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MongiIG

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  1. MongiIG
    Consumer staples stocks are popular defensive portfolio investments, with a unique set of advantages and drawbacks. These five are the largest on the FTSE 100.
    Source: Bloomberg   Indices Shares Reckitt Diageo Haleon Consumer  
    Written by: Charles Archer | Financial Writer, London Consumer staples stocks are shares in companies which specialize in selling daily essentials — food and drink, hygiene and household products, cosmetics, alcohol and tobacco. These stocks are classified as ‘defensive’ — consumers will continue to buy them regardless of the state of the economy — meaning the companies benefit from inelasticity of demand.
    These are non-cyclical businesses, which means sales, revenue and at least some profit is generally expected. However, consumer staples stocks are unlikely to make headlines for capital growth or explosive revenue increases.
    Instead, they offer low price volatility, dividends, and defensive positioning within a wider portfolio. And a key trade-off is that consumer staples companies can be better able to pass on inflation-matching cost increases to customers — this is a huge advantage in inflationary periods which is becoming more apparent.
    Given the perceived lower risk, lower return, consumer staples stocks are often popular with investors closer to retirement, or else investors starting to venture outside the diversification offered by ETFs.
    Perhaps a core advantage that is often ignored is the heritage and branding power of most larger consumer staples companies. Many have been in operation for decades or more due to the defensive nature of the sector, and this can have a positive ongoing effect on investment attractiveness.
    Of course, past performance is not an indicator of future returns.
    Top consumer staples stocks to watch
    The following five shares are the largest FTSE 100 consumer staples stocks by market capitalisaiton. There is an element of subjectivity to inclusion as there is no standardised ‘consumer staples’ definition.
    Unilever Diageo British Amercan Tobacco Reckitt Benckiser Haleon Unilever
    Unilever is a very well-known transnational consumer staples business which produces a dizzying array of products including food, drinks, cleaning agents, beauty and personal care products. Some of its well-known brands include Dove, Ben & Jerry’s, Cornetto, Domestos and Hellmann's.
    Full-year 2023 results saw underlying sales growth at the FTSE 100 company rise by 7% — with a turnover of €59.56 billion. Encouragingly, the business’s underlying operating margin rose by 60bps to 16.7%. CEO Hein Schumacher argues that ‘2023 Full Year results show an improving financial performance, with the return to volume growth and margins rebuilding. We are moving with speed and urgency to transform Unilever into a consistently higher performing business.’
    Unilever shares have remained almost flat over the past five years, with some investors arguing it has underperformed the wider market. However, it is in the midst of a turnaround plan; Schumacher took the reins in July 2023 noting that it is not ‘reaching its potential’ and that productivity and returns have ‘under-delivered.’
    Diageo
    While some consider alcohol not to be a consumer staple, it is a consumer product that people tend to buy regardless of the wider economic climate. Diageo is one of the largest alcoholic drinks manufacturers in the world, and controls a premium brand portfolio covering Johnnie Walker, Guinness, Smirnoff, Baileys, Captain Morgan, Tanqueray and Gordon's.
    In recent interim results, CEO Debra Crew did note that ‘the first half of fiscal 24 was challenging for Diageo and our sector, particularly as we lapped strong growth in the prior year…looking ahead to the second half of fiscal 24, despite continued global economic volatility, we expect to deliver improvement in organic net sales and organic operating profit growth at the group level.’
    For context, an unfavourable foreign exchange market and the declines in Latin America and the Caribbean saw net sales decline by 1.4% to $11 billion. Accordingly, operating profit fell by 11.1% to $3.3 billion — though this fall was just $205 million when excluding the LAC region.
    In more bad news, the stock has fallen to its lowest level in four years as news of China’s ‘anti-dumping’ investigation into brandy from the EU heats up.
    British American Tobacco
    Debate it if you must, but tobacco is also commonly thought of as a consumer staple. Smokers and vapers typically buy their favourite product — with the addictive component of nicotine an ethical question for individual investors to consider.
