Bitcoin has had its 15 minutes of fame in my view and is unlikely to be a profitable long-term pick. And gold is a useful investment perhaps, when investors fear markets may fall. But overall for the long term, putting money into profitable companies is, I believe, far more financially rewarding. If you’re reading this, hopefully you agree with that view.
While the ads featuring Winston Wolfe may catch the eye, as an investment, Direct Line (LSE: DLG) is one of those FTSE 100 companies that tends to go more under the radar than some of the more famous companies on the index such as BP and Barclays.
When it comes to its financial performance, Direct Line has ups and downs. In July, the insurer revealed that profits had dropped in the first half of its trading year, its operating profits fell 10% to £274m. Nevertheless, perhaps reflecting confidence in the future, management decided to hike up the dividend on the back of an increased number of overall policies across the UK.
I think the profit fall is just part of the nature of being in the insurance industry. For example, a government policy meant that Direct Line took a £17m hit in order to cover payouts for those who were seriously injured in accidents. In time the business will adjust to this – presumably by putting up rates – so long term, I don’t think it’ll impact the company.
With the shares currently so lowly valued, I think now could be an ideal time to buy into the shares to profit down the line when the business recovers. The shares look good value as the P/E is only nine and the dividend yield on offer to investors is over 7%.
On course to deliver
Water company Severn Trent (LSE: SVT) had good news for investors last month. It said it had made a “good start” to the financial year in a trading update and added that there had been no material change to the current year business performance or outlook since its full-year results announcement back in May.
Providing investors with a dividend yield of 4.7% and with the shares trading at a reasonable valuation (as shown by the P/E being around 14), I think the company looks like it has a lot to offer investors. If they become worried about the wider economy, defensive shares such as utilities will become more popular.
As a utility, Severn Trent will be in the crosshairs of a Labour government and its desire to nationalise, so there’s a risk there. For investors prepared to take the risk that nationalisation either won’t happen or wouldn’t happen in a way that would wipe out shareholders, the company provides a good income from dividends at a reasonable price, as shown by the P/E ratio. This is why I believe Severn Trent is a high-yielding share that could help you build a fortune.
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Andy Ross has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. 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.