However, by acting quickly, even a 50-year-old still has time to build up a substantial £300,000 nest egg for retirement. Here’s how…

The three-step plan

Step one: open a Self-Invested Personal Pension (SIPP). This is a powerful retirement investing vehicle that provides tax relief from the government on all contributions – a critical advantage.

Step two: start putting aside some money each month from a paycheque and add it to a SIPP.

Step three: invest this money by drip feeding capital into high-quality shares and letting compounding work its magic.

That could be all investors need to do to aim for a £300k pension pot. And depending on when they plan to retire, this nest egg could end up being substantially larger.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Reaching £300k+

When someone adds £700 each month to their SIPP, the government automatically tops up this balance to £875 thanks to 20% income tax relief. And on average, the UK stock market has generated a historical annual return of around 8% over the long run.

If a 50-year-old plans on retiring at age 65, then investing £875 a month at an 8% rate for 15 years translates into a pension pot worth £302,783.

But if they’re willing to delay retirement by two years until age 67, that grows to £377,823. And for those able to keep contributing until age 70, compounding transforms this nest egg into just over half a million!

By comparison, the average pension pot size in the UK is around £145,900. And it just goes to show that with some consistent, prudent investing, it’s possible to unlock a massively superior retirement.

Earning 8%+ a year

Replicating the stock market’s performance is pretty straightforward with a low-cost index tracker. The only catch is that past performance doesn’t guarantee future returns. As such, a pension could end up being much smaller than expected when retirement comes knocking.

This is where stock picking offers a potential solution. By investing directly in high-quality companies, a SIPP can go on to generate vastly superior returns. Just ask anyone who’s been buying Howden Joinery (LSE:HWDN) shares over the last 15 years.

The fitted kitchen specialist has generated an average of 16.1% annually over the last 15 years, transforming a £875 monthly investment into £652,925. And looking ahead, the business looks set to continue thriving.

Even with higher interest rates subduing the home renovation market, Howden has continued to outmanoeuvre its industry rivals, stealing market share in the process, both in the UK and in France.

Prolonged weakness within the UK housing market is undeniably a handicap for growth. And inflation has only added to this pressure, resulting in fairly flat returns over the last five years, perfectly demonstrating the cyclical risk surrounding this business.

But looking out to the next 15 years, the company has plenty of runway to expand and reward shareholders. That’s why I’ve already added Howden to my pension portfolio.

The post How to kick off building a £300k pension pot starting at age 50 appeared first on The Motley Fool UK.

I’m thrilled too, as the FTSE 100 aircraft engine maker has pride of place in my Self-Invested Personal Pension (SIPP). But with a sizeable stake already, I’m not planning to buy more. I don’t want to get too top heavy on one stock. So I’m looking elsewhere for growth. And today there’s a blue-chip stock beating Rolls that I’ve hardly ever looked at. Its name?

Howden shares lead the FTSE 100 today

Howden Joinery Group (LSE: HWDN). Don’t laugh. The trade kitchen supplier doesn’t have the clout of Rolls-Royce. But its shares are leading the FTSE 100 this morning, up almost 8% in early trading. Sadly, its long-term record isn’t quite up to Rolls-Royce levels.

Even after today’s jump, the Howden share price is up just 4% over the last year and a modest 18% over five years. Investors have got dividends on top, but with a trailing yield of 1.78%, the total return hasn’t been transformative. By contrast, Rolls-Royce is up 113% over one year and 1,069% over five.

Today, the £5bn company reported group revenues up 4.1% to £2.42bn, with UK sales up 3.8% despite a difficult market. The cost-of-living squeeze and a slower housing market continue to weigh on kitchen demand. It’s doing better overseas. International revenue climbed 13.5% as Howden expands in France and the Republic of Ireland.

Gross margins improved by 110 basis points to 62.7%, as revenue growth and sourcing and manufacturing efficiencies offset cost inflation, delivering £41m of productivity savings. Pre-tax profit rose 5.1% to £344.9m. Howden has launched a new £100m share buyback and lifted its full-year dividend to 21.9p per share, up 3.3% from 21.2p.

Investors are happy today, but the longer-term picture is less certain. Howden said the UK kitchen market is likely to be broadly flat year on year, although this follows years of decline. It remains on track to meet 2026 forecasts.

