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Forget buy-to-let. I’d put my money into FTSE 100 dividend stock Glencore

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With the average house price currently close to a record high compared to average earnings, it may prove difficult to buy properties at prices that represent good value for money. As such, a buy-to-let investment appears to lack appeal at present.

In contrast, FTSE 100-listed Glencore (LSE: GLEN) appears to have a wide margin of safety. The company has the potential to generate improving financial performance, with the risks it faces seemingly priced in.

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Alongside another FTSE 350 dividend share that released a positive update on Wednesday, now could be the right time to buy Glencore.

Low valuation

The other company in question is transport business Stagecoach (LSE: SGC). Its trading statement showed it has performed relatively well, with positive progress in its UK Rail Division. Its performance was ahead of expectations, reporting good underlying revenue trends. As a result, the company expects group adjusted earnings for the full year will be ahead of previous guidance.

Revenue growth in its UK Bus (regional) operations has been similar to that reported in the first half of the year, with increasing market share delivered. In its UK Bus (London) division, Stagecoach has undertaken a review to identify opportunities to improve its performance on Transport for London tenders. This could help deliver improved performance in a competitive environment.

With the stock having a price-to-earnings (P/E) ratio of 9, it seems to offer good value for money. A dividend yield of 5%, and the fact that shareholder payouts are expected to be covered twice by earnings, shows it may also offer income investing potential over the long run.

Improving prospects

As mentioned, Glencore may have a bright future. Certainly, there are risks facing the company, as well as the wider resources sector. A slowing China remains a key concern for the business, with its recent data showing the world’s second-largest economy is experiencing a challenging period. This could lead to weaker investor sentiment, as well as profit growth that’s more limited across a variety of segments within the wider resources industry.

However, this risk seems to be priced into Glencore’s valuation. It currently trades on a P/E ratio of 8.6, which suggests it offers a wide margin of safety. Its risks have also fallen in the last few years as it reduced debt and sought to improve efficiency.

With Glencore having a dividend yield of 5.3% from a payout that’s covered 2.2 times by profit, it seems to offer income investing appeal. Although it may be a less stable business than a number of other FTSE 100 income shares, it could nevertheless deliver dividend growth in the long run. As such, for less risk-averse investors, now could be the right time to buy the stock while it trades on a low earnings multiple.

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Peter Stephens has no position in any of the shares mentioned. 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.

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