Investing for income may feel a distinctly boring approach when compared to the thrills and spills on offer from growth-focused stocks. Here at the Fool UK, however, we think this strategy can make a lot of sense for those who would rather build their wealth slowly but surely.
With this in mind, here are three FTSE 100 stocks popular with income investors that might be worth paying attention to in January.
Likely festive winner
Quick out of the blocks next month is clothing stalwart Next (LSE: NX). The company provides an update on trading — including its performance over the all-important festive season — on 3 January.
At a time when many retailers are struggling, Next is something of an exception to the rule. Sure, sales at its physical stores continue to fall, but the online part of the business, as you would hope/expect, is doing very well indeed.
Considering that the weather over the last few months has also been generally favourable to clothing retailers, I’d be surprised if there were any nasty shocks waiting for investors. Having soared a little over 70% in price in 2019 so far, however, I’m wondering if the shares need to cool off a little. The dividends are as secure as they come, but the yield has dropped to ‘just’ 2.4%.
Even if you have no interest in ever holding the shares, I recommend reading its results anyway, if only to give yourself an insight into how a business should report to its owners. In terms of clarity, Next sets the bar.
Also providing an update on trading next month (8 January) is the UK’s second-biggest supermarket J Sainsbury (LSE: SBRY).
Times have been tough for the business following its failed merger with Asda at the hands of the Competition and Markets Authority back in April. Indeed, in a year when the FTSE 100 has put in a great performance despite Brexit headwinds, Sainsbury’s stock is down 10%.
Contrarians and value investors will be running the rule no doubt and it’s quite possible that the share price could jump if CEO Michael Coupe announces that trading has been even marginally better than expected.
On 12 times earnings for FY20, however, I don’t think the current valuation is worth getting excited about. The 4.6% dividend yield is undoubtedly attractive and covered 1.9 times by expected earnings, but this can be achieved elsewhere at less risk, in my opinion.
A final top-tier stock worth tracking next month is housebuilder Persimmon (LSE: PSN). It’s scheduled to provide the market with an update on 15 January.
With the threat of a Jeremy Corbyn-led government completely gone and a bit more certainty on Brexit, the shares have rallied strongly since the outcome of the election was announced, supported by a report from property portal Rightmove that demand from prospective buyers jumped in the first four days after the election. That’s got to be encouraging news for the York-based business.
I must confess that I’ve never been Persimmon’s biggest fan as a result of the exorbitant pay given to executives and the far-too-regular allegations of shoddy workmanship from disappointed buyers. Nonetheless, I can’t deny that the investment case is enticing based purely on the financials. Margins and returns on invested capital continue to grow and the stock, still available for under 10 times earnings, yields a chunky 8.9%.
Income-seeking investors like you won’t want to miss out on this timely opportunity…
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He even anticipates that the dividend could grow nicely too — as this much-loved household brand continues to rapidly expand its online business — and reinvent itself for the digital age.
With shares still changing hands at what he believes is an undemanding valuation, now could be the ideal time for patient, income-seeking investors to start building a long-term holding.
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Rightmove. 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.