    British American Tobacco is one of the world’s biggest tobacco companies, with a significant brand portfolio of famous names. However, the business is dealing with changing consumer preferences and government intervention. It wrote off circa £25 billion in value of its US-based cigarette portfolio in December 2023 — while the UK is planning to implement a ban on disposable vapes soon.
    For context, revenue fell by 1.3% in full-year results (though rose by 3.1% at constant rates). ‘New category’ revenue grew by 21% — and revenue from non-combustibles now makes up 16.5% of the group’s overall revenue. Best of all, new categories achieved profitability in 2023 after years of losses and two years ahead of target.
    But longer-term, combustibles revenue is expected to continue to fall, while some investors think replacing this revenue with vaping may be harder than the company expects. CEO Tadeu Marocco contends that the ‘refined strategy commits us to 'Building a Smokeless World', a predominantly smokeless business, with 50% of our revenue from Non-Combustibles by 2035.’
    Reckitt Benckiser
    Like Unilever, Reckitt Benckiser has been effectively flat over the past five years. The company owns many famous brand names, including Dettol, Strepsils, Veet, Gaviscon, Calgon and Air Wick. It’s widely assumed that consumers are prepared to pay a price premium for cleaning products and medications compared to other categories.
    In Q3 results, Reckitt saw like-for-like net revenue growth rise by 3.4%, led by strong a broad-based growth of 6.7% across its hygiene and health segments. While overall volume declined by 4.1% year-over-year, the company remains the market leader in the US nutrition business — and with its recent strategic update, the company expects to target sustained mid-single digit life-for-like sales growth in the medium term.
    In further good news, the company has initiated a £1 billion share buyback programme. CEO Kris Licht notes that ‘we are firmly on track to deliver our full year targets, despite some tough prior year comparatives that we continue to face in our US Nutrition business and across our OTC portfolio in the fourth quarter.’
    Haleon
    Like Reckitt Benckiser, Haleon is a consumer healthcare multinational which controls its own famous brand portfolio — including Sensodyne, Panadol and Centrum vitamins. And it’s widely regarded as one of the largest over-the-counter medicines operators in the world.
    Spun off from GSK, the company could remain a stalwart of the FTSE 100 for decades to come. In Q3 2023 results, Haleon saw 5% organic revenue growth, while adjusted operating profit rose by 8.8% at constant currency rates. And the company saw an adjusted operating profit margin of 24.6%.
    CEO Brian McNamara enthuses that the results ‘demonstrate continued strong momentum across the business. Despite challenging markets, we have delivered another quarter of strong organic growth…our FY guidance remains unchanged and we expect to deliver strong growth in both organic revenue and adjusted operating profit constant currency.’
     

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  2. MongiIG
    A short description of defensive stocks, and five of the best defensive stocks to watch in 2024. These are the five largest defensive FTSE 100 companies.
    Source: Bloomberg   Shares GSK plc Market trend Diageo AstraZeneca Unilever
    Written by: Charles Archer | Financial Writer, London   Defensive stocks are companies whose underlying business is expected to generate reliable revenue and profits regardless of the wider economic environment. This could be because they hold a dominant market position, hold a reputation for value for money, or even simply provide the bare necessities.
    Accordingly, they are usually blue-chip companies benefitting from inelasticity of demand, making them ‘safe havens.’ In other words, if they raise prices to match inflation, consumers will continue to buy the products regardless.
    Defensive companies rarely deliver significant capital growth, and therefore tend to underperform during bull markets, even underperforming passive investment in indices such as the FTSE 100. But in bear markets, they can appear more attractive for the consistent earnings.
    By contrast, cyclical stocks are businesses which tend to outperform in the good times and fall sharply during downturns. These might include consumer discretionary stocks, miners, or oilers, all of which depend on a healthy economy to thrive.
    Investing in defensive stocks — and particularly the timing of an investment — is not simple. If you reposition your portfolio too early, you might miss out on additional growth before a downturn becomes too severe. And when the economy recovers, defensive stocks can become undervalued as investors sell in favour of growth.
