I’ve just been looking at the rates of interest you get on Cash ISAs these days, and they don’t make pleasant reading. Even with inflation rate falling to 1.3%, too many won’t protect your money in real terms, paying just 0.5%, or less.
I’d rather put my money into FTSE 100 stocks that offer a combination of share price growth and rising dividend income. They’re riskier than cash, but you can reduce the dangers by investing in a spread of stocks with the aim of holding them for years. Here are two I’d consider today.
Associated British Foods
Don’t be fooled by the name, the real attraction of Associated British Foods (LSE: ABF) is value clothing, as it’s the parent company of hugely popular chain Primark. High street success is a rarity for retailers these days, and Primark is doing so well enough it can get by with no online store.
Its shares are up around 3% this morning after its trading update showed group revenue from continuing operations up 4% year-on-year at constant currency. Primark posted steady like-for-like sales growth across Europe, the UK and US, in what was the crucial Christmas trading period. So at least one retailer can report some festive cheer. Increased retail selling space was the main reason.
The £20.8bn group also has sugar and agricultural businesses, and owns Twinings, all of which posted sales growth, offsetting an operating loss at its Allied Bakeries operation. Group outlook is unchanged.
The ABF share price is up 15% over the last year, and it looks a little pricey trading today at 17.6 times earnings, but this shows that the market rates this stock. Earnings growth forecasts of 8% in both 2020 and 2021 look promising, and while the forecast yield is low at 1.9%, it’s covered 2.9 times by earnings, which gives management scope for progression.
Household goods giant Unilever (LSE: ULVR) remains one of my favourite FTSE 100 stocks of all, despite its recent troubles. I’ve been an admirer for years, because the group offers a string of brand names that you scarcely need to think about, as you pop them into your shopping trolley.
Try these for size: Lifebuoy, Dove, Sunsilk, Knorr, Lux, Vaseline, Persil and others, which are bought by a billion households across 39 countries. The wealthier emerging market consumers get, the better Unilever should do.
After years of steady growth, the Unilever share price has faltered. This is due to rising commodity costs hitting margins, subscription direct-to-consumer businesses drawing customers to rival brands, and retailers like Aldi developing their own-brand products.
Today, you can buy the stock for 18.3 times forward earnings, when a year or two back, you thought yourself lucky to buy it at 24 or 25 times. The yield also looks more tempting, at a forecast 3.6% (it hovered around 2.2% for years).
Yet Unilever’s earnings outlook is promising, with forecast 10% growth this year, and 6% next. Now could be a great time to get into what remains a top long-term buy-and-hold.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Associated British Foods. 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.