International Consolidated Airlines Group (LSE: IAG) has had a pretty rough ride in the last couple of years. The owner of the British Airways brand has had to deal with strikes, poor publicity on social media regarding the quality of its planes, data breaches, and a bizarre fight with the Financial Times.
Back in April, the airline stopped offering the FT to passengers because it was reportedly upset with the paper’s coverage. This did little to improve the brand’s reputation among customers and the press.
All of these factors have had an impact on the stock’s share price, lagging the broader market by 14% over the past 12-months, excluding dividends paid to investors.
However, despite all of the negative publicity, profits have held up relatively well. IAG is expected to report earnings per share of €1.07 this year, a 7.4% dip from last year, but up 20% from 2016’s figure of €0.89.
Barring any more substantial setbacks, City analysts expect growth to return in 2020 with earnings rising 7% to €1.15.
I think this could be a fantastic opportunity for investors to buy into this world-class brand at a discounted price. At the time of writing, shares in the airline group of trading at a forward P/E of just 5.9, a valuation that offers a substantial margin of safety, in my opinion.
The stock also supports a dividend yield of 5.3%, so investors will be paid to wait for confidence to return. Lastly, the payout is covered three times by earnings per share, so there’s a sizable cushion to protect the dividend if earnings fall further.
Another FTSE 100 dividend champion I think’s too cheap to pass up right now is the owner of the B&Q and Screwfix brands Kingfisher (LSE: KGF). The firm has been struggling to grow for the past six years, with revenue for the period expanding at an anaemic 1% per annum. Rising costs have also eaten into the company’s profit margins.
Kingfisher’s operating margin has fallen around 40% since 2014. A transformation plan, which was designed to revolutionise the business for the digital age, has also failed to yield the desired results.
But I think the company’s fortunes could be about to change. At the end of September, Véronique Laury, who has been managing the group since 2015, stepped down and was replaced by Thierry Garnier, a veteran of French retail giant Carrefour.
The new CEO has been quick to make his mark. He’s already replaced the management of Kingfisher’s struggling French business with a former executive at Carrefour’s hypermarkets unit.
Garnier has also put his money where his mouth is. Soon after coming on board, the CEO splashed out £130k buying Kingfisher shares. The group’s CFO also purchased a similar amount.
I think it could be worth following Kingfisher’s new CEO as he seeks to turn the business around. Today, you can snap up shares in this retail giant for just 10.3 times forward earnings. The stock also supports a dividend yield of 5%, so you’ll be paid to wait for the recovery.
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Rupert Hargreaves owns no share 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.