The FTSE 100’s recent market crash may have produced a number of buying opportunities for long-term investors. Even companies that have historically offered relatively solid financial performances are trading down on the price level at which they started 2020.
As such, now could be the right time to build a diverse range of undervalued FTSE 100 shares. They may not produce high returns over the short run due to a lack of clarity on the economy’s outlook, but they may offer growth prospects over the coming years as the stock market recovers.
SSE’s (LSE: SSE) recent trading update stated that the company is maintaining its dividend, despite an uncertain operating environment caused by coronavirus. Its 80p per share dividend is likely to prove popular among investors, since the stock currently yields 6.2% at a time when many of its FTSE 100 index peers are cancelling or withdrawing their dividends.
Although there are no guarantees that SSE will continue to pay its dividend during the current crisis due to the lack of clarity regarding the economic outlook, its business model may prove to be more resilient than many FTSE 100 stocks. This may allow it to pursue its dividend growth timetable over the next few years, thereby making it an increasingly attractive income investing opportunity.
With the SSE share price having fallen by around 13% since the start of the year, it appears to offer a margin of safety. Therefore, it may produce a relatively solid total return in the coming years that makes now the right time to buy a slice of it for the long run.
FTSE 100 retailer Morrisons
Another FTSE 100 share that could deliver improving performance after a decline so far in 2020 is Morrisons (LSE: MRW). Its shares are down by 6% since the start of the year, which is less than the wider index’s 17% drop over the same time period.
Morrisons recently reported that it is expanding its online offer to capitalise on rising demand for grocery deliveries. Although this has been an established trend over recent years that has seen an increasing demand for online shopping, the lockdown could cause an increasing number of consumers to purchase their groceries online in future. Therefore, the company’s decision to broaden its click-and-collect service to 280 stores by mid-June and to double the availability of its online delivery slots could help to improve its financial prospects.
Clearly, weak consumer confidence present across the UK following the lockdown could cause challenging operating conditions for retailers such as Morrisons. However, with what appears to be a sound strategy and a growing presence in the wholesale segment, its long-term profit growth potential appears to be relatively attractive. As such, now could be the right time to buy the stock after its recent decline.
Peter Stephens owns shares of Morrisons and SSE. The Motley Fool UK has no position in any of the shares mentioned. 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.