The share prices of many UK businesses spiked higher following December’s general election. Some of these are now starting to drift back down towards the levels they were trading at before the election. Is this a buying opportunity?
Today I want to look at two UK dividend stocks from my buy list, plus an overseas firm that’s out of favour with UK investors at the moment.
The picture is improving
Over the last few years my television viewing has shifted almost completely from broadcast television to on-demand. I’ve also gotten used to being able to watch box sets at my own pace.
ITV (LSE: ITV) is having to change its business model to keep pace with these changes. Producing its own programmes and selling adverts is no longer enough.
Chief executive Carolyn McCall is continuing to expand the ITV Studios business, which produces content for ITV and other broadcasters. She’s also working hard to attract more on-demand viewers and find new ways of extracting cash from them.
Progress so far seems reasonable to me. Revenue from digital services is growing and the Studios business now accounts for around one-third of profits.
ITV now trades on about 10 times forecast earnings and offers a dividend yield of 5.8%. I think that looks cheap for a business with an operating margin of about 18%. I’d keep buying.
A tough choice
Mining and commodity trading group Glencore (LSE: GLEN) won’t win any awards from environmental campaigners. The firm’s coal business is starting to look a bit embarrassing. Ongoing investigations into alleged bribery aren’t a good look, either.
However, if you look beneath the surface I think this group has a number of attractions. For one, it’s a major producer of copper and cobalt. These commodities are in growing demand for electric vehicles.
The group’s trading business is also a reliable performer. Management expect this business to generate $2.2bn to $3.2bn of operating profit each year, even during weaker market conditions.
One final attraction is that long-time boss Ivan Glasenberg is expected to retire soon. My feeling is that the group needs a new generation of management who will be more sensitive to environmental, social, and governance issues.
Glencore shares look battered. But the outlook is improving for 2020 and the shares offer a yield of around 5.5%, backed by strong cash generation. I see GLEN stock as a contrarian buy for risk-tolerant investors.
Income on home turf
My final pick is FTSE 100 landlord British Land (LSE: BLND). This REIT has a portfolio of retail and office property in London and near major UK population hubs. Although bricks-and-mortar shops are continuing to struggle against the growth of online shopping, physical retail isn’t dead.
Footfall in the group’s shopping centres was flat during the six months to 30 September. According to British Land, retailers’ like-for-like sales actually rose during the period.
Overall occupancy is about 97%, suggesting that there are very few empty units in the group’s shopping centres and office blocks. Debt levels look sensible to me, too.
At current levels, the shares offer a dividend yield of about 5.6% and trade at a 30% discount to their book value. I don’t see too much risk in buying at this level and have added the shares to my own portfolio.
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Roland Head owns shares of British Land Co and ITV. The Motley Fool UK has recommended British Land Co and ITV. 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.