    This makes buying these types of shares in a bull market and then selling them in bear market a popular contrarian investing strategy; though as always, this is harder to do than it sounds.
    The following FTSE 100 dividend stocks can be considered to be some of the more popular defensive companies to own in the UK as many have a reliable history of paying out. But remember, past
    performance is not an indicator of future returns.
    The best defensive stocks to watch
    These stocks are the largest defensive stocks on the FTSE 100, if you consider defensive sector companies to be only those which deal in healthcare, consumer staples, utilities or tobacco.
    AstraZeneca Unilever GSK Diageo British American Tobacco AstraZeneca
    AstraZeneca is a multinational pharmaceutical titan which focuses on the development and commercialisation of novel prescription medicines. It works in areas such as cardiovascular, oncology, and respiratory medication — though has a presence across almost the entire development market.
    Healthcare sector stocks remain highly defensive, and AstraZeneca is no exception.
    In FY23 results, total revenue rose by 6% to $45.8 billion, despite a decline of over $3.7 billion in covid-19 medication sales. When excluding covid-10 medicines, revenue rose by 15%, with oncology revenue up by 21%. And the company boasted a core product sales gross margin of 82%.
    CEO Pascal Soriot enthuses that he expects ‘another year of strong growth in 2024, driven by continued adoption of our medicines across geographies. Our differentiated and growing portfolio of approved medicines, global reach and rich R&D pipeline give us confidence that we will continue to deliver industry-leading growth.’
    Excitingly, the company recently reported success in its Laura Phase III trial for its Tagrisso treatment, which showed a ‘statistically significant and highly clinically meaningful improvement’ in progression-free survival.
    Unilever
    Unilever is a multinational consumer goods company which produces a wide range of products including food, drinks, cleaning agents, beauty and personal care products. Some of its well-known brands include Dove, Ben & Jerry’s, and Hellmann's. While the company has arguably underperformed in recent years, it is working at a turnaround plan.
    FY23 results saw underlying sales growth at the FTSE 100 defensive company rise by 7% — with a turnover of €59.56 billion. Encouragingly, the business’s underlying operating margin rose by 60bps to 16.7%.
    CEO Hein Schumacher notes that ‘2023 Full Year results show an improving financial performance, with the return to volume growth and margins rebuilding. We are moving with speed and urgency to transform Unilever into a consistently higher performing business.’
    GSK
    GSK — formerly GlaxoSmithKline — is a global biopharma company which aims to positively impact the health of 2.5 billion people by the end of 2030. After spinning out consumer healthcare company Haleon, GSK’s R&D focus is on four therapeutic areas: infectious diseases, HIV, respiratory/immunology and oncology.
    FY23 sales rose by 5% year-over-year to £30.3 billion, and by 14% when excluding covid-19 based sales. Top vaccine patent Shingrix, which protects against shingles, generated £3.4 billion alone. Further, adjusted operating profit rise by 12%, reflecting ‘strong sales ex COVID and higher royalty income, partly offset by increased investment in R&D and new product launches.’
    With 71 vaccines and specialty medicines now in clinical development, CEO Emma Walmsley notes the company is ‘now planning for at least 12 major launches from 2025, with new Vaccines and Specialty Medicines for infectious diseases, HIV, respiratory and oncology. As a result of this progress and momentum, we expect to deliver another year of meaningful sales and earnings growth in 2024.’
    Diageo
    Diageo is a global leader in premium alcoholic drinks, controlling over 200 brands and with sales in nearly 180 countries. The company owns distilleries which produce 40% of all Scotch whisky including Johnnie Walker — and it also owns Guinness, Smirnoff, Baileys, Captain Morgan, Tanqueray and Gordon's.
    In recent interim results, net sales declined by 1.4% to $11 billion, driven by an unfavourable foreign exchange impact and the widely reported net sales declines in Latin America and the Caribbean. Accordingly, operating profit fell by 11.1% to $3.3 billion — though this fall was just $205 million when excluding the LAC region.
