Tuesday’s stock market wobble was a reminder that the economic outlook remains uncertain. Some investors seem to be shifting their assets into cash, but I’m staying focused on buying ‘boring’ FTSE 100 stocks.
I’ve chosen three shares I think should perform well and pay reliable dividends, whatever happens next. In my view, these could be the best FTSE 100 shares to buy today.
Back to growth
Telecoms giant Vodafone Group (LSE: VOD) has been out of favour in recent years, but this is starting to change. CEO Nick Read has slimmed down this business, focusing on core European and African markets. Revenue has returned to growth and Mr Read has raised cash to pay down debt by floating the group’s tower business.
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Vodafone’s share price has risen by nearly 20% over the last six months. I think there’s more to come. City analysts expect profits to rise by around 30% over the coming year. Cash generation is expected to remain strong too. I think we could see a return to dividend growth this year.
What could go wrong? Like most big telcos, Vodafone must keep spending on network upgrades, even though growth opportunities are limited in mature markets like the UK. I think this could limit long-term share price growth.
I don’t expect fireworks, but Vodafone’s 5.6% dividend yield looks safe and attractive to me.
The government is selling this FTSE 100 stock
The banking bailouts of 2008 seem a long time ago now. But the UK government still owns 55% of NatWest Group (LSE: NWG) — the FTSE 100 bank formerly known as Royal Bank of Scotland Group.
The good news is that government ownership no longer stops the bank paying dividends. NatWest is expected to pay a dividend of 8.8p per share for 2021, giving the shares a forecast yield of 4.6%.
Chancellor Rishi Sunak seems keen to get rid of NatWest shares too. The Treasury sold a 5% chunk of NatWest stock earlier this week, raising £1.1bn. I suspect we could see more sales later this year.
An economic slump could lead to an increase in bad debts. But NatWest was cautious last year and prepared for significant losses. So far, it looks as though these could be smaller than expected.
NatWest shares trade at a 25% discount to book value and offer a forecast yield of 4.6%. I’d be happy to buy at this level.
A defensive winner?
My final choice is consumer goods group Reckitt Benckiser (LSE: RKT). This £45bn FTSE 100 stock is probably best-known for its health and hygiene products, including brands such as Finish, Dettol, and Nurofen.
Sales of cleaning products rocketed during the pandemic. However, the rest of the business is still playing catch-up. This is due to stockpiling last year, plus lower demand for products such as cold and flu remedies during lockdown.
One concern for me is that the group’s nutrition division — which mostly sells baby formula milk — may continue to underperform. Much of this business was acquired in an expensive deal in 2017. I’m not sure it was a good deal.
Even so, I expect most of Reckitt’s big brands to return to a more normal performance over the next 12 months. Analysts put the stock on 20 times forecast earnings, with a 2.8% dividend yield. I think that’s fair value today, but I see this FTSE 100 stock as a good long-term buy.
