CRH shares spiked again on Tuesday (30 September) after the company unveiled its financial targets through to 2030. They impressed the market, with RBC Capital analyst Anthony Codling noting that, unlike some of its US and global peers, Tuesday’s guidance represents an upgrade to current medium-term consensus in terms of revenue growth, EBITDA margin, and free cashflow conversion

Let’s drill down into the numbers, and consider why — even though tough conditions persist in key markets — the FTSE company is worth serious consideration right now.

Robust outlook

CRH certainly isn’t shy about discussing its strengths. It proclaims itself to be “the global leader in building materials and the number one infrastructure play in North America“, and yesterday said that between 2026 and 2030 it expects to deliver:

• average annual revenue growth of between 7% and 9%
• an adjusted EBITDA margin of 22%-24% by the end of the period
• average annual adjusted free cash flow conversion of above 100%

Those robust predictions were also above what City estimates had largely been expecting. According to research platform Visible Alpha, annual growth of 5.6% had been expected by brokers over the five years, alongside an adjusted EBITDA margin of 20.4%-21.2%, and average annual adjusted free cash flow around 80%.

Adding an extra sweetener, CRH said it expects to record $40bn of financial capacity — which is cash and debt financing available after maintenance capex — through to 2030. That’s up from the $35bn it has tipped between 2024 and 2028.

Are CRH shares a buy?

Also on Tuesday, CRH affirmed its financial expectations for the current financial year. This includes adjusted EBITDA forecasts of $7.5bn to $7.7bn, up from $6.9bn in 2024.

All in all, then, the Dublin company’s outlook appears brighter than ever. But how much of this good news is already priced in?

Based on 2025’s predicted earnings, CRH’s share price commands a princely price-to-earnings (P/E) ratio of 20.4 times. To put that into perspective, the broader FTSE 100’s forward multiple sits way back around 12.5.

It’s also important to consider the risks the building materials supplier faces. Its operations are highly cyclical, leaving it vulnerable to worsening economic conditions and especially in the US, its core market.

A top FTSE 100 stock

That said, I still think CRH a top blue-chip share to consider given its excellent long-term returns. These have averaged 18% per year since 2015.

Past performance isn’t always a reliable guide to future returns. But there’s a lot I’m confident about here, including the firm’s ability to grow earnings and maintain margins in tough conditions, as Tuesday’s update illustrates.

Thanks to booming US infrastructure spending, CRH looks set for a decade of robust earnings growth. It has significant financial strength to fully maximise this opportunity, too, through additional M&A. Its latest move came in July with the $2.1bn acquisition of cement specialist Eco Material Technologies.

I think that strong balance sheet means investors can also reasonably expect more share buybacks and a steadily growing dividend.

CRH shares don’t come cheap. But I think the company is worth its premium valuation, and merits a serious look from investors today.

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Despite the fact that dividends are never guaranteed, here’s why I like these picks for juicy returns.

What they do

LondonMetric is set up as a real estate investment trust (REIT), meaning it makes money from property. The beauty of REITs is that they must return 90% of profits to shareholders.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

CRH is a construction supply business, including materials such as cement, asphalt, and other aggregates.

Taylor Wimpey, the second-largest residential property developer in the UK, with a wide presence, and favourable track record to boot.

The good stuff!

I’m a fan of LondonMetric’s diverse operations. It doesn’t have all its eggs in one basket, like many other REITs. Diversification is a great way to mitigate risk. Plus, it gives the business the flexibility to capitalise on trends. LondonMetric possesses many logistics facilities to capitalise on the current e-commerce boom, and is moving away from office space, which is decreasing in demand due to home working trends.

From a returns view, a dividend yield of 5.2% is attractive. For context, the FTSE 100 average is 3.9%.

CRH’s wide presence, as well as the potential for dividend growth is exciting. Demand for further infrastructure is linked to a rising global population. The demand for its products could soar, and boost earnings and returns. A prime example of this is CRH potentially capitalising on a huge infrastructure bill passed recently in the US, which is where the firm makes most of its money.

From a returns perspective, CRH shares yield close to 2% currently. However, I can see this growing over time.

Taylor Wimpey is in a prime position to benefit from the housing imbalance in the UK. Demand is currently outstripping supply. With its favourable market position and reputation, the business could find that better economic conditions could catapult the business to new heights. In turn, this could result in boosted earnings and returns.