Rolls-Royce shares are impossible to ignore

With a price-to-earnings ratio of 18.5, it isn’t obviously cheap. There’s a reason I’ve never switched onto Howden. It may be worth considering for patient long-term investors, but lacks excitement. Especially compared to Rolls-Royce, which has so much more in its locker. It’s guiding for £4bn-£4.2bn of underlying operating profit in 2026 and £3.6bn-£3.8bn of free cash flow.

While profit-takers may emerge in the days ahead, these are exceptionally strong results and the long-term outlook remains compelling. Erginbilgiç has raised the bar again, targeting free cash flow of £5bn-£5.3bn by 2028, and a return on capital of 23%-26%. It’s starting to look indispensable for UK investors with a long-term horizon but with a P/E nudging a staggering 65, any bad news will be punished.

Well done Rolls-Royce, and well done Howden too. But for my next big FTSE 100 growth play, I’ll look elsewhere. I think there are better opportunities out there now.

The post This overlooked UK growth stock just smashed Rolls-Royce – what have I missed? appeared first on The Motley Fool UK.

The good news is that by making some smart decisions today, investors can use tools like a Self-Invested Personal Pension (SIPP) to change that. And with enough time, drip feeding even as little as £500 a month can potentially unlock an income double what the government provides.

Here’s how.

Building stock market wealth

To double the 2026 State Pension, a portfolio needs to generate a passive income of £25,096. And following the 4% withdrawal rule, that means a SIPP needs to be worth just shy of £630,000.

Needless to say, that’s not something most people have lying around. But by leveraging the power of stock market compounding alongside the tax relief benefits of a SIPP, drip feeding £500 each month is all that’s needed, even for a 40-year-old starting from scratch today.

Let’s say an investor is in the 20% income tax bracket. Whenever £500 is dropped into a SIPP, the government automatically tops up this position to refund any income tax previously paid. And the result is that this £500 is transformed into £625 of investable capital.

Taking that £625 each month and investing it at the stock market’s average total return of 8% a year is what enables a portfolio to steadily compound over time.

After 26 years of consistent saving and investing, a pension pot will surpass the £630,000 threshold. And for stock pickers who manage to beat the market and average an 12% annualised return, this timeline shortens to around 20 years.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Finding market-beaters

Earning a 12% annualised return for two decades is no easy feat. But it’s not as impossible as most believe when investors learn to identify high-quality companies trading at discounted stock prices. And shareholders of Howden Joinery (LSE:HWDN) have learned this first-hand.

Over the last 20 years, the fitted kitchen specialist has leveraged its highly cash-generative business model to steadily expand and outmanoeuvre competitors. The result has been a staggering 1,613% total return since February 2006 – the equivalent of 15.3% a year!

To put that in perspective, anyone who was drip feeding £625 a month at this rate of return for the last two decades doesn’t have £630k today, but rather £976k.

Still worth considering?

Today, Howden’s now a much larger enterprise with a £4.6bn market-cap. Yet, the business continues to expand at an impressive rate.

With the UK housing market starting to heat back up, demand for its fitted kitchens and recently added bedrooms is starting to climb. And its market-dominant position alongside superb financials gives it a serious competitive edge against its rivals – something management is aiming to replicate internationally as well.

Of course, Howden’s still heavily dependent on the currently weak UK economy. And a slower-than-expected cyclical recovery of the housing sector could lead to lacklustre investment performance.

Nevertheless, with an excellent track record of operational execution and capital allocation, I think Howden Joinery is definitely worth a closer look, especially from investors seeking to build an income portfolio that beats the State Pension.

The post How much do you need in a SIPP to double the 2026 State Pension? appeared first on The Motley Fool UK.

Of course, getting started on an investing journey’s quite a daunting task. And when I first started, I made the classic mistake of chasing flashy, extremely risky penny stocks, mistaking luck for skill, and later losing almost all my starting capital.

Having learned the hard way, I now know that one of the best approaches for new ISA investors is focus on boring-but-durable, high-quality companies with large diversified revenues and reliable cash flows.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Luckily, the FTSE 100 index is filled with companies that meet these criteria, including…

1. AstraZeneca: defensive pharma

AstraZeneca‘s (LSE:AZN) one of the largest pharmaceutical and biotech groups in the world. And its size grants a lot of competitive and structural advantages.

The pharmaceutical industry’s among the most complex. Beyond having to navigate stringent regulations, drug development’s exceptionally expensive, takes decades and, to top things off, up to 95% of drug candidates never make it to market.

But for established players like AstraZeneca, this risk is significantly reduced through diversification.

