolled out. This includes new multi‑year commercial supply work for Bristol Myers Squibb, underpinning expectations of sustained medium‑term earnings growth.

Overall, revenue increased 31% to £168.7m, underlining the strong uplift in client activity across its gene‑therapy projects. And net cash surged 169% to £55.4m, supported by improved operating performance and upfront client payments.

Looking ahead, Oxford Biomedica expects 2026 revenue of £220m–£240m and an operating EBITDA margin of around 10%. With new manufacturing facilities coming online soon, management expects 25%–30% annual revenue growth by 2027/28. EBITDA margins by that time are projected to be well over 20% a year.

So where should the shares be trading?

Discounted cash flow analysis identifies the price at which any stock should trade. It does this by projecting future cash flows of the underlying business and discounting them back to today.

Some analysts’ DCF modelling is more bearish than mine depending on the variables used. However, based on my DCF assumptions — including a 7.7% discount rate — Oxford Biomedica shares are 57% undervalued at their current £6.32 price.

That implies a fair value of around £14.70, more than double where the stock trades today.

And because of the long-term relationship between a share’s price and fair value, this suggests a potentially superb buying opportunity to consider today if those DCF assumptions hold.

My investment view

Oxford Biomedica now looks far more like a scalable, cash‑generating biomanufacturing business than the speculative biotech the market still prices it as.

Earnings look set to accelerate sharply, and my DCF work points to a valuation more than double the current share price.

That combination of operational momentum, financial strength and deep undervaluation means I will buy the stock as soon as possible.

The post 57% under ‘fair value’ and 74% forecast earnings growth! 1 FTSE high-tech med stock I just can’t pass up appeared first on The Motley Fool UK.

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Simon Watkins has positions in AstraZeneca Plc. The Motley Fool UK has recommended AstraZeneca 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.

Imperial Brands (LSE: IMB) remains one of the FTSE 100’s heavyweight dividend payers, offering a yield that dwarfs most of the index.

A risk here is any sustained strengthening of the British pound. This would cut the sterling value of profits in any of its key overseas markets, most notably the US. Another would be supply-chain disruptions that could affect production and squeeze margins.

That said, it remains a cash‑rich business with disciplined payouts that make it a rare source of dependable income. And analysts forecast its earnings will rise by a solid 4% over the medium term, underpinning these returns.

So, how much could investors make from the stock over time?

Rising dividend yields forecast

Imperials Brands’ current dividend yield is 5.8%, compared to the FTSE 100’s average of just 3.1%.

However, analysts forecast that it will lift its annual payouts to 168.8p this year, 177.3p next year, and 186.8p in 2028. These would give respective annual dividend yields of 6.1%, 6.4%, 6.7%.

The rising trend in its dividends has been a feature of the firm for years. Since 2021, for example, it has increased its yearly payout from 139.08p to 160.32p in 2025. These generated average annual dividend yields of 8.9%, 7.6%, 8.8%, 7.1%, and 5.1%.

The drop in dividend yield, despite the rising payouts, illustrates that these returns can change over time.

How much dividend income?

A £20,000 holding (the same as mine) would buy around 719 shares in Imperial Brands at today’s price.

After 10 years on the forecast 6.7% yield, investors would make £19,012 and after 30 years £128,434. This assumes that the dividends would be reinvested in the stock to utilise the turbocharging effect of dividend compounding.

At the end of the 30-year period, the total value of the holding would be £148,434 (including the initial £20,000).

And that would generate an annual income of £9,945.

Share price gains too?

All the stocks I buy primarily for their high dividend yield also look deeply discounted to their ‘fair value’. This encompasses the true worth of the underlying business, while price is just whatever the market will pay at any point.

Crucially for investors, share prices tend to move toward their fair value over the long run. So understanding the difference between the two measures — and quantifying the difference — is critical to maximising long-term profits.

My discounted cash flow analysis (including an assumed 9% discount rate) shows Imperial Brands’ shares are 44% undervalued at their current £27.83 price. Other analysts’ DCF modelling may be more bearish, along with the key assumptions used.

But my DCF result suggests a fair value for the stock of around £49.70 — much higher than today’s price.

So that price-to-value gap suggests a potentially superb buying opportunity to consider today if those DCF assumptions prove accurate.

My investment view

Imperial Brands offers a rare blend of high income, steady dividend growth, and deeply-discounted valuation, in my view. I think the stock well worth of consideration by savvy, long-term income investors.

I will certainly be adding to my holding in the firm shortly. And I also have my eye on other high-yield stocks that look seriously undervalued too.

