A FTSE 100 dividend stock I’d buy over this 8% yielder

Royston Wild zeroes in on two dividend stocks, one a major player on the FTSE 100 (INDEXFTSE: UKX), that have very different investment appeal.

| 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.

I’ve always had great faith in Moss Bros Group’s (LSE: MOSB) ability to circumvent the broader pressures damaging the broader retail sector.

Up until recently I was confident the outfitter would be able to keep revenues on an upward keel on the back of its successful e-commerce strategy that has seen internet sales boom, as well as the impact of its store refitting programme that has worked a treat in dragging punters through the doors.

However, the FTSE 250 business shook lower at the start of the year after a disappointing Christmas period in which lower footfall than it had previously anticipated forced it to issue a shock profit warning.

Should you invest £1,000 in ITV 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 ITV made the list?

See the 6 stocks

And Moss Bros was at it again in March, warning that high pressure on customers’ wallets — along with the disruption resulting from “stock shortages caused by the consolidation of key suppliers” — would see profits fall short of estimates.

In response to what it called “the more challenging trading environment,” Moss Bros took the drastic step of cutting the full-year dividend for the period ending January 20187 to 1.97p per share from 3.98p a year earlier. This meant the total payout for last year slumped by almost a third to 4p per share.

Suiter slumps

The net effect of these chilling updates is that the retailer has seen its share price almost halve in the space of less than three months. However, I wouldn’t consider this to be a sound dip buying opportunity.

I have faith that Moss Bros’s investment in cyberspace and in its store network will build the foundations for decent revenues growth in the long term. The ‘suiter and booter’ is a reputable name in the field of selling and renting out smart men’s fashion, and this should help it to ride out the current storm.

But right now I believe the retail maelstrom taking bites out of the high street’s biggest retailer’s could send Moss Bros’s stock value shuttling even lower, as could predictions that the aforementioned supply problems be solved by late spring.

City estimates are currently suggesting a 47% earnings drop in fiscal 2019, reflecting these tough conditions, and yet brokers are still expecting the dividend to be held at 4p. Given the probability of this estimate being hacked down, I believe share pickers should pay little attention to the company’s gigantic 8.3% yield.

TV star

ITV (LSE: ITV) is another big-yielding share that has endured plenty of revenues pain recently thanks to slumping advertising budgets.

But I would be far happier to splash the cash on the FTSE 100 broadcasting behemoth today, and not just because of its dirt-cheap forward P/E ratio of 9.4 times (which comes as stark contrast to Moss Bros’s higher corresponding reading of 17.3 times).

This low reading provides decent protection against a share price collapse should the predicted 4% earnings slide for 2018 increase in the months ahead. And what’s more, this is a great level at which to latch on to the brilliant long-term growth opportunities afforded by ITV’s global expansion drive and successful move into new media.

What’s more, an expected dividend of 8p per share — a figure that yields an impressive 5.5% — stands on stronger footing than the projected reward over at Moss Bros. ITV is a share I would happily buy today and stash away for the years ahead.

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Royston Wild has no position in any of the shares mentioned. 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.

More on Investing Articles

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

GSK’s share price looks a steal to me anywhere below £43.29, and here’s why

GSK’s share price has fallen a long way from its one-year high, which has only increased the major undervaluation I'd…

Read more »

Investing Articles

6.5% yield! Is this FTSE 100 stock my ticket to a growing second income?

REITs were literally designed to help ordinary investors earn a second income from real estate. And one in particular has…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

At a P/E ratio of 7, are shares in this UK retailer unbelievable value?

Shares in Card Factory trade at a P/E ratio of 7 and come with a 6.7% dividend yield. But do…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

This 10.6% yielding dividend share goes ex-dividend tomorrow (3 April)!

Our writer considers the pros and cons of investing in a high-yielding oil and gas dividend share before its ex-dividend…

Read more »

Charticle

I’m backing FTSE blue-chip stocks to outperform the S&P 500 in 2025

Andrew Mackie explains why his Stocks and Shares ISA is crammed full of FTSE blue-chip stocks in preference to US…

Read more »

Investing Articles

Down 25% in a month, but experts forecast the IAG share price is set for a mega-rally!

Harvey Jones feared he’d missed a brilliant opportunity after the IAG share price doubled last year, but following the recent…

Read more »

Investing Articles

Could Aston Martin’s share price explode over the next 12 months? These analysts think so!

Is it possible that Aston Martin's crumbling share price could be set for a stunning turnaround? City brokers think so,…

Read more »

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

2 dividend shares to consider in what could be a bumpy April!

Searching for solid passive income stocks in uncertain times? Here are two rock-solid dividend shares to consider this month.

Read more »