Rather than being reliant on a single drug like most young biotechs, the firm has hundreds of products both in development and on the market. And since healthcare demand doesn’t wane during times of economic crisis, its cash flows have historically been impressively resilient, even during recessions.

Does that make it risk-free? Of course not.

Patents on drugs don’t last forever. And like many of its peers, several critical ones for blockbuster drugs are approaching expiration. So if AstraZeneca isn’t able to replace this lost revenue with new drugs, the firm’s profits could take a beating.

Regardless, with a long list of drug candidates approaching the end of Phase 3 trials backed by solid efficacy, that’s a risk that might be worth considering.

2. Howden Joinery: steady compounding

Howden Joinery‘s (LSE:HWDN) another boring but dependable stock that could fit nicely into a new portfolio. The fitted kitchen and bedroom designer works exclusively with contractors, supplying all the components and designs needed for homeowners to renovate and modernise their homes.

Renovation demand Is obviously a lot more cyclical compared to healthcare. But over the last few years, Howden’s once again demonstrated the resilience of its business model.

By supplying top-quality designs and materials, the firm’s developed a premium reputation that generates pricing power both for itself and contractors. Subsequently, professional builders are often keen to promote the company’s offer, acting essentially as a free salesforce.

At the same time, since it only deals with professionals, Howden doesn’t need to lease expensive high street property. Instead, it operates out of depots located in industrial estates where rents are cheaper, and access is easier.

The result is a highly cash-generative enterprise that’s steadily taking market share.

Its operations are still highly sensitive to cyclical shifts within the UK housing market. And during previous market downturns, revenue and earnings growth have temporarily stalled. But with a track record of solid execution, these risks may still be worth taking, in my opinion.

The post FTSE Shares: 2 solid picks to consider when starting an ISA appeared first on The Motley Fool UK.

To get started, investors just need two things: a small bit of cash and some top-notch, cheap dividend stocks worth buying. The latter’s the trickier task. But to help speed things along, here are two companies I’ve already added to my passive income portfolio.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

1. Dividends from self-storage

First on the list is Safestore Holdings (LSE:SAFE). It’s a pretty straightforward business that owns and operates a network of self-storage facilities across the UK and, more recently, Europe. Tenants pay a monthly fee proportionate to the amount of space they lease to store their belongings, and there are also some optional extras, such as insurance.

That all gets funnelled into Safestore’s coffers, which the management team then uses to maintain and expand its network of locations, as well as reward shareholders with dividends. And with just roughly £6.85, anyone can grab one share and start earning dividends.

Demand for self-storage has slowed in recent years due to a weaker property market. However, falling interest rates are starting to reheat things.

The group’s latest results showed occupancy climbing, along with revenue and profits – a trend I expect will continue in 2026 and beyond. That’s why Safestore is my fifth-largest passive income portfolio position.

There are, of course, risks to consider. The stock’s significantly underperformed lately as a result of the cyclical nature of its industry. And while it may be on the path to recovery right now, that could change in the future.

Furthermore, the company looks likely to get hit with a higher tax bill following the recent changes to business rates in the latest government Budget. Nevertheless, with an impressive track record of navigating through such storms, Safestore’s worth a closer look, in my opinion.

2. Dividends from home renovation

Like Safestore, Howden Joinery (LSE:HWDN) hasn’t been a particularly strong performer since inflation came knocking in 2022. With most households looking to avoid big, expensive projects, demand for new kitchens has softened considerably versus the pandemic. Yet unlike most of its peers, Howden’s proven to be remarkably resilient.

By expanding its customisation offerings and launching new kitchen and bedroom designs for both its premium and budget ranges, sales and earnings have remained relatively stable, allowing dividends to continue flowing and growing since 2019.

Once again, with a share price of around £8.20, investors don’t need much starting capital to start earning passive income.

But like all investments, there are still risks to consider. Stubborn inflation is driving up raw material costs, pressuring profit margins. And this impact’s only being compounded by the recent hikes in the National Minimum Wage, driving up operating costs.

Fortunately, as a highly cash-generative enterprise, Howden seems to have the strength to weather the storm and capitalise on the incoming recovery. That’s why it’s my fourth-largest income position. Yet these UK shares aren’t the only opportunities I’ve spotted. My top three look even more promising.

The post 2 low-priced dividend stocks I’m buying to target a lifetime of passive income appeared first on The Motley Fool UK.

