As the coronavirus outbreak has spread around the world, investors have rushed to sell the FTSE 100. This has thrown up some fantastic bargains for long-term investors.
As such, now could be an excellent time for buy-and-forget investors to start taking advantage of these opportunities.
FTSE 100 income
One FTSE 100 company that stands out as being on sale is pharmaceutical group GlaxoSmithKline (LSE: GSK). The global pandemic is unlikely to impact Glaxo in any significant way.
The company might see a decline in demand of some of its consumer pharmaceuticals, but the sales of higher-value products should remain robust. For example, the business is unlikely to see a significant drop in the demand for its HIV medication, vaccines production, or cancer treatments. This provides the business with a certain level of insulation against the current crisis.
Furthermore, in the long run, the demand for healthcare and pharmaceuticals is only going to increase. That implies the FTSE 100 income stock’s long-run growth potential is bright. Therefore, now could be the time to take advantage of the market’s short-term outlook and buy the business as a long-term investment.
After recent declines, the stock is trading at a price-to-earnings (P/E) ratio of 12.4. That’s below the company’s long-run average of around 15. In addition, the stock supports a dividend yield of 5.6%. The distribution is covered 1.5 times by earnings per share. This suggests even if earnings fall a third, the business can still maintain its dividend.
Another FTSE 100 dividend stock that looks attractive after recent declines is AstraZeneca (LSE: AZN). Astra has similar defensive qualities to Glaxo. The company is one of the world’s largest pharmaceutical businesses, producing everything from cancer drugs to blood pressure medication.
These aren’t the sort of medications that patients can stop overnight, which suggests the firm’s sales revenue is unlikely to decline significantly.
Astra has also been investing heavily in new treatments, primarily in the field of oncology, over the past few years. As these new treatments come to market, analysts believe the company’s revenue will grow around 25% by 2021.
This sales growth, analysts believe, should translate into earnings per share of $5.12 by 2021. That puts the stock on a P/E of 15.2. This multiple is a bit higher than Glaxo’s but, considering Astra’s growth rate, it looks as if the business deserves this premium.
As well as its growth potential, this FTSE 100 stalwart also offers a dividend yield of 3.6%. With the payout covered 1.8 times by earnings, it seems as if management has plenty of headroom to increase the distribution further in the years ahead.
With this being the case, if you’re looking for FTSE 100 bargains in the current environment, Glaxo and Astra appear to offer defensive income streams, as well as long-term growth potential at an attractive price.
It’s ugly out there…
The threat posed by the coronavirus outbreak has spooked global markets, sending stock prices reeling.
And with the Covid-19 virus now beginning to spread beyond of China and Italy, it seems very likely that the bull market we’ve enjoyed over the past decade could finally be coming to an end.
Against such a backdrop of market worry, it’s little wonder that many investors are starting to panic. (After all, nobody likes to see the value of their portfolio fall significantly in such a short space of time.)
Fortunately, The Motley Fool is here to help, and you don’t have to face this alone…
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Rupert Hargreaves owns no share mentioned. 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.