All forms of investment carry some degree of risk, naturally, though some represent nothing more than an expensive crap shoot. And there’s few better ways to drain your finances over the long term than by playing the National Lottery.
But it’s easy to see the appeal of the lottery. For the cost of a £2 ticket (and the time it takes to select half a dozen random numbers), you can change your life forever. But largely speaking, it’s an exercise in wasting money. For every one person that’s made a mint there’s countless others who have simply thrown their cash away.
My dad’s played done the lottery every week, sometimes twice a week, since the first-ever draw was made back in 1994. Aside from the occasional sub-£100 win in that time, he hasn’t won a sausage. A pretty terrible return for more than a quarter of a century of playing, I’m sure you’d agree.
Think of the many thousands of pounds that’s gone down the plughole, and how much more effectively he could have used that money. A quick chat with one of the many millionaires who’ve got rich through Stocks and Shares ISAs could well have helped him make that elusive fortune.
I won’t pretend stock investing will guarantee you big returns. Equity markets aren’t immune to volatility, after all, as the FTSE 100’s recent plunge back towards 7,000 points shows. And of course companies can fail and cost you a fortune, as investors of the recently-delisted Patisserie Valerie will attest to, to cite just one painful example.
But it’s been proven time and again that, over the long-term, a well-researched, a diversified and income-generating shares portfolio can create some stunning returns for investors. And I believe recent weakness in the Footsie is a brilliant opportunity for individuals to nip in and grab some big-dividend-paying bargains.
Take IAG (LSE: IAG), for example. The owner of British Airways and Iberia recently dropped to two-and-a-half-year lows as fears over excess competition in the low-cost European arena, allied with how concerns over an economically-disastrous Brexit, are impacting traveller numbers now and in the future. Added to this, another catastrophic IT failure and scenes of stranded passengers at Heathrow this month have hardly helped the Footsie flyer’s case.
But I think the scale of market-selling has been excessive. At current prices, IAG boasts an ultra-low forward P/E ratio of 4 times. This reading sits well below the FTSE 100 corresponding average of 14.5 times and is one I feel grossly underestimates the company’s transatlantic markets and its growing role in the fast-expanding budget arena. Indeed, strong traveller growth across all its regions between January and June pushed passenger revenues 7.2% higher from the same period a year earlier.
One final thing. At current prices, IAG carries a monster 7.2% dividend yield for 2019, one which also blows the forward blue-chip average of 4.5% to smithereens. So stop dreaming with the lottery and, in my opinion, start making money with this dirt-cheap dividend star.
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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.