If you have £5,000 to invest today, it seems there are plenty of stocks in the FTSE 100 that offer value at current levels. Here are two companies with attractive income credentials that could help you build a passive income stream for life.
Recent trading updates from emerging markets-focused bank Standard Chartered (LSE: STAN) show its recovery is well underway. In 2015, the lender’s profits collapsed following a string of bad investments over several years. Management has been working flat out to restore the firm’s reputation ever since. It now seems as if this hard work has paid off because profits are growing again.
Therefore, now could be a good time for savvy value hunters to buy this dividend champion. City analysts believe the bank’s earnings will jump more than 200% for fiscal 2019. That puts the stock on a price-to-earnings (P/E) ratio of 11.
Furthermore, analysts are forecasting a 15% increase in earnings for 2020. This implies a 2020 P/E of 10. It also seems as if the bank is undervalued based on its balance sheet. The stock is dealing at a price-to-book (P/B) ratio of 0.6. In addition Standard yields 2.9%, so it appears as if investors will be paid to wait for the stock price to recover.
All of the above seems to suggest that shares in the emerging markets-focused lender offer a wide margin of safety at current levels. Hence, now could be an excellent time to snap up shares of this income investment at a discount price.
Retailer Tesco (LSE: TSCO) also seems to be on the road to recovery. Recent updates from the group show it’s well on the way to achieving its margin target, which should be great news for income investors.
Certainly, bigger profit margins should mean there’s more cash available to distribute to investors. Hence, now could be a good time for income seekers to snap up shares in this retail champion.
It seems like the stock will support a dividend yield of 3.3% this year, rising to 3.7% in 2021. The payout is covered twice by earnings per share, which suggests there’s plenty of room for further growth in the years ahead as well. On top of the company’s existing income credentials, there could also be the potential for special dividends.
Tesco has informed investors it’s seeking buyers for its Thai business. Because such a sale could potentially unlock billions of pounds in extra capital for the company, analysts believe management will return some of this money to shareholders as a one-off payout.
As a result, if you’re looking for income shares for your portfolio, Tesco deserves your attention. The stock already offers an attractive level of income, and it seems like investors could be in line for a sizeable exclusive distribution in the future.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Standard Chartered and Tesco. 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.