The post I’m aiming for £9,945 in annual dividend income from 719 shares in this FTSE 100 gem appeared first on The Motley Fool UK.

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Simon Watkins has positions in Imperial Brands Plc. The Motley Fool UK has recommended Imperial Brands 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.

£20,000 invested in BP (LSE: BP) shares this time last year would now be worth around £35,608, with dividends included. It is a stunning return of 78% in just 12 months.

This was driven by high energy prices, aggressive share buybacks and some of the strongest cash flows BP has generated in years.

That said, the firm is now targeting even higher returns from its key businesses, while continuing to prioritise shareholder distributions.

So is now exactly the right time for me to buy more of the stock?

Where’s the growth coming from?

The share price and dividend trajectory of any firm are ultimately driven by earnings (profits) growth. A risk to BP is any sustained period of much lower oil and gas prices, which could squeeze its margins. Another is the rising cost of its energy‑transition strategy, which could pressure free cash flows over time.

Nonetheless, analysts forecast that BP’s earnings will grow a whopping average of 23% a year over the medium term. And this looks well supported by its recent results.

The numbers showed record operational performance, with upstream plant reliability hitting 96.1% and refining availability reaching 96.3%.

The metrics are important, as high reliability directly lifts volumes and margins, which in turn support dividend cover and long-term growth.

Meanwhile, operating cash flow came in at a whopping $24.5bn (£17.9bn), despite softer commodity prices over the period.

Are the shares still undervalued?

Just because a stock’s price has risen a lot does not mean no value remains in it, because price and value are different things. Price is whatever the market will pay at any given moment, while value reflects the underlying business’s fundamentals.

The difference between the two is crucial for the profits of long-term investors. This is because share prices tend to converge to their ‘fair value’ over the long run.

Discounted cash flow analysis identifies where any stock should trade by projecting the future cash flows of the underlying business. The outcomes of different analysts’ DCF modelling vary, depending on the data used. However, my modelling — including a 7.3% discount rate — shows BP shares are 39% undervalued at their current £5.79 price.

This suggests a fair value for the shares of around £9.49 — nearly double where they trade today.

So the gap here between price and value suggests a potentially superb buying opportunity to consider today if those DCF assumptions prove accurate.

My investment view

It is not just the huge potential share price gains I am eyeing from BP, but sizeable dividend returns too. It currently generates a dividend yield of 4.3% — well above the present FTSE 100 average of 3.1%. But analysts forecast this will rise to 4.7% by 2028 — although it could go down or up over time.

So, my £20,000 holding in the oil giant would make £11,971 in dividends after 10 years and £61,694 after 30 years. These numbers reflect the forecast 4.7% yield and the dividends being reinvested back into the stock.

After 30 years, my holding would be worth £81,694 (including the £20,000 initial investment). And this would pay me £3,840 a year in dividend income!

Given this income stream and the strong potential share price gains, I will buy more of the shares very soon.

The post £20,000 invested in BP shares 1 year ago is now worth… appeared first on The Motley Fool UK.

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Simon Watkins has positions in Bp P.l.c. The Motley Fool UK has no position in any of the shares mentioned. 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.

This FTSE 100 income stock often flies under the radar, but it continues to throw off generous dividends.

And its recent performance hints at something more interesting beneath the surface. The business is strengthening, yet the share price still feels restrained.

That gap could be where the opportunity lies for investors who value both income and mispricing.

Increasing dividend returns?

UK insurance giant Admiral’s (LSE: ADM) current dividend yield is 5.4% — way higher than the FTSE 100’s 3.1% average.

However, analysts forecast this will rise to 5.5% this year, 6.2% next year, and 6.8% in 2028.  So, my £20,000 holding in the stock would make £19,402 in dividends after 10 years and £132,929 after 30 years. This period is commonly seen as a standard investment cycle for long-term investors, such as me.

These numbers are based on the average 6.8% forecast yield, although these can alter over time — up or down.

They also assume that the dividends are reinvested into the stock to harness the supercharging effect of ‘dividend compounding’. It is like leaving interest to grow over the years in a savings account.

After 30 years on this basis, the holding’s value would be £152,929.

And this would generate an annual income from dividends of £10,399!

Rising share price?

Share prices tend to converge to their ‘fair value’ over time. This value represents the true worth of the underlying business, while price is simply whatever the market will pay at any point.

Discounted cash flow (DCF) analysis identifies any stock’s fair value by projecting future cash flows from the business. It then discounts these back to today.