At present, the shares offer a dividend yield of 6.2%. Plus, the shares look decent value for money on a price-to-earnings ratio of just 15.

Risks to consider

REITs use debt to fund growth, and buy new assets to make money from. LondonMetric may find this harder at present due to higher interest rates as debt is costlier to service and pay down. This may have an impact on future returns.

For CRH, economic shocks are a worry. When these occur, construction projects can grind to a halt. This could result in earnings and returns being impacted. This is a cyclical risk I’ll keep an eye on.

It’s been a tough time for house builders due to higher costs related to inflation damaging completion numbers and sales. Higher costs take a bite out of profits, which underpin returns. Plus, buyers have been deterred by higher interest rates, which translate into higher mortgages. Despite inflation coming down, and a new government in place making promises to address the housing crisis, we’re not out of the woods yet. A continued murky economic picture could have a detrimental impact on earnings and returns too.

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These Footsie companies have all been named as ‘buys’ recently by analysts. What’s more, their share prices are tipped to rise as much as 37% in the next year.

Here’s what you need to know about them.

B&M European Value Retail (LSE:BME)

Hot competition in the grocery sector poses a danger to retailer B&M European Value Retail. Of particular threat to the low-cost specialist is the rapid expansion of discounters Aldi and Lidl.

But B&M is no slouch itself when it comes to rapid expansion. It plans to eventually have 1,200 stores in operation, up significantly from 741 today.

This will give it increased scope to capitalise on the growing value retail market and deliver strong profits growth. GlobalData researchers expect this market to grow 4% a year between 2022 and 2027.

Currently, 18 analysts have ratings on the retailer. Of these, 12 have a ‘buy’ rating on the business; four consider it a ‘hold’; while just two have slapped a ‘sell’ on it.

The consensus among brokers is that B&M’s share price has significant growth potential, too. They expect it to rise to 593.3p per share from current levels of 493.4p.

This represents a massive 31% premium from current prices.

CRH (LSE:CRH)

CRH is the largest supplier of construction products in North America, selling materials like asphalt, cement, and aggregates. It also has significant operations in Europe.

These may not be the most exciting products out there. But as infrastructure investment increases and urbanisation continues, demand for them looks set to increase strongly over the long term.

This makes CRH an attractive growth share, in my opinion, even though sales may weaken during weaker economic periods.

Of the 10 analysts with ratings on the business, nine consider it to be a ‘buy,’ while one have put a ‘sell’ rating on it.

What’s more, the number crunchers think CRH’s share price has even greater share price potential than B&M in the near term. They think it will climb from current levels of £57.32 to £78.60 in the next year.

This would represent a capital gain of around 37%.

Legal & General Group (LSE:LGEN)

I think Legal & General could be one of the best UK shares to capitalise on the growing ‘silver economy.’ As the global population rapidly ages, demand for retirement, wealth, and protection products should also march higher.

I like Legal & General because it has a wider geographic footprint than many of its blue-chip rivals, too. I’m especially excited by its opportunities in the gigantic pension risk transfer (PRT) markets in the US and Canada.

Earnings may suffer if interest rates remain around current highs. Yet I believe this threat is baked into the company’s low price-to-earnings (P/E) ratio of 9.5 times.

18 brokers have ratings on the company today. And the view of it is more mixed compared with those other two FTSE 100 shares.

Seven analysts reckon it’s a ‘buy,’ while six consider it a ‘hold’. That said, only one expects it to underperform.

As a result, Legal & General’s share price is also tipped to rise strongly in the next year. The consensus target sits at 267.4p, up substantially from the firm’s current price of 234.2p.

In fact, that’s an attractive 14% premium from today’s level.

The post 3 excellent FTSE 100 blue-chip shares that could supercharge investment portfolios! appeared first on The Motley Fool UK.

Alphabet

What it does: Alphabet is the operator of Google and a leading innovator in advanced technology, including AI.

By Oliver Rodzianko. I recently increased my Alphabet (NASDAQ:GOOGL) holdings by 33%. I consider the firm to have an immense moat in online search and data. Additionally, I think its AI is going to be highly valuable over the long term.

Even considering the recent troubles with its Gemini model, where users have experienced counterfactual responses, the share price is too good for me to ignore.

Usually, technology firms trade at a valuation which is way higher than Google’s. I’m pleasantly surprised by this, and I consider the shares 20% undervalued.