    CEO Debra Crew admitted that ‘the first half of fiscal 24 was challenging for Diageo and our sector, particularly as we lapped strong growth in the prior year and faced an uneven global consumer environment…looking ahead to the second half of fiscal 24, despite continued global economic volatility, we expect to deliver improvement in organic net sales and organic operating profit growth at the group level, compared to the first half.’
    British American Tobacco
    British American Tobacco is one of the world’s largest tobacco companies, boasting a brand portfolio including Lucky Strike, Dunhill, and Pall Mall. In terms of defensiveness, tobacco is a popular investing theme given the addictive nature of nicotine — though of course there is an ESG element to consider.
    However, the company is contending with changing consumer preferences and government intervention. It wrote off circa £25 billion in value of its US-based cigarette portfolio in December 2023 as smoker rates fall — while the UK is planning to implement a ban on disposable vapes soon.
    In full-year results, revenue dropped by 1.3% (though rose by 3.1% at constant rates). For context, ‘new category’ revenue grew by 21% — and revenue from non-combustibles now makes up 16.5% of the group’s overall revenue. Importantly, new categories achieved profitability in 2023 after years of losses and two years ahead of target, contributing £398 million to the profit pile.
    CEO Tadeu Marocco notes that the ‘refined strategy commits us to 'Building a Smokeless World', a predominantly smokeless business, with 50% of our revenue from Non-Combustibles by 2035.I am confident that the choices we have made will drive our long-term success and create sustainable value for all our stakeholders.’
     

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  3. MongiIG
    These five FTSE 100 dividend shares could be some of the best to watch next month. They are currently the highest yielding on the index.
    Source: Bloomberg   Indices Shares FTSE 100 Dividend Stock Dividend yield  
    Written by: Charles Archer | Financial Writer, London   The FTSE 100 continues to underperform comparable international indices, sliding by 0.6% year-to-date to 7,673 points. While investors in some of the high yielding dividend stocks on the index have of course benefitted from company payouts, improving the life of the London markets has been a central theme of 2024.
    In today’s budget, Chancellor Jeremy Hunt has — among many measures — introduced the ‘British ISA,’ which will allow UK-based investors an additional £5,000 allowance on top of the current £20,000, which can only be invested specifically in ‘UK companies.’
    Quite how this might work, and how long it might be until the account is widely available, will be common questions over the next few days. But the key takeaway is that the government is trying to spur internal investment, in an attempt to stem UK delistings, the IPO drought, and continued private equity bids for ‘undervalued’ businesses listed in London.
    On the macroeconomic front, the base rate remains at 5.25%, while CPI inflation stands at 4%, double the official target. While inflation is now expected to hit 2% within the next few months, the Bank of England has warned it will then resurge due to moving comparators with energy bills. While rates may start to fall later in the calendar year, Governor Andrew Bailey has previously warned he wishes to see sustained low inflation before beginning cuts.
    This all makes investing in FTSE 100 dividend stocks complex. In particular, the highest dividend yields can be hostage to economic policy — where individual investment cases and changing financial landscapes can create value traps or payout irregularities.
    Best FTSE 100 dividend stocks to watch
    These shares are the highest yielding on the index as of 1 March 2024. They may not be the best investments and the dividends and capital itself are not guaranteed.
    Vodafone Phoenix Group British American Tobacco Imperial Brands M & G Vodafone
    Vodafone's recent Q3 results saw total organic revenue grew by 4.7%, a significant improvement on the 1.8% growth of a year ago. Meanwhile, global services revenue rose by 8.8% while the B2B division grew by 5% year-over-year.
    The company remains one of the largest telecoms companies in Europe, and the current strategy may be delivering. For context, the all-important German sales rose by 0.3% in the quarter. However, the company is actually losing customers in the region, with the revenue growth driven by price increases.
    The key risk could remain the debt mountain, which remains multiples of Vodafone’s market capitalisation. However, the company has made several asset disposals to counter this risk — and is actively considering further sales of its Italian arm.