DCF modelling varies according to the assumptions used by analysts — some more bullish than mine and others more bearish. But based on my DCF assumptions — including a 7.2% discount rate — Admiral shares are 48% undervalued at their current £33.50 price.

On that basis, I calculate a ‘fair value’ of around £64.42 — nearly twice the level they are now.

So this price-to-valuation gap suggests a potentially terrific buying opportunity today, if those DCF assumptions hold good.

Supported by growth momentum?

A risk to Admiral is the high level of competition in the insurance sector, which may squeeze its margins. Another is any further surge in the cost of living that may prompt customers to cancel policies.

However, its 2025 results, released on 5 March 2026, showed profit before tax jumping 16% year on year to £958m. The rise was powered by Admiral’s core underwriting and cost‑discipline initiatives. Insurance revenue increased 9% to £4.98bn, highlighting continued momentum across UK Motor, Household, and European lines as pricing and customer retention improved. Turnover remained buoyant at £5.9bn, reflecting the successful integration of the ‘More Than’ business into Admiral’s UK portfolio.

These numbers highlight a business with strengthening fundamentals and operational leverage that should continue to drive earnings growth ahead, in my view.

My investment view

This combination of rising dividend potential, strengthening operational momentum, and deeply-discounted share price means I will be buying more of the stock soon.

I also think these elements make it a compelling candidate for long‑term investor consideration.

In short, it offers the rare blend of dependable income today and the possibility of meaningful gains as the market closes the gap between price and value.  

The post A 6.8% forecast yield! 1 often-overlooked FTSE 100 income stock to buy today? appeared first on The Motley Fool UK.

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Simon Watkins has positions in Admiral Group Plc. The Motley Fool UK has recommended Admiral Group 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.

Despite a 5% dip from its 18 February one-year traded high, GSK’s (LSE: GSK) share price has firmed over the past year.

Post-Haleon demerger, GSK is a cleaner, more predictable business with strong earnings growth drivers in vaccines and HIV.

But the stock is still valued way below many global pharma rivals, so where should it be trading?

Undervalued compared to peers?

GSK looks cheap on key stock measures against its competitors.

Its price-to-earnings ratio of 15 is bottom of this group, which averages 25.2. These firms comprise Merck KGaA at 18.3, Zoetis at 18.7, AstraZeneca at 30.7, and CSL at 33. So it looks very cheap on this basis.

It also looks a bargain on its 2.6 price-to-sales ratio, compared to its peer group average of 4. And the same is true of its 5.2 price-to-book ratio against its competitor average of 6.4.

‘Correct’ price?

Discounted cash flow (DCF) analysis identifies the price at which any stock should trade based on the underlying business’s fundamentals. It does this by projecting a firm’s future cash flows and ‘discounting’ them back to today.

Some analysts’ DCF modelling is more conservative than mine — depending on the variables used. However, based on my DCF assumptions — including a 7.2% discount rate — GSK shares are 54% undervalued at their current £21.68 price.

So, this implies a ‘fair value’ for the stock of around £47.13 — more than double where it trades now.

The difference between any stock’s price and its fair value is crucial for long-term investors’ profits. This is because share prices tend to converge to their fair value over time.

So the price-to-value gap for GSK shares suggests a potentially terrific buying opportunity to consider today if those DCF assumptions prove accurate.

Earnings growth drivers

The key to long-term gains on any company’s share price (and dividends) is sustained growth in earnings (‘profits’). A risk to GSK is any failure in one of its key products that could lead to litigation. Another is intense competition in the vaccines sector, which could squeeze its margins.

Nevertheless, analysts forecast its earnings will grow a solid 6% a year on average over the medium term at minimum. And this looks well supported by its recent results.

Core operating profit increased 7% year on year to £9.8bn, underpinned by disciplined cost control and improved mix. Core earnings per share climbed 8% to 172p, highlighting the benefits of GSK’s sharper post‑demerger focus. And turnover rose 4% year on year to £32.7bn, reflecting continued strength in vaccines and speciality medicines.

Together, these results underline operational momentum that should continue to drive earnings growth ahead.

My investment view

What makes GSK compelling to me is the blend of stability and potential, which is why I will buy more soon. In short, it is not just a business with reliable earnings but also catalysts that could drive a meaningful re‑rating.

Investors rarely get the chance to buy a global pharma at a price that assumes so little future progress. And with the company’s vaccines, HIV, and pipeline execution, the wider market will also have to reassess its valuation soon.