With that in mind, I asked three of the leading chatbots for their ideas about the best passive income opportunities. The results were interesting – but not that useful…

What they said

ChatGPT was the only one to give me an answer at all. Gemini said it isn’t allowed to recommend stocks and Claude said it doesn’t have access to live market data.

ChatGPT however, did give me a name. It actually gave me a few, but the stock at the top of the list was Johnson & Johnson (NYSE:JNJ) – a popular name with dividend investors.

It highlighted a few key points, including the firm’s strong record of rising payments and its strong competitive position in a pretty resilient market. But it missed one important thing: the stock comes with a 2.75% dividend yield. And while ChatGPT rightly noted that this isn’t particularly high, it didn’t realise that I won’t even get 2.75% by buying the stock.

Dividend taxes

Johnson & Johnson is a US business and I’m a UK investor. That means any distributions I might receive from the company are subject to a 30% withholding tax. This is reduced to 15% with a W-8BEN form. So by the time the dividends hit my account, what I’ll get is more like 2.35% – and this highlights something important.

Without knowing everything about my financial situation, it isn’t possible for ChatGPT to give an accurate assessment of my returns. That’s not its fault, but it’s a key limitation.

My tax situation means my income from Johnson & Johnson’s likely to be 15% lower than ChatGPT might think. While I like the stock, I think there are more attractive opportunities.

FTSE 100 dividends

In my view, UK investors happy with a 2.35% dividend should think about buying Howden Joinery Group (LSE:HWDN) instead. It’s another strong business but with a higher yield.

The company is probably less recession-resistant than J&J, but I think it looks like a terrific business. Unlike its rivals, it focuses on trade sales, which gives it some key advantages.

One of these is that selling to trade customers is more likely to generate repeat business. And another is that the firm doesn’t need expensive showrooms – it can operate out of warehouses.

This means it can charge lower prices than its rivals while maintaining wider margins. I see that as a really powerful long-term position to be in, which is why I like it as an investment.

Insider knowledge

There are good reasons why ChatGPT can’t tell me which dividend stocks I should buy. It depends on specific things about me that it’s unreasonable to expect AI to know.

It’s not just about being a UK tax payer, a lot of things determine what’s best for me. So while I think J&J’s a reasonable idea, I don’t think it’s my best passive income opportunity. 

In this sense, I actually think the other chatbots have the right response. In a situation where AI isn’t in a position to make a fully-informed suggestion for me, the best thing to do is hold off.

The post I asked ChatGPT, Gemini, and Claude for the best passive income stock to buy appeared first on The Motley Fool UK.

Even when looking exclusively at 50-year-olds, the numbers don’t get much better. But the good news is, there’s still plenty of time to build retirement wealth even with just £550 a month. Here’s how.

Earning £1,000 a month passively

The UK State Pension’s currently £230.25 a week, which works out to just shy of £12,000 a year. Alone, that’s barely enough to get by. But throw in another £12,000 from a retirement portfolio and things get a bit easier.

To earn that extra £12,000, the 4% withdrawal rule shows that a portfolio needs to be worth at least £300,000. Obviously, that’s not pocket change. But with a time horizon of 17 years, a 50-year-old investor can just about make it when using a SIPP.

Don’t forget, SIPPs provide income tax relief. So for someone paying the 20% basic rate, whenever money is put into a SIPP, they receive that 20% back from the government. As such, a £550 deposit becomes £687.50 of capital. And investing this money each month at the stock market average of 8% for 17 years translates into £296,860 – almost exactly on target.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

£12,000 isn’t enough

Having an extra £12,000 a year, when combined with the State Pension, can go a long way. Sadly, 17 years from now, due to inflation, it’s likely not going to be enough.

As such, rather than relying on index funds, my SIPP portfolio’s custom-built, containing only the best businesses, in my opinion. Why? Because while stock picking incurs greater risk, it opens the door to superior returns. And even if that means an extra 4% a year, that’s all it takes to turn that initial £296,860 into £454,650 – 53% more wealth.

Obviously, earning 12% a year is easier said than done. But one stock from my portfolio that could have this potential is Howden Joinery (LSE:HWDN).

The market leader

The fitted kitchen specialist is currently navigating a cyclical downturn within the UK home renovation market and these headwinds have caused growth to slow to a crawl.

But Howden’s proven to be quite resilient. In fact, management’s been capitalising on the struggles of its peers and has even been busy stealing market share. And at the same time, operational efficiency improvements across its depot network have translated into wider profit margins.

