2 Neil Woodford dividend stocks I’d buy right now

If you’re looking for dividend-growth stocks, check out these Neil Woodford-owned companies.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Neil Woodford is having a tough time at the moment. Investors are withdrawing their capital from the portfolio manager’s funds at a dramatic rate, with his flagship Equity Income fund shrinking in value by around £1bn in the first five weeks of the year.

A glance at the holdings across Woodford’s range of funds reveals some names that are out of favour at present. There are plenty of stocks that I personally wouldn’t invest in. Having said that, Woodford does own some stocks that I believe look attractive right now. Here’s a look at two.

ITV

At the end of December, ITV (LSE: ITV) was the 13th largest holding in Woodford’s Income Focus fund, with a weighting of 2.2%. The portfolio manager bought ITV back in September, stating at the time that the broadcaster is a “highly-cash generative business with a good track record of returning excess cash to shareholders through special dividends.” Woodford went on to explain that the stock’s valuation looked attractive, and that the risks surrounding the industry were priced into the share price.

Should you invest £1,000 in Abrdn right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Abrdn made the list?

See the 6 stocks

I agree with Woodford’s stance on ITV, and believe that the risk/return profile of the stock looks attractive right now. For a start, the valuation is low. With analysts expecting earnings of 15.7p per share for FY2017, the P/E ratio is just 10.3. That’s 45% lower than the FTSE 100 average trailing P/E of 18.8.

Furthermore, with the shares having fallen over 20% in the last year, the dividend yield looks very tempting. Analysts expect a payout of 7.8p per share for FY2017, a yield of 4.8% at the current share price.

ITV is a much more diversified business than it used to be, and now generates 50% of its revenues from sources other than spot advertising. An update in November confirmed that its Studios and its Online, Pay and Interactive divisions were performing well. As a result, I believe the stock is a ‘buy’ right now.

Softcat

Another Woodford-owned stock I have my eye on is Softcat (LSE: SCT). The company is an IT specialist, providing organisations with data centre, networking and security solutions. At 31 December, it was the 14th largest holding in Woodford’s Income Focus fund, with a weight of 2.2%.

Softcat appeared on my radar early last year. At the time, the shares were changing hands for around 300p. Today, the share price is around 520p, an increase of nearly 75% in just 13 months. Despite the share price rise, I still like the investment case here.

A trading update released last week confirmed that momentum is strong at present. The company advised that adjusted operating profit for the six months to the end of January rose approximately 19%.

Looking ahead, demand for the company’s expertise in areas such as cybersecurity and data storage solutions is likely to remain robust, in my opinion. Analysts’ projections reinforce my view, with sales expected to rise 12% this year.

Adding weight to the investment thesis are the company’s dividend prospects. Analysts expect the payout to double this year, taking the yield to around 3.5% at the current share price. The stock is not a bargain, on a P/E of 22.7, but I believe that valuation is justified, given the potential growth on offer.

Should you invest £1,000 in Abrdn right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Abrdn made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in ITV. The Motley Fool UK has recommended ITV. 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.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Investing Articles

These 4 FTSE shares have crashed hard. Which do I like today?

These four FTSE 100 stocks have plunged in value over the last month. But after this latest market meltdown, which…

Read more »

Investing Articles

1 FTSE 250 stock that analysts are calling a ‘Strong Buy’

The FTSE 250 can be overlooked by investors, but analysts believe this stock in particular could be undervalued by as…

Read more »

Close up of a group of friends enjoying a movie in the cinema
Investing Articles

I asked ChatGPT to name 5 FTSE shares for the perfect SIPP. Here’s what it picked

Harvey Jones called on ChatGPT to help him decide which shares would be right to buy for a well-balanced SIPP.…

Read more »

Investing Articles

Should I load up on Rolls-Royce shares after the 17% drop?

Rolls-Royce shares have pulled back sharply in the FTSE 100 in recent weeks, leaving this Fool to wonder if he…

Read more »

Investing Articles

Is this the best S&P 500 stock to consider buying in these volatile times?

With bullion prices still rocketing, I think buying the S&P 500's only gold stock is worth serious consideration right now.

Read more »

Young Asian woman with head in hands at her desk
Investing Articles

Yielding 7.25% but with a P/E of 186x! What’s up with the BP share price?

Harvey Jones thought the BP share price was a brilliant bargain but it's only brought him a world of trouble.…

Read more »

Asian man looking concerned while studying paperwork at his desk in an office
Investing Articles

Down 26% with a 7% yield! Could this little-known FTSE 250 gem make a comeback?

Mark Hartley considers the long-term prospects of FTSE 250 recruiter Page Group. Weak results have sent the price tumbling but…

Read more »

Investing Articles

Analysts are calling Diageo shares a strong buy! Are they mad?

Analysts still have faith in Diageo shares, with 10 of them giving it the highest possible stock rating. Harvey Jones…

Read more »