I think balance is key when starting to invest. That’s why today, I’ve selected a group of FTSE 100 stocks that score high on quality and growth prospects as well as providing owners with dividends.
Taken collectively, it’s my belief that these fab five should do well for those new to the stock market and wanting to adopt a buy-and-hold strategy.
Luxury pick
The distinctive Burberry check has been around since the 1920s and is synonymous with luxury. The rise of middle-class consumers in parts of the world such as China (which tend to hold Western brands in high regard) should ensure this remains the case for some time to come.
Burberry has long shown itself to be a quality business, generating high returns on the money that it invests. The shares aren’t cheap — and can be rather volatile when global growth looks shaky — but I do think this is one to keep for years. I’ll be looking to add to my own holding on any price weakness.
Drink up
Drink leviathan Diageo boasts a corking portfolio of brands including Guinness and Johnnie Walker whose popularity should endure while technology fads come and go.
Since hitting an all-time high in September, however, the shares have dipped in value. This could continue if Boris Johnson wins a majority in the forthcoming election as the value of sterling rises on a bit of Brexit ‘certainty’ (Diageo makes most of its money overseas).
Not that any of this should concern committed buy-and-holders. A falling share price also means a higher dividend yield which, if building your wealth is important, should then be reinvested back into the market.
Income stalwart
Regardless of the geopolitical climate, the world will always be in need of healthcare. That’s why I think most portfolios could benefit from the inclusion of a pharma giant or two.
Since AstraZeneca looks priced to perfection right now, my choice from the UK would be peer GlaxoSmithKline, particularly as the latter’s dividend now looks safer than it once did. The consumer healthcare joint venture with Pfizer has started well and Glaxo recently raised earnings guidance for the full year. A price-to-earnings ratio (P/E) of 14 is still far below its five-year average of 23.
Set sail
Higher fuel costs, poor weather and a travel embargo against Cuba have combined to hit cruise line operator Carnival‘s earnings and share price recently.
Despite this blip, I’m convinced that future prospects are still excellent and that cruising will continue to increase in popularity with holiday seekers of all ages around the world (and particularly those in relatively untapped markets such as Asia).
The fact that Carnival’s shares also trade at less than 10 times forecast FY20 earnings and yield 4.9% make it arguably the biggest bargain of today’s selection.
Packaged payouts
For added diversification, packaging firm Mondi is my final pick for a starter portfolio.
The £8bn cap is larger than peers Smurfit Kappa and DS Smith and boasts the highest returns on capital and operating margins of the three, making it the natural choice for quality-focused investors.
Following a sell-off, Mondi’s shares are now 25% lower in price than they were in August and yield 4.1% based on analyst estimates. The dividends should also be covered over twice by profits, suggesting there’s no risk of a cut any time soon.