Also, Alphabet is one of billionaire Bill Ackman’s biggest holdings. So, I’m pretty confident the investment is going to perform well over the long term.

However, I think the organisation could use a little more internal efficiency. Hopefully, its further integration of AI in the workplace will drive this, and the returns could be even better in the future than they have in the recent past.

Oliver Rodzianko owns shares in Alphabet.

Apple

What it does: Apple is a technology company that specialises in smartphones, computers, laptops, and tablets. 

By Edward Sheldon, CFA. Apple (NASDAQ:AAPL) shares have pulled back recently and I have been buying a few more of them for my portfolio. 

I’m not expecting Apple’s share price to surge in the near term. At the moment, the company is not generating a lot of revenue growth. Meanwhile, its valuation still looks quite full (the price-to-earnings ratio is about 24).  

However, taking a longer-term view, I believe the shares still have a lot of potential. Around the world, Apple has around 1.5bn iPhone users. So, just wait until the company launches an artificial intelligence-enabled smartphone. I reckon this could propel revenues, and the share price, much higher. 

I’ll point out that competition from rivals does present a risk, especially in China, where other brands such as Huawei and Oppo are having a lot of success. 

I’m comfortable with this risk though. I’m backing Apple to fend off the competition and remain a top player in the global smartphone market. 

Edward Sheldon owns shares in Apple.

Apple

What it does: Apple is a world leader in the consumer electronics industry. It’s best known for its production of the iPhone and iMac.

By Charlie Keough. Apple (NASDAQ: AAPL) was one of the first stocks that I ever purchased. Over the years, I’ve gradually been adding to my position.

I most recently bought some more shares for a few reasons. Firstly, I remain bullish on what Apple can do in the artificial intelligence space in the years to come.

It also recently upped its dividend payout to $0.25 per share, a 4% rise. Alongside that, it announced an additional share buyback programme worth $110bn, the largest ever buyback authorisation by a US company.

Flagging sales continue to be the biggest threat to the business. In China, which represented nearly 20% of Apple’s sales last year, revenues have taken a hit as spending has hit the brakes.

Nevertheless, Warren Buffett recently said the iPhone was potentially “the greatest product, of all time”. It’s for reasons like that I plan to hold the stock for a very long time.

Charlie Keough owns shares in Apple.

CRH

What it does: CRH is the largest supplier of building materials like asphalt and cement in North America and Europe.

By Royston Wild. Shares in CRH (LSE:CRH) have trended lower as expectations of interest rate cuts in the US have dwindled.

The building products supplier sources three-quarters of earnings from the States. So muted action from the Federal Reserve in the coming months could be a big drag on the company.

Yet this hasn’t dulled my appetite for the FTSE 100 stock. CRH — which supplies a wide range of building products in 29 countries — has significant long-term growth potential.

CRH should benefit from phenomena like rising urbanisation and decarbonisation across its global markets, and soaring infrastructure spending in the US.

Ongoing M&A activity gives it an excellent opportunity to capitalise on these trends, too. It made 22 fresh acquisitions in 2023 alone.

City analysts believe CRH’s share price will rebound strongly in the short term, too. The company has an average 12-month price target of £74.60 based on 19 brokers’ forecasts, up markedly from current levels.

Royston Wild owns shares in CRH.

Serco

What it does: FTSE 250 member Serco is an outsourcing group providing services in areas such as immigration, justice, healthcare and defence.

By Roland Head. Outsourcing group Serco (LSE: SRP) says it won £4.6bn of new business last year, supporting a year-end order book of £13.6bn.

The outlook for new contract wins also seems to be strong. Management says that Serco’s pipeline of potential new work rose by 28% to £10.1bn during the second half of last year – the highest level in a decade.

My analysis of Serco’s 2023 accounts suggests the group is on a solid financial footing at the moment. Debt levels are down and last year’s numbers show good cash generation, with improved profit margins.

The main risk I can see is that Serco could run into problems with a major contract, incurring big losses. I don’t see any sign of this at the moment, though.

Indeed, Serco shares look decent value to me on 12 times earnings. I think they could have further to go, and recently added them to my portfolio.

Roland Head owns shares in Serco.

TSMC

What it does: Taiwan Semiconductor Manufacturing Company (TSMC) is the world’s largest contract chip manufacturer.    

By Ben McPoland. I recently added to my holding in TSMC (NYSE: TSM). Unlike rivals Intel and Samsung, it doesn’t design its own chips. Instead, it just manufactures them for others, including tech giants like Tesla, Nvidia and Apple.

