International Consolidated Airlines Group (LSE: IAG) isn’t having the best of it right now. Going ex-dividend today means its share price has fallen exactly 33% over the past 12 months. I would argue, though, that this represents a truly-terrific buying opportunity.
Demand for the British Airways owner has hardly been helped by industry rival Lufthansa’s June profit warning, the German flyer rocked by huge price competition in the European short-haul market, as well as the recent uptick in fuel prices. So it’s not a surprise to see IAG’s share price drop in the wake of the release. After all, the recent collapse of Monarch and Flybmi in the UK alone illustrates the huge pressures facing the UK operators alone.
Flying through the fog
But for the time being the FTSE 100 aviation giant is flying through this turbulence and, pleasingly, affirmed its full-year profits estimates for 2019 last month. Okay, reduced air fares in Europe are troublesome for IAG’s Aer Lingus and Vueling divisions but, thankfully, the strength of the transatlantic market is helping to keep things in the air.
Besides, in the long term, I’m confident the blue-chip flyer’s expansion in the continent’s budget sector should pay off handsomely, helped by more and more of its local rivals running into trouble and going to the wall. IAG is, in my opinion, a great share to buy today and cling onto for years, my enthusiasm boosted by its modest forward P/E ratio of 4.6 times and gigantic 6.6% corresponding dividend yield.
I would argue the National Grid (LSE: NG), while enjoying a solid share price upswing of late, also looks pretty undervalued — the power network operator still remains around 8% lower from levels seen a year ago.
And this means, at current prices, National Grid carries a forward earnings multiple of 14.5 times versus the broader average above 15 times for the FTSE 100. Sure, this isn’t a gulf, but I would expect a higher valuation given the stock’s reputation as a classic safe-haven in these uncertain times for the UK and global economies.
In fact, I reckon such a low multiple provides the base for additional share price strength in the weeks ahead as Brexit drags on, fears over slowing global growth intensify, and the political standoff between Iran and the West intensifies.
Another big yield
It’s true that the regulatory risks, and more specifically the threat of re-nationalisation under a Jeremy Corbyn government, has taken some of shine off of National Grid’s investment appeal in recent months. But with latest YouGov polling today showing Labour in fourth place for the first time, the chances of such an eventuality look slim, even if a general election were to be called tomorrow.
One final thing. At current prices, National Grid boasts a giant 5.7% prospective dividend yield. All things considered, I think the share, like IAG, is a great buy for today’s dividend chasers.
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Royston Wild 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.