    Vodafone remains confident in previous guidance for future underlying earnings — and with a price to equity ratio of just 2 (despite this figure being affected by asset sales), it may be attractive to value investors.
    Dividend Yield: 10.94%
    Phoenix Group
    Phoenix Group's recent trading update saw the company deliver £1.5 billion of new business long-term cash generation in 2023, achieving its 2025 target much earlier than expected.
    For context, new business net fund inflows rose by circa 80% year-on-year to £7 billion, driven by improved performances at the Standard Life branded Pension & Savings and Retirement Solutions segments.
    CEO Andy Briggs remains ‘delighted that Phoenix Group has delivered another year of strong organic growth in 2023, with increased new business net fund flows supporting us… we have achieved our 2025 new business long-term cash target two years early, reflecting the focus and investment we have put into our growth strategy.’
    Within pensions and savings, Phoenix’s workplace business saw net fund flows nearly double year-over-year to circa £4.5 billion. According to Briggs, this included ‘the transfer of one of the largest workplace schemes tendered in the UK market in recent years.’
    Dividend Yield: 10.49%
    British American Tobacco
    British American Tobacco full-year results saw the FTSE 100 dividend company’s revenue fall by 1.3% at constant currency rates, though rise by 3.1% on an organic basis at constant rates. This was driven by ‘new categories’ growth with revenue from non-combustibles now worth 16.5% of group revenue.
    CEO Tadeu Marroco enthuses that ‘2023 was another year of resilient financial performance and delivery in line with our guidance, underpinned by our global footprint and multi-category strategy, despite a challenging macro-environment. New Categories delivered continued volume-led revenue growth and increased profitability.’
    However, the FTSE 100 tobacco company will have to pivot fast, having written off £27.3 billion of its US brand portfolio after acknowledging they have ‘no long-term future.’ Compounding the weak combustibles growth, the UK recently announced a ban on disposable vapes which could hit BATS’ long-term ambitions in non-combustible categories — and is also imposing a specific vaping tax as well. This could hit margins if similar legislation is adopted more broadly.
    Positively, the titan and competitor Philip Morris International have finally agreed an eight-year long resolution to long running patent disputes on their cigarette alternatives technology.
    Dividend Yield: 10.22%
    Imperial Brands
    Imperial Brands is the second FTSE 100 tobacco stock — and faces many of the same issues as BATS: regulatory clampdowns and changing consumer habits.
    However in recent results, the company saw adjusted operating profit grow in line with its five year plan, including 10 basis points aggregate market share growth in its top-five priority combustible tobacco markets.
    Further, next generation product net revenue rose by 26% — and increased by a whopping 40% in Europe. Accordingly, the dividend was hiked by 4% alongside a 10% increase in share buybacks, leaving investors with total FY24 returns of £2.4 billion.
    CEO Stefan Bomhard enthuses that ‘means we are well placed to deliver on our commitment to enhance returns to investors, with increases to both our dividend and buyback programme. Looking ahead, we expect the continuing benefits of our transformation to enable a further acceleration in our adjusted operating profit growth in the final two years of our five-year strategy.’
    Dividend Yield: 8.81%
    M&G
    In September’s half-year results, M&G increased its interim dividend by 5% to 6.5p per share. For context, it saw positive net client inflows of £700 million — remaining positive into a third consecutive year. M&G also saw operating capital generation rise by 17% year-over-year to £505 million, driving adjusted operating profit 31% higher to £390 million.
    M&G plans to generate operating capital amounting to £2.5 billion by the end of 2024 and had achieved more than 50% of this three-year target, 18 months in. Moreover, its shareholder Solvency II Coverage ratio remains at the top end of the target range at 199%, with no defaults in the first half of the year.
    CEO Andrea Rossi enthused that the results ‘demonstrate the underlying strength of our business model, the resilience of our balance sheet… we have made progress against all three pillars of the strategy that we launched in March.’
    Full-year results will be released on 21 March 2024.