This means it is agnostic as to who wins the AI race. If this technology is really going to transform every industry long term, then TSMC should certainly benefit.

In Q1, revenue grew 13% year on year to $18.8bn, while its net profit margin was an incredible 38%. The firm’s CEO said: “Almost all the AI innovators are working with TSMC to address the insatiable AI-related demand for energy-efficient computing power.”

Now, the firm is still seeing weaker demand in smartphones and electric vehicles. So one risk here is a slowdown in the AI boom, which could harm projected revenue growth.

However, TSMC remains a key enabler of the whole digital revolution. I don’t expect that to change. Meanwhile, the stock looks very reasonably priced at 20 times forecast earnings.

Ben McPoland owns shares in Tesla and TSMC. 

The post 5 stocks that Fools have been buying! appeared first on The Motley Fool UK.

Apple 

What it does: Apple is the world’s largest consumer technology company, with it being most renowned for the iPhone.  

By Charlie Keough. I already own shares in Apple (NASDAQ: AAPL), but given the stock’s recent decline, I’ve decided to buy more.  

Following the news that Chinese government workers have been banned from using iPhones, the Apple share price slid. However, I saw this as an opportunity. 

Warren Buffett once said to invest in companies you understand. And with Apple and its billions of users, the company’s core business model is pretty simple to follow. With that, it’s no surprise the American powerhouse makes up the majority share of Buffett’s Berkshire Hathaway portfolio. 

What draws me to Apple is the focus it has begun to place on its noncore products, including paid subscriptions and gadgets such as its VR headset.  

I also like Apple’s dividend. And while it’s not massive, it’s most certainly consistent.  

It’ll face headwinds in the weeks and months ahead including the potential for further Chinese pressure alongside ongoing inflationary concerns. But given the strength of the brand, I see it coming through the other side. With that, I saw the decline as a chance to buy.  

Charlie Keough owns shares in Apple.  

Barclays

What it does: Barclays is a UK-focused universal bank with commercial, investment and retail operations. 

By Dr James Fox.

Barclays (LSE:BARC) isn’t among the sexiest picks on the FTSE 100, but it makes sense to me. The banking stock trades at just 5.3 times forward earnings and 0.42 times book value, inferring a considerable discount to its net asset value as well as the sector. 

The downward pressure on banking stocks has largely been engendered by the continued rise in interest rates. Contrary to popular opinion, the BoE’s base rate has now extended far above optimal levels. 

However, it’s entirely possible that we’ve seen the last rate increase after Andrew Bailey’s commentary last week. While we’re yet to see the full impact of the last 18 months of monetary tightening – there could be more pain to come – an end to the cycle would likely be very positive for lenders amid concerns about a slew of defaults. 

So, with a normalising economic climate, and phenomenal 58% discount to its tangible net asset value, I’ve been topping up on Barclays shares.

James Fox owns shares in Barclays.

CRH

What it does: CRH produces cement, aggregates and other building materials. The group generates around 75% of its profits in North America.

By Roland Head. FTSE 100-listed CRH (LSE: CRH) is trading strongly at the moment. Pre-tax profit rose by 25% to $1.5bn during the first half of 2023.

Chief executive Albert Manifold expects “significant increases” in US government spending to drive further growth during the second half of this year.

Against this backdrop, the stock’s forecast price-to-earnings ratio of 12 doesn’t seem too expensive to me.

The other reason I invested was a little more speculative. CRH is about to move its primary stock market listing from London to New York.

My research suggests CRH looks a little cheaper than its US-listed rivals. I reckon the shares could benefit from a higher valuation once the US market gets to know this £30bn business.

Of course, I could be wrong. Construction is cyclical and the US economy could slow, leading to a profit slump.

Time will tell. But right now, I think CRH looks interesting.

Roland Head owns shares in CRH.

Kraft Heinz

What it does: Kraft Heinz is multinational food company. Its products include Phildelphia, HP Sauce, and Capri Sun

By Stephen Wright. Shares in Kraft Heinz (NASDAQ:KHC) have been at their 52-week low lately with a dividend yield of around 4.5%. I’ve been using the opportunity to load up in my portfolio.

The business doesn’t really go through the cyclical ups and downs that other industries face. As a result, I think it’s important to seize opportunities when they present themselves.

