Investors can be forgiven for wanting to find safe ports in todays market storms, but it isnt always easy. When the market is hit by a force 10 gale, there are few protectedharbours. Dothese three FTSE 100 stalwarts offer you a comfortable berth?
I fondly remember spiritsgiant Diageo (LSE: DGE) in the glory days under acquisition-thirstychief executive Paul Walsh, when it binged on rival drinks firms and doubled mymoney. I sold up shortly after successor Ivan Menezes announced that he was shifting focus to itspremium brands through his DrinkBetter strategy, which I sawas an admission that the rampant growth years were over.
History has proved me right, because the stock has done nothing in the last three years, despite its strong brands, emerging markets prospects, and cost-cutting strategy. But emerging markets havent delivered and hey, everybody is cutting costs these days. Last weeksupdate showedpre-tax profit easingupwards from 1.64bnto 1.78bn in the six months to31 December, asrevenue slipped from 8.72bn to 8.27bn. These are hardly numbers to get those tastebuds watering, especially since its valued at a pricey21 times earnings andyields a so-so 2.95%.
British American Tobacco
Some mightcallBritish American Tobacco (LSE: BATS) the ultimate safe haven and its performance over the past five years appears to back that up, with itsgraph lining steadilyupwards. It has grown65% in that time, against zero growth on the benchmark FTSE 100. All isnt plain sailing however, given that 70% of its earnings now come from emerging markets, and its reasonable to assume that Western health trends will migrateoverthere as populationsget wealthier and healthier.
Yet its premium brands continue to gain market share and (like everybody else) BATShas boosted its figures by cutting costs successfully. The growing global trend to force cigarette manufacturers to adopt plain packaging could erode itsbrand advantage, however. Revenues and profits have stayed disappointinglyflat over the last six years, althoughearningsper share are forecast to grow 7% this year. British American Tobacco is still a safe haven compared to most of the index, and one that satisfies witha slow burning 3.8% yield. At 18.7 times earnings, theres a premium to pay for safety.
GlaxoSmithKline (LSE: GSK) has underminedits status as a safe haven stock ever since the bribery scandal in China, althoughgrowth of 23% over the past five years lookspretty solid againstthe flatFTSE 100. The dividend yield still thrills at5.6% but has been called into question lately, something that never happened in the old days. Trading at 15.6 times earnings, its valuation looksbang on the nail.
The attraction of Glaxo is its healthy product pipeline. The worry is that itdoesnt come through. Emerging markets offer great growth potential although again, theyre hardly to be relied on right now. Glaxostill generates plenty of cash and is rewarding investors with dividend hikes and buybacks, whichis highly comfortingas storm clouds gather over the wider market.
If you’re looking for a top dividend-paying stock with great prospects then check out our BRAND NEW report A Top Income Share from The Motley Fool.
While many leading UK companies are slashing their dividends, this FTSE 250 star accelerated its payout at astonishing speed in 2015.
The Fool’s crack team of analysts is so impressed by this company’s ambitious growth plans they’re happy to call it one of the best income stocks on the market today.
Click here to enjoy this FREE, no-obligation wealth report. It will be yours in moments and won’t cost you a penny.
Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Diageo and GlaxoSmithKline. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.