Yet neither of these achievements is being reflected in its financials… yet. Once the tide turns and economic conditions improve, the rebound in demand could see Howden’s revenue and profits surge – a tailwind I’m aiming to capitalise on.

When this expected rebound will occur is anyone’s best guess. And persistent economic weakness could eventually start to shake even Howden’s strong financial position.

Even if everything recovers as expected, its competitors, while smaller, are still a credible threat, especially if they come out with novel designs that outshine Howden’s offerings. After all, consumer tastes are constantly changing.

Nevertheless, I remain cautiously optimistic. That’s why I think investors may want to take a closer look for their own SIPPs.

The post How much should a 50-year-old put in a SIPP to earn a monthly passive income of £1,000? appeared first on The Motley Fool UK.

Yet for my income portfolio, I’m interested in owning businesses that may have modest payouts today, but are potentially on track to pay enormous yields in the future.

How? By finding the stock capable of generating impressive and consistent cash flow growth. And three UK shares that I think fit the bill are:

• Games Workshop (LSE:GAW)
• Howden Joinery (LSE:HWDN)
• Safestore (LSE:SAFE)

Impressive income potential

As previously mentioned, none of these stocks currently offer a yield worth getting excited about. In fact, both Games Workshop and Howden Joinery pay below what FTSE 100 index funds currently offer at 2.2% and 2.6%, respectively, compared to 3.2% from UK large-caps.

But in the long run, that could all change.

Games Workshop continues to hit the mark with impressive new miniature ranges for its Warhammer franchises. At the same time, its licensing activities across video games are beginning to bring in substantial royalties as well as draw in a broader audience to its fantasy worlds.

Howden Joinery is on a similar trajectory. Despite encountering challenging headwinds within the home renovation market, the group has proven to be far more resilient than many of its peers.

Depot upgrades and optimisations have bolstered margins in a softer revenue environment. And by expanding its collection of fitted kitchens and bedrooms to cover a wider range of budgets, free cash flow continues to flow.

Subsequently, both businesses have been hiking payouts since my initial investment in 2022. And now my yields for Games Workshop and Howden stand at 5.7% and 3.3%, respectively – a trend that could continue into double-digit territory.

Incoming tailwinds

Safestore is another business primed to deliver payout growth, in my opinion. Much like Howden, the company is highly correlated with the residential real estate sector. That’s because a leading demand driver for self-storage stems from families needing temporary storage as they move houses or start renovation projects.

Higher interest rates have dampened demand for large expenditures, and Safestore’s occupancy has suffered as a consequence. But looking at its latest results, the tides seem to be shifting. Occupancy is back on the rise, and with it, so are dividends.

Weighing the risks

As a shareholder in these stocks, I’m obviously bullish. But that doesn’t mean I’m blind to the risks.

Stubborn inflation could prolong the process of cutting interest rates, resulting in consumers continuing to be squeezed.

As a premium discretionary retailer, Games Workshop could find growth increasingly more challenging, especially with the added pressure of US tariffs that are already impacting its US gross margins.

For Howden, higher rates continue to be a headwind for households postponing renovation projects. This also indirectly impacts Safestore, but with the firm also carrying a high level of debt, it means more cash flow gets gobbled up by interest expenses, leaving less for shareholder dividends.

Having weighed these risks against the potential rewards, I still believe these UK shares could outperform long term and are worth considering. But they’re not the only income stocks I’ve got my eye on right now.

The post 3 UK shares I own for superb passive dividend income appeared first on The Motley Fool UK.

With valuations reaching lofty levels, the risk of investing is rising, especially as investors become increasingly more greedy.

That’s why some are warning of an incoming correction, or possibly even a full-blown stock market crash. So what does the ‘Oracle of Omaha’ recommend in today’s market climate?

Prepare, don’t predict

Buffett’s long stressed that no one can reliably time market chaos. There are so many influencing factors that have derailed catastrophe predictions from even the smartest minds within the investing community. However, as markets become frothy like today, he’s also urged investors to prepare just in case.

That means being patient, avoiding being lured into investments by the fear of missing out, and building a cash cushion to provide liquidity. All three of these steps mitigate portfolio volatility and help reframe corrections for what they truly are – opportunities, not catastrophes.

Focus on the business, not the stock

When the market is near all-time highs, Buffett may still do a bit of shopping. If the underlying business shows enough promise with a reasonable valuation, he and his team at Berkshire Hathaway have often pounced on opportunities.

The same principle applies when the market is in freefall. All too often, panicking investors will throw the baby out with the bathwater, resulting in wonderful businesses being sold off, creating bargains for those with cooler heads.