Inflation is often a risk in this industry and Kraft Heinz isn’t immune to this threat. But the company has a number of advantages when it comes to dealing with cost increases.

First, the company’s size of the company’s operations allow it to explit economies of scale. Second, the strength of its brands help it to pass costs through to consumers.

Essentially, I see Kraft Heinz as a company that has some long-term competitive advantages. These make the short-term weakness in the share price look like a buying opportunity to me.

Stephen Wright owns shares in Kraft Heinz.

Legal & General Group  

What it does: Legal & General Group provides wealth, protection and retirement products chiefly in Europe and North America.

By Royston Wild. I first bought Legal & General (LSE:LGEN) stock for my portfolio in the spring. And I added to my position in August after half-year trading numbers sent its share price falling again.

Okay, news of a 2% fall in operating profit over the period wasn’t ideal. Demand for financial services is coming under pressure as the cost-of-living crisis endures. 

Yet the long-term outlook for the FTSE 100 stock remains super bright, in my opinion. And as someone who buys shares to hold for several years at least, I think the company could deliver excellent returns in that time. 

Uptake of retirement and wealth products is tipped to surge over the next decade as people take post-work financial planning more seriously. Pleasingly, Legal & General’s strong brand power should allow it to make the most of this opportunity. 

Today its shares trade on a forward price-to-earnings (P/E) ratio of 9.3 times. They also carry a 9.5% dividend yield. I think it’s a brilliant value stock to buy at current prices. 

Royston Wild owns shares in Legal & General.

London Stock Exchange Group

What it does: London Stock Exchange Group is a diversified financial markets infrastructure and data business that operates through three divisions: Data & Analytics, Capital Markets, and Post Trade.

By Edward Sheldon, CFA. London Stock Exchange Group (LSE: LSEG) is a high-quality company, in my view. And I think it’s well placed to generate solid growth in the years ahead.

In its H1 results, which were published in August, the company advised that it has made a “strong start” to its recent partnership with tech giant Microsoft. It noted that its customers will begin to see the benefits next year.

It also said that it is harnessing the power of artificial intelligence (AI) technologies across the business. “Both LSEG and our customers are well positioned to benefit from the rapid developments in AI technologies which will enhance the value of our data, improve customer workflow and drive ongoing efficiencies in our own business,” wrote management in the H1 report.

But it’s not just the growth potential that attracts me here. I also like the capital returns. For H1, the group declared a dividend of 35.7p per share, up 12.6% year on year. Additionally, it said that it expects to buy back up to £750m worth of shares before April 2024.

Now, the valuation here is well above the market average. This adds risk.

Overall, however, I see the long-term risk/reward setup as attractive.

Edward Sheldon owns shares in London Stock Exchange Group and Microsoft.

MongoDB

What it does: MongoDB is a document-oriented cloud database-as-a-service provider that powers big data applications worldwide.

By Zaven Boyrazian. Behind almost every modern data-driven technology lies a database. And while companies like Oracle have long dominated this space, the level of competition is heating up. And MongoDB (NASDAQ:MDB) has been making waves.

The firm provides cloud database storage solutions that use the document-oriented approach rather than the traditional relational table method offered by Oracle. Without going too far into the weeds, this alternative architecture enables developers to read and write unstructured data exceptionally quickly.

That’s critical for technologies like IoT, 5G, and machine learning, where low latency is an absolute must. So, it’s no surprise that demand is on the rise. In fact, the latest earnings report beat analyst expectations by more than double!

Of course, no investment is without risk. Stealing market share from long-established rivals isn’t cheap. And as an unprofitable enterprise, the level of volatility remains elevated even now that markets have started cooling down.

Nevertheless, with losses shrinking, the long-term potential looks explosive in my eyes.

Zaven Boyrazian owns shares in MongoDB.

Smurfit Kappa Group

What it does: Smurfit Kappa Group specialises in manufacturing paper-based packaging and runs a network of paper, recycling and forestry operations, including its own paper mills. 

By Harvey Jones. I’ve been on a buying spree this summer filling up a self-invested personal pension (SIPP) and one of the stocks that excited me most was Dublin-based packaging group Smurfit Kappa Group (LSE: SKG).

I thought it was a real dark horse, a lesser-known FTSE 100 stock with terrific growth prospects once the cost-of-living crisis eased and e-commerce resumed in its full corrugated paper glory. It looked cheap, too, trading at around seven times earnings and yielding roughly 4.5%.

