While the price of Bitcoin may have made strong gains since the start of the year, it continues to offer a highly uncertain future. Its limited size, lack of infrastructure, and the potential for regulatory change could mean it fails to ultimately replace traditional currencies.
By contrast, the risk/reward opportunities among FTSE 100 shares appear to be highly appealing. There are a number of high-yielding stocks on offer that could also produce impressive capital returns. Here are two prime examples that could be worth buying today.
Utility companies such as SSE (LSE: SSE) offer relatively high dividend yields at present compared to their historic averages. SSE, for example, has a yield of 7.3%. This is over 300 basis points higher than the FTSE 100’s yield, and means that investors may not need to generate high capital returns from the stock in order to outperform the wider index.
Of course, the utility sector is currently cheap due to risks such as the threat of nationalisation from a future Labour government, as well as regulatory changes. SSE also faces the uncertainty that comes with a major strategy change, since the business is aiming to exit its UK domestic energy supply operations. This process, though, has proved to be somewhat challenging, with a merger with incumbent npower having fallen through.
Looking ahead, the company is expected to raise dividends by at least as much as inflation over the next few years. This could make the stock increasingly appealing, while its current margin of safety suggests its long-term investment appeal may be relatively high. As such, now could be the right time to buy a slice of the business.
Plumbing and central heating specialist Ferguson (LSE: FERG) may not offer one of the highest yields in the FTSE 100, but its dividend growth potential is high. The company’s dividend yield of 2.4% is currently covered 3.1 times by net profit. This means it may be able to increase dividends at a faster pace than profit over the medium term without putting its financial position under pressure.
The outlook for the company’s profitability remains high. Its focus on the US means it’s exposed to rapidly-rising demand for its products, which could act as a tailwind on its overall performance. Ferguson’s focus on reducing costs is also leading to improving margins, which could act as a further catalyst on its financial performance.
The company’s strong financial position and its improving cash flow mean it may be able to make acquisitions to complement its organic growth. As such, from a total return perspective, it could be highly appealing for long-term investors. Its potential for dividend growth I think may make it an attractive purchase for income investors and growth investors alike.
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Peter Stephens owns shares of SSE. 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.