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I like these 2 FTSE 100 shares for diversification and dividend income

As we say goodbye to choppy August markets and start the last quarter of 2019, I’d like to discuss the outlook for two FTSE 100 shares that may be appropriate for long-term portfolios with share prices that could perform well in the months to come. So here are two stocks that I like and you may want to study further.

Let’s get defensive

On 31 July, defence giant BAE Systems (LSE: BA) released half-year results that saw revenue increasing by 4% to £8.7bn. The group’s earnings per share also rose 10.6% to 21.9p.

The maker of military equipment has strong relationships with the US and Saudi Arabian governments. It is also part of a consortium behind the Eurofighter Typhoon jet.  And the MoD is an important customer too. 

All these clients have led to the current multi-billion pound order book, which in turn means revenue visibility. Indeed its half-year results showed that growth came across all divisions except for Cyber & Intelligence, which suffered from a £25m restructuring charge.
The company’s dividend yield stands at 4% and the shares should go ex-dividend as of 17 October. In general, management increases dividends by about 2% year-over-year. 

If you are one of the investors who feel that the decade-long global economic expansion may be winding down, then it would make sense to diversify the holdings in your portfolio. And I regard BA as a defensive stock.

The shares have declined from a 52-week high of around 643p in October 2018 to about 550p at the time of writing but I believe that the share price may move toward 600p-level in the months to come.

Cruising away

Carnival (LSE: CCL) is the world’s largest cruise operator and its shares are dual-listed on the LSE and  NYSE in the US. In the early 1970s, the company had one ship, the Mardi Gras. Now the group’s different cruise line brands operate a combined fleet of over 100 vessels visiting more than 700 ports globally. 

Many of our readers would be familiar with its P&O Cruises and Cunard in the UK. Other brands include Carnival Cruise Line, Holland America Line, Princess Cruises and Seabourn in North America. Carnival also owns AIDA Cruises in Germany, Costa Cruises Italy, and P&O Cruises in Australia. Additionally, it has a cruise line brand that operates in Alaska and the Yukon.  

Annually, the combined fleet welcomes almost 11.5m guests aboard, or about 50% of the global cruise market.

I believe that the potential growth, especially in emerging economies of Asia as well as Latin America, is likely to be a major catalyst for CCL shares. For example, in 2017 around 2.5m Chinese travellers took cruise trips. Analysts forecast that by 2025 the number of Chinese cruise passengers will grow to 9m-10m a year. It would not be wrong to assume that an important portion of these travellers will be making the trip on a Carnival brand.

CCL share price peaked at around 5,360p in September 2017 and has since declined to the current level of about 3,450p, a drop of about 35%.

Following this price fall, the stock now offers a dividend yield of around 4.7%. The shares, which went ex-dividend on August 22, trade at a trailing P/E of 9.7.

Although there might still be some choppy waters ahead due to macroeconomic concerns, I believe the leisure travel company is well suited to take advantage of global growth in the coming decade.

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tezcang has CCL covered calls (September 6 expiry) on CCL ADR shares listed on NYSE. The Motley Fool UK has recommended Carnival. 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.