Smurfit dipped 10% shortly after I bought it on 10 June and I kicked myself for failing to average down after the stock rebounded just as sharply.

Now I’m glad I didn’t, because the Smurfit Kappa share prices has crashed almost 17% on news that it’s combining with US rival WestRock to make the world’s largest listed packing group worth almost £16bn. It will seek a New York listing, with a standard listing in London.

CEO Tony Smurfit has been working out how to crack the US for years and reckons this will boost earnings per share by more than 20% in the first full year.

Unfortunately, markets disagree. The merger may incur hefty upfront costs before we see those efficiency savings and many fear Smurfit has overpaid at $43.51 per share, a whopping 36% premium to WestRock’s closing price.

I hadn’t banked on these shenanigans when buying the stock but I’m not going to sell and crystallise what I hope is only a short-term loss. I will hold on and hope that Tony Smurfit’s US dream is worth the high price he paid.

Harvey Jones owns shares in Smurfit Kappa

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I’m a big fan of the company myself. In fact I bought it for my Stocks and Shares ISA back in 2021. It is currently the fifth-largest holding in my investment portfolio.

City analysts are also positive on the company’s investment prospects. Of the 21 brokers with ratings on the company, 19 rate it as a ‘buy.’ One has ranked it as a ‘hold’ while another has slapped a ‘sell’ on it, according to stock screener Trading View.

The broad view among analysts is that the CRH share price will rise another 10.4% over the next year, bursting through £50 per share.

Of course brokers don’t always get it right. Signs of a prolonged downturn in the global economy could derail mine and the City’s bullish view. But here is why I think the business remains a top buy right now.

Industry giant

CRH is one of the world’s largest suppliers of products to the construction industry. These include basic materials like cement, asphalt, lime, and aggregates. It also manufactures architectural, infrastructure, and utilities products that make the building process easier and more time-efficient for companies.

The FTSE company does this across a wide geographic footprint. A long-running commitment to growing through acquisitions means it has operations in almost 30 countries across North America, Europe, and Asia.

CRH’s colossal scale gives it obvious advantages. It sources 75% of profits from North America. But its broad territorial footprint reduces risk. If trading conditions worsen in one or two regions the impact on the bottom line can be reduced.

It also gives the company the chance to exploit significant regional opportunities. Rapid urbanisation in emerging markets should boost long-term demand for its products. So should large programmes of infrastructure upgrades in the US and Europe.

Too cheap to miss

CRH has proven that it has what it takes to lead in these marketplaces. In fact it continues to perform strongly even as conditions in its end markets cool.

Sales rose 22% in the first quarter thanks to what it said was “good pricing progress, resilient underlying demand, the positive contribution from prior year acquisitions and the continued delivery of our integrated solutions strategy”.

The company’s excellent cash generation gives it further room to keep growing revenues through acquisitions. CRH has spent €200m to pick up four businesses in the year to date. It also means the company should also keep returning lots of cash to its investors (it’s currently in the middle of a €3bn share repurchase programme).

The CRH share price currently trades on a forward price-to-earnings (P/E) ratio of 14.2 times. This is just ahead of an average of 14 times for FTSE 100 shares. And I think this represents excellent value given its exceptional profits outlook.

The post CRH’s share price sits at record highs! Here’s why the FTSE stock is a top buy appeared first on The Motley Fool UK.

In the past 12 months, investors had an opportunity to buy at a more attractive valuation as the shares fell back a bit. But the price has recovered from its brief 2022 weakness now.

Even after such a solid performance, the global building materials business doesn’t look so highly valued. Forecasts indicate a price-to-earnings (P/E) ratio of around 12, which seems undemanding.

Progressive dividend

There’s a dividend yield of 3%. That’s not the biggest, but it’s reasonable and progressive. And in recent years, it’s been strongly covered by earnings. Add it to the past five years of share price growth, and that’s a very profitable total return.

The company itself seems to see its shares as undervalued. It’s been buying them back since 2018, and in December announced the latest continuation. At the time, the total had reached $4.1bn, and CRH extended it by up to a further $300m by the end of March 2023.

Returning cash that way gives shareholders a balance between dividend cash and share price appreciation, which will hold different attractions for different investors.

Results

Full-year results are due on 2 March. If they live up to expectations, they should deliver. In a November update, chief executive Albert Manifold said “Looking ahead to the remainder of the year we expect to deliver full-year EBITDA of approximately $5.5 billion representing another year of progress for the group”.

