Shares in defence, aerospace, and security company BAE Systems (LSE: BA) have climbed by 3.85% in the first week of 2020, on the back of a few pieces of positive news.
First, full-production on a contract to supply the US Army with artillery pieces should begin this month. Second, the UK’s Tempest fighter jet programme, of which BAE is a founding partner, is gathering momentum. Third, analysts at JP Morgan and Citigroup recommended this stock as a buy today, the former placing a target price of 700p on it.
Now revenues tend to be a bit lumpy with BAE, as contracts are won and lost, but earnings (while not growing much) have been positive for the last five years. Dividends have been growing, and the trailing 12-month yield now is around 3.75% on a price of 590p per share.
BAE is one of the top three FTSE 100 performers in the first week of 2020. Read on for the others.
Assets under management
M&G (LSE: MNG), a savings and investment company that was spun off from Prudential in October of last year, has seen its share price rise by 3.44% in the new year.
The bulk of revenues will come from fees charged on £340bn of assets that the company manages for both retail and institutional clients. So, it is comforting to read that many of the funds it offers are rated highly by third-parties.
M&G could be a solid bet for the income investor. Consensus dividends for the next three full years are 17.9p, 18.3p, and 18.8p. With shares priced at about 250p, the forecast dividend yield is at least 7.16%.
As for share price appreciation, I would not expect too much. Revenues come from small percentage fees on managed assets, which are already huge and probably won’t grow too much more.
A renewed energy
BP (LSE: BP) has had its shares pumped up by 5.35% in the new year. It produces oil, and the tensions in the Middle East are supportive of the price of black gold and its producers.
Leaving that to one side, the oil majors have to look to a possible future when their business will have to change. BP has made it its strategy to meet the world’s need for more energy, with fewer emissions, and to transition to a low carbon company.
BP already has a venture capital division. It takes small stakes in new energy businesses that are focused on, for example, efficiency, low-carbon and biofuels, and carbon management.
Within the last year, a division has been launched to create five $1bn businesses by 2025. All will focus on finding new sources of energy, energy efficiency, and reducing emissions.
The thinking is that developing and scaling your own technologies is better than just bearing the cost of say, putting up more wind farms. If successful, BP gets highly valued proprietary technology while also doing what it needs to do to avoid a climate catastrophe.
With partnerships to supply data centres in Europe with renewable energy, and pushing the use of its PET plastics recycling technology, BP is moving in the right direction. It is also a reasonably reliable dividend payer despite being in a cyclical industry. I like this stock for the long term.
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James J. McCombie owns shares in BP and BAE Systems. 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.