Bitcoin’s volatile ride is too scary for me. But a combination of a generous dividend yield and the potential for share price growth is a great combination for any investor, I think. Of all the companies in the FTSE 100, I believe that insurer and investment manager Legal & General (LSE: LGEN) might have the best potential to both grow and provide investors with income.
On the up
One of the things that makes Legal & General such a good investment for me is the dividend. The yield currently stands at 5.3% — despite a sharp rise in the shares recently. That’s still well above the average for the FTSE 100, which is nearer to 4.3%. The growth in the dividend has been consistent in recent years, rising from 11.25p in 2014 to 16.42p in 2018.
Despite that growth, dividend cover hasn’t been squeezed. Earnings are comfortably covering the dividend payout, meaning there’s little chance that this generous dividend is likely to be cut any time soon. This cover is 1.8x which is far above a rate that might suggst a cut is on the cards, as has happened with other generous dividend payers like Vodafone.
The shares are on a P/E of only 10 – meaning they’re not that expensive, another positive for any investor looking to buy the rising share price.
The business has also been performing well financially. Back in August 2018, it reported operating profits of £1.2bn during the first half, up 12% year-on-year. Growth was driven by annuities in particular.
A focus on retirement and low-cost passive investment products has underpinned the growth at the group. I expect both trends to continue and see Legal & general doing very well for shareholders in the coming years.
A winner that could keep on winning
Pharmaceutical giant AstraZeneca (LSE: AZN) has a decent track record of growing its share price and delivering value for shareholders. Over the last five years, the shares have risen by 69%. Over the same timeframe, shares in one of its nearest competitors GlaxoSmithKline have gone up by just under 10%. That’s a quite phenomenal difference in performance.
AstraZeneca is a winner that I expect to keep on winning. The simple reason why is that it is very focused on the key area of oncology – far more so than GSK, which is now playing catch-up. The drugs pipeline is brimming with opportunities to develop new blockbuster drugs, following years of patent expiries, which have hit growth. The pharma giant currently has a whopping 164 projects in its pipeline, many focused on treatments for cancer.
This quality hasn’t gone unnoticed by investors. The shares now trade on a P/E of 29 and the share price rise has pushed the yield to under 3%. But sometimes you have to pay for quality. And with AstraZeneca, that is what you get. I expect the share price to keep pushing up.
Both of these companies have attractive business models and will benefit from ageing populations. I think the wider trends in society create a lot of opportunities for both Legal & General and AstraZeneca. They have a lot of potential to make investors far better off than investing in Bitcoin!
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Andy Ross owns shares in Legal & General and AstraZeneca. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended AstraZeneca. 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.