That would be nicely ahead of the $5bn recorded in 2021, and it should come with an improving EBITDA margin.

In the first nine months, CRH invested $3bn in “solutions-focused acquisitions“. More recently, in December, the firm announced “CRH Ventures, its venture capital unit, which will support the development of new technologies and innovative solutions to meet the increasingly complex needs of customers and evolving trends in construction“.

Flexible

So, it’s a global company generating strong cash flow. Some of it goes towards a conservative dividend programme. Some goes to buy back shares. And some is for reinvesting in acquisitions and new technology. Is there anything I don’t like here?

Well, yes, I don’t like debt. The firm expects to be carrying net debt of around $5.2bn by year-end. That should represent a net debt/EBITDA multiple of only around 1 times, which doesn’t seem too stretching. But I can’t help thinking that some of the $4.1bn already used for share buybacks might have been better used for paying down a bit of it.

Economy

The other risk factor I see is the economy, and in particular the current squeeze on the housing and general construction business. Is there sufficient safety margin in the current valuation to handle any lengthy downturn? I’m not sure there is.

But I reckon investors looking for a combination of income and capital growth might benefit from doing some research here.

The post The CRH share price is climbing. Is it too late to buy? appeared first on The Motley Fool UK.

All eight analysts who follow CRH named it a buy, the only stock on the entire FTSE 100 to get a 100% rating.

Analysts love these shares

This is a stock on the up, climbing 19.04% over the past three months, although the shares trade just 1.66% higher than a year ago. I’m surprised by its recent burst of speed, given the troubles afflicting the property sector. 

Management has defied the wider downturn, reporting resilient demand, strong pricing, and growing sales. Costs have been volatile, but CRH still expects to deliver full-year EBITDA earnings of $5.5bn, up from $5bn in 2021.

I am also impressed by its forecast dividend yield of 3.7%, which is notably higher than this year’s 2.7%. Better still, the payout is covered 2.7 times by earnings, which offers the prospects of further progression.

Management has also been rewarding shareholders through an ongoing buyback programme. This now totals a thumping $4.1bn since May 2018, further boosting returns.

CRH also has strong free cash conversion, forecast profit margins of 12%, and a solid 13.6% return on capital employed (ROCE). Its net debt is a concern, though. It stood at $9.98bn last June, although its $6.83bn cash reserve shrinks that to $3.16bn.

Given all the good news, I expected a towering valuation but the current price-to-earnings ratio is hardly demanding at 14. I agree with those eight City analysts. CRH looks like a buy to me.

I was surprised to see Vodafone was the second-most favoured stock among analysts. Of the 25 who took a view on the company, a staggering 23 said buy, with only two against (both of whom called it a hold).

High income, low expectations

I looked at Vodafone in December, and wasn’t hugely impressed. Its stock is down 26.7% in the last year, and 58.31% over five years. Today’s share price of 93.12 is a fraction of its March 2000 tech boom peak of 548.2p.

To make up for the lack of growth, Vodafone has lavished loyal shareholders with dividends. Today it yields a thumping 8.4%. That is one of the highest on the FTSE 100, although cover is wafer thin at just 1.2.

It’s cheap, unsurprisingly, trading at 9.7 times earnings. That may explain its appeal to City analysts. Some may be impressed that UAE telecoms company e&, formerly Etisalat, has upped its stake in Vodafone to 12%. I’m not. I never buy on takeover talk.

Personally, I remain wary. Vodafone is a sprawling beast that seems to be struggling across a number of markets. That sky-high yield doesn’t look safe to me, either. I suspect it will be cut again and I’ll take a fresh look afterwards. If I can scrape together the cash in February, I would rather buy CRH.

The post Analysts love these 2 FTSE 100 stocks. Should I buy them in February? appeared first on The Motley Fool UK.

I have a few core requirements that should allow me to find a productive new holding from a dividend perspective. I want a dividend that has been paid consistently for many years. Furthermore, I want this yield to increase in the next financial year. I also want a track record of year on year growth. This is useful for identifying the higher-quality income shares within an index.

Smurfit Kappa Group

The first company on my list is Smurfit Kappa Group (LSE: SKG). A manufacturer of paper-based packing products operating in the UK, Europe and America. The stock has performed well for the last few years. However, 2022 has been challenging, with the price falling almost 22%. Despite this, the underlying fundamentals are attractive, with solid forecast earnings growth and reasonable profit margins.