What I’m doing in 2025

As the markets reach new record highs, so has my growth portfolio with chunky double-digit gains since the start of the year. While chunky returns are nice to celebrate, I’m definitely growing more cautious, particularly as today’s valuations don’t seem to reflect the looming economic headwinds, particularly in the US.

That’s why I’ve been steadily trimming some of my largest holdings to follow Buffett’s advice and build cash.

But I’m not just selling bit by bit. Even though I suspect the stock market’s overheating, there are still opportunities to be found. And one that I’ve got my eye on for my income portfolio is Howden Joinery (LSE:HWDN).

Over the last 12 months, the fitted kitchen and bedroom supplier has lagged the FTSE 100. That’s despite earnings proving to be quite resilient, resulting in an undemanding price-to-earnings ratio of 17.9.

The UK home renovation market remains relatively soft due to higher interest rates, causing investor sentiment surrounding businesses in this sector, like Howden, to weaken. Yet, through operational optimisations across its depot network and pricing adjustments, management has successfully offset some of the impact through self-help actions.

Subsequently, dividends and buybacks have continued to flow. And with interest rates steadily being cut, analyst projections suggest 2026 could spark the beginning of a sector-wide recovery.

The timing of this rebound isn’t set in stone. And the recovery may prove weaker than expected, with pressure mounting from competitors, likely resulting in further lacklustre returns for investors. Nevertheless, given the group’s track record of prudent capital allocation, I’m tempted to expand my existing position in this business.

But it’s not the only Buffett-like opportunity I’m watching closely right now…

The post Here’s Warren Buffett’s advice as stocks reach record highs appeared first on The Motley Fool UK.

What I am focused on, however, is the H1 update that caused the share price to surge. Because I think it could be a very positive sign for a stock I’m much more interested in. 

Kingfisher Group

Kingfisher is the company that owns home improvement stores like B&Q and Screwfix. And the firm reported like-for-like revenue growth of 1.9%.

This isn’t particularly exciting, but adjusted pre-tax profits were up 10% as a result of better cost controls. And management expects the firm to generate at least £480m in free cash flow this year.

That makes the stock look ridiculously cheap at an enterprise value of £4.7bn, so the company is accelerating its share buyback programme. And that’s a move I wholeheartedly approve of.

Despite all this, I’m still not that interested in buying Kingfisher shares right now. Before I say why, let me point out something that did catch my attention.

UK growth

Kingfisher’s like-for-like sales growth might only have been 1.9% overall, but UK revenues came in 3.9% higher. And there were several reasons for this. 

One was an increase in demand for seasonal (garden) products during unusually warm summer weather. People might not have wanted Greggs sausage rolls in the heat, but they did want barbecues.

Another important reason was high demand for big-ticket items, such as kitchens and bathrooms and a third was strong growth in trade sales. And it’s these that stand out to me.  

Both are signs of UK consumer spending being relatively resilient. But this points me in the direction of another FTSE 100 company that might be a beneficiary.

Howden Joinery Group

Shares in Howden Joinery Group (LSE:HWDN) climbed around 3% after Kingfisher’s report. But I think it’s in a much better position to benefit from the increase in UK demand. 

Unlike Kingfisher, Howden gets substantially all of its revenues from the UK trade industry. That kind of concentration can be a risk, but it could be an advantage at times like this one.

Inflation is also a risk that investors shouldn’t overlook. But on a price-to-book (P/B) basis (the metric I prefer to use for companies with cyclical earnings) the stock is near its Covid-19 lows.

Given this, I think the prospect of a revenue boost is very interesting. And there are also reasons to like the business from a long-term perspective as well. 

Long-term investing

Howden Joinery Group has a unique business model that involves selling out of warehouses, rather than expensive retail stores. And that gives it a number of natural advantages.

These include lower costs (which lead to higher margins) and more revenue stability (as a result of its focus on trade). That’s why I like the stock more, despite Kingfisher’s impressive recent results.

Kingfisher is doing an impressive job of protecting its margins in an inflationary environment. But I’m sceptical of the idea that managing costs can offset weak sales growth over the long term.

Howden’s next scheduled trading update isn’t until 6 November, so I’ve got time to work out what to do. But positive signs from a FTSE 100 rival have got me thinking carefully about buying.

The post Something big caught my eye as this FTSE 100 stock surged 19% in a day appeared first on The Motley Fool UK.