The post GSK’s share price is under £22, but with a ‘fair value’ much higher, is it time for me to buy more right now?  appeared first on The Motley Fool UK.

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Simon Watkins has positions in AstraZeneca Plc and GSK. The Motley Fool UK has recommended AstraZeneca Plc and GSK. 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.

Legendary investor Warren Buffett best encapsulated the key idea at the heart of passive income, in my view. He said: “If you don’t find a way to make money while you sleep, you will work until you die.”

The best way I have found of making money while I sleep is through dividends paid by shares. The only real effort on my part is to choose good stocks initially and then to monitor their progress periodically.

One share that caught my eye recently is terrestrial and digital media giant ITV (LSE: ITV).

Why this one?

For a start, the firm delivers a current dividend yield of 6.5% — way higher than the FTSE 100’s 3.1% or the FTSE 250’s 3.4%.

Better still is that analysts forecast this will rise to 7% by 2028.

So, investors considering a £20,000 holding would make £20,193 in dividends after 10 years and £142,330 after 30 years. This period is commonly seen as a standard investment cycle for long-term investors.

The numbers assume the same 7% forecast yield as an average, although this can go up and down. It also factors in the dividends being reinvested back into the stock to capture the turbocharging effect of ‘dividend compounding’. It is like allowing interest to grow in a savings account.

At the end of 30 years, the holding would be worth £162,330 (including the original £20,000 investment). And this would pay £11,363 every year in income from dividends.

A share price bonus too?

On top of that potential income stream, I think there could be share price profits too. This is because the current price of ITV is far below the ‘fair value’ of the stock. And over time, asset prices (including shares) tend to converge to this true value.

Discounted cash flow (DCF) analysis enables investors to pinpoint the price at which any stock should trade. It does this by projecting future cash flows for the underlying business and ‘discounting’ them back to today.

Some analysts’ DCF modelling is more bearish than mine, depending on the data used. However, based on my DCF assumptions — including an 8.2% discount rate — Vodafone shares are 27% undervalued at their current 77p price.

This implies a ‘fair value’ of around £1.05.

Given the gap here to its current price, this suggests a potentially terrific buying opportunity to consider today if those DCF assumptions hold.

My investment view

A risk here, in my view, is the sub-£1 share price, which adds price volatility to the value proposition. Aged over 50, I am in the latter part of my 30-year investment cycle and am looking to minimise risk. Another risk is the intense competition in its sector that may squeeze its margins.

However, for those younger than I or with less risk aversion, I think ITV looks a strong passive income play. It is starting from a high dividend yield base, and this is projected to rise to the key 7% level.

Why is this key for me? Because it effectively offers compensation for taking the additional risk in share investment over no risk at all. And the ‘risk-free rate’ (the 10-year UK gilt yield) is currently 4.8%.

Meanwhile, other high-yielding, deeply discounted shares have caught my eye in the last few days.

The post Here’s how investors can aim for £11,363 a year in passive income from £20,000 in this overlooked FTSE media gem appeared first on The Motley Fool UK.

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Simon Watkins has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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.

An income share yielding nearly 7% today — and with a forecast return of 9.1% by 2028 — has caught my eye. And in a market where many dividends look fragile, this company stands out for the visibility and consistency behind its payouts.

Its business model is built on recurring revenue, low customer churn, and strong cash conversion, giving it the sort of stability that income investors such as me crave.

So, what is the stock and how much could investors make from it?

Telecoms to energy stock

The company behind those numbers is Telecom Plus (LSE: TEP), the FTSE firm best known for its Utility Warehouse brand. Unlike traditional energy suppliers, it operates a bundled‑services model that keeps customers loyal and cash flows predictable.

And it covers everything from broadband to mobile to home energy. That mix of essential services creates unusually strong recurring revenue — exactly the foundation that supports a rising dividend profile.

A risk to these is any regulatory changes affecting household utility pricing or commissions, which could dent earnings. And this is ultimately what powers any firm’s dividends (and share price) over time. Another would be increased competition that could squeeze margins.

However, consensus analysts’ forecasts are that Telecom Plus’s earnings will rise by an average 10% a year over the medium term.

Rising dividends from a high base

The UK’s only integrated multi-utility provider currently generates a dividend yield of 6.9%. This is more than double the current 3.4% average dividend yield of its home FTSE 250 index.

However, analysts project the dividend will rise to 101.4p this year, 110.2p next year, 118p in 2028, and 124p in 2029.

These would generate respective dividend yields of 7.5%, 8.1%, 8.7%, and 9.1% on the current £13.60 share price.