However, the dividend potential has grabbed my attention most. Smurfit has a yield of 3.5%, and has paid out consistently for 11 years. The payout has also grown for 10 years. Its yield is forecast to grow by 14.5% to 4% next year, significantly above its three-year average growth rate. Also, its yield should be covered by earnings per share (EPS) as much as 2.7 times.

On the negative side, it has slightly more debt than I am happy with. Its debt is currently sat at 40% of its market capitalisation. And despite the share price fall in 2022, its price-to-earnings (P/E) ratio is almost 14. This could still fall further before being undervalued.

Nonetheless, I still believe the company represents an excellent opportunity for generating income. I am keen to add it to my portfolio in 2023.

CRH

The second company on my list is CRH (LSE: CRH), a global manufacturer of building products. After a solid performance over the last few years, the stock has struggled this year, down almost 14%. Yet its underlying fundamentals are solid. It high free cash conversion, reasonable profit margins and strong return on capital employed (ROCE).

Its dividend potential is also appealing with a current yield of 3.1%. This has been paid consistently for the last 29 years and has grown for the previous six. Furthermore, it is forecast to grow by over 14% in 2023. It would have comfortable dividend cover of 2.4 in 2023.

Once again though, its current debt level of almost 41% of market capitalisation could pressure future dividends if earnings decline. I am likely to wait until the share price begins to stabilise before buying as recent increased volatility could lead mean further falls to come.

However, I believe CRH presents an excellent income opportunity for my 2023 portfolio. So I will probably add it to my portfolio in the New Year

The post 2 stocks I’d buy in 2023 for great passive income appeared first on The Motley Fool UK.

Here are three dirt-cheap UK shares I’d buy with £5,000 today.

Airtel Africa

As a long-term investor, I’m tempted to snap up Airtel Africa (LSE: AAF) shares for my portfolio. I think recent heavy share price weakness represents an attractive dip buying opportunity for me.

Today, the telecoms titan trades on a forward price-to-earnings (P/E) ratio of just 7.7 times. It also carries a 4.1% dividend yield, beating the FTSE 100 average of 3.9%.

Demand for telecommunications and financial services is soaring in Africa. This reflects low product penetration rates and leaping wealth levels on the continent.

It’s my belief that Airtel should generate terrific profits growth on the back of this. It is Africa’s second-largest telecoms company with operations in 14 countries. It is also rapidly expanding its mobile money business and recently launched its services in Nigeria.

Airtel grew its customer base almost 10% between April and September, to 134.7m. Revenues and EBITDA rose 13% and 14% respectively during the period. I’d buy the business even though adverse currency markets pose a threat to future earnings.

CRH

Building materials supplier CRH (LSE: CRH) faces massive uncertainty as the global economy cools. It could endure a sharp fall in earnings if construction activity flatlines.

But I’m tempted to buy the FTSE 100 share at current prices. Today, it trades on a forward P/E ratio of just 9.9 times.

Disclosure time. I already own CRH shares in my Stocks and Shares ISA. I bought it because I think its share price will soar over the next decade as construction activity takes off in developed and emerging markets.

The business sells a wide range of products including concrete, cement and asphalt all across the world. I’m expecting demand for these materials to grow strongly as infrastructure is updated in the West and urbanisation rates grow in developing nations.

A handy 3.7% dividend yield adds an extra sweetener to the company’s investment case.

WPP

Advertising agency WPP (LSE: WPP) could be considered particularly risky today. This is because marketing budgets are one of the first things to be slashed by companies when times get tough.

But I’d still buy the FTSE 100 firm as its transformation programme continues to impress. Heavy investment in areas like digital could provide the spark for exceptional long-term growth.

I also believe the market may be overly pessimistic over WPP’s near-term earnings prospects, meaning its heavy share price fall in 2022 might also be unwarranted.

As analyst Derren Nathan of Hargreaves Lansdown commented: “The breadth of value-add services that allows it to win multi-billion dollar remits from the likes of Coca Cola [make it] more resilient than mere vendors of advertising space.”

Today, the company trades on a forward P/E ratio of just 8.6 times. It also carries a market-beating 4.7% dividend yield.

The post 3 cheap FTSE 100 shares I’d buy with £5,000 to invest! appeared first on The Motley Fool UK.