How much dividend income can be made?

A £20,000 holding in Telecom Plus could make investors £29,516 in dividends after 10 years and £283,516 after 30 years. This period is commonly seen as the standard investment cycle for long-term investors. It begins with first investments around 20 and ends in early retirement options around 50.

These numbers assume the forecast 9.1% as the average yield (but this could go down or up over time as well as many other changes happening to the company). They also factor in the dividends being reinvested back into the shares to capture the turbocharging effect of ‘dividend compounding’.

Including the original £20,000 investment, the holding could be worth £303,516 by the end of 30 years. At that point, it could be producing a passive annual income of £27,620 from dividends alone!

My investment view

For me, Telecom Plus is the kind of income share that is very hard to overlook.

Its starting yield near 7%, backed by recurring revenue and a long record of dependable payouts already puts it in rare company. And the prospect of that rising towards 9%+ over the coming years only strengthens the case.

My existing stake in another firm in the telecoms sector — BT — precludes me from buying it currently. To do so would unsettle the risk/reward balance of my portfolio. But for long‑term investors who want growing passive income from a stable, essential‑services business, it seems well worth a closer look.

The post A 9.1% forecast yield! 1 under-the-radar FTSE income share to buy today? appeared first on The Motley Fool UK.

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Simon Watkins has positions in Bt Group Plc. The Motley Fool UK has no position in any of the shares mentioned. 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.

To me, Chemring (LSE: CHG) looks one of the best FTSE 250 defence stocks to buy right now. It is a specialist in high‑specification, low‑competition areas, with elevated margins reflecting this.

The US — its largest single customer — expects to spend around 3.5% of gross domestic product (GDP) on defence in 2026 and the following years. And other NATO members have pledged to lift their combined defence budgets to 5% of GDP by 2035, up from around 2% last year. It is an increase worth roughly $423bn (£314bn) a year.

As a result, Chemring is strengthening its order visibility, expanding its margins, and setting its earnings up to move much higher. But the market appears not to have factored all these elements into the price as yet.

So, how much could investors potentially make from the price-to-value gap here?

Where’s the growth coming from?

Chemring’s crown jewel is its countermeasures business, which produces the flares, chaff, and advanced decoys that protect military aircraft from missile threats.

Demand here is rising as geopolitical tensions intensify and Western air forces return to operating in contested airspace. The Pentagon and non-US NATO are now in the middle of a multi‑year effort to replenish and upgrade their stockpiles.

Chemring’s second main business pillar is Sensors & Energetics, covering explosive‑detection systems, chemical, and biological threat sensors, and specialist explosives.

This side of the group sits squarely in areas where governments are increasing investment in intelligence, detection, and protective infrastructure. And Chemring is perfectly positioned to benefit from long‑term spending trends here.

A risk to the firm would be any supply‑chain disruption in its highly specialised manufacturing. Another would be any core failure in any of its key products, which could prove costly to fix.

That said, the consensus of analyst forecasts is that the company’s earnings will grow by a very robust 13.2% a year over the medium term. And it is ultimately this that powers any stock price higher over the long run.

Low multiples, higher fair value

Chemring looks undervalued against its competitors on several key stock measures, including the price-to-earnings benchmark. Its 27.9 ratio is second lowest in the group, which averages 34.3. These firms are Northrup Grumman at 23.7, BAE Systems at 33.3, RTX at 38.9, and L3Harris Technologies at 41.2.

To nail down what this means for its fair value, I ran a discounted cash flow (DCF) analysis. This identifies where any stock ‘should’ trade by projecting future cash flows for the underlying business and discounting them back to today.

Analysts’ DCF modelling varies — some more bullish than mine, others more cautious — depending on the variables used. Nevertheless, based on my DCF assumptions — including an 8.9% discount rate — Chemring shares are 26% undervalued at their current £5.45 price. This implies a fair value of around £7.36.

Share prices tend to converge to their fair value over time, so this suggests a potentially terrific buying opportunity to consider today if those DCF assumptions hold.

My investment view

I already hold two stocks in the defence sector — BAE Systems and Rolls-Royce — so adding another would unsettle the risk/reward balance of my portfolio.

But for investors without this concern, Chemring looks an intriguing opportunity to consider.

The post Down 11% and 26% under ‘fair value’! 1 of the best FTSE defence stocks to buy today? appeared first on The Motley Fool UK.

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Simon Watkins has positions in BAE Systems. The Motley Fool UK has recommended BAE Systems and Chemring Group 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.