    Dividend Yield: 8.71%
    How to invest or trade in FTSE 100 shares with us
    Learn more about FTSE 100 shares Open an account with us or practise on a demo Select your opportunity Choose your position size and manage your risk Place your deal and monitor your trade You can either invest in shares directly or trade using spread betting or CFDs to benefit from leverage.
    Keep in mind, leverage means you can gain or lose money faster than expected. Because your position size is far greater than your deposit, you could lose more money than you put in. Be aware also that past performance is not an indicator of future returns.
    Learn more about the differences between trading and investing here.

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  4. MongiIG
    Phoenix Group, Vodafone and M&G could constitute the three best FTSE 100 dividend shares to watch next month. These shares are currently the highest yielding on the index.
    Source: Bloomberg  Charles Archer | Financial Writer, London The FTSE 100 has enjoyed somewhat of a volatile 2023 — falling to a recent low of 7,291 points on 27 October before recovering to 7,402 points today.
    Still, the UK’s premier index remains down by 1.9% year-to-date. Despite being filled with miners, oilers, and banks, many of which are profiting from historically higher commodity prices and tightening monetary policy, the index is likely reacting to wider geopolitical instability. For perspective, FTSE Russell data indicates that FTSE 100 companies generate circa 80% of their revenue from overseas.
    Further, the UK’s macroeconomic situation remains subject to significant variability. While the Bank of England has chosen to retain the base rate at 5.25% for now, CPI inflation remains more than triple the official 2% target at 6.7%.
    And on the fiscal policy side, the Autumn statement later this month could yield yet more uncertainty. Chancellor Jeremy Hunt has steadfastly refused to entertain the idea of significant tax cuts, despite significant political pressure to do so. Given the lateness of the election cycle and the state of the polls, some tax cuts may nevertheless be incoming.
    Accordingly, though the following three shares are currently the highest yielding on the index, it’s important to note that these yields may not be sustainable — and further — are subject to wider macroeconomic pressures. Phoenix Group has its debt pile, Vodafone shares a poor share price track record, and M&G’s popularity could see it become overvalued in time.
    For context, housebuilder Persimmon was consistently one of the highest-yielding FTSE 100 stocks for several years and has now been demoted to the FTSE 250 in the face of the weaker housing market. Past performance is not an indicator of future returns.
    Best FTSE 100 dividend stocks to watch?
    1. Phoenix Group
    With a dividend yield of 11.2%, this popular insurance company may be tempting to value investors eyeing its 24.7% share price fall year-to-date. For context, the company paid out 50.8p to investors last year — and the average analyst expectation is that this will increase to 52.6p in 2023.
    In H1 results, the FTSE 100 business reported cash generation of £898 million, above analyst predictions, allowing the company to boost its interim dividend by 5% to 26p per share.
    Given that Phoenix Group is now on track to generate £1.3 billion to £1.4 billion of cash generation for the full year, the dividend could now be safe — especially with its solvency II ratio of 180% at the top of the 140-180% management target.
    However, there are risks. Its bonds are likely falling sharply in value as rates continue to rise, and Phoenix also has a debt pile to manage.
    JP Morgan analysts have cut their price target from 655p to just 430p, and downgraded Phoenix to underweight, arguing that ‘the stock has too much debt leverage relative to peers, which creates numerous capital and growth risks in the long term.’
    2. Vodafone
    Vodafone shares have fallen by 46.5% over the past five years, and now offer a 10% dividend yield with a price-to-earnings ratio of just 2. While this may seem like an exceptional opportunity at first glance, it’s important to place these numbers into context.
    Vodafone saw after-tax revenue of €11.84 billion in the financial year to March 2023 — but this was heavily warped by one-off asset sales, including the €8.61 billion generated from the sale of Vantage Towers. If you remove the gains made from these sales, the price-to-equity ratio is significantly higher.
    However, the dividend itself appears relatively safe — Vodafone is selling more assets, including its Spanish arm for ‘at least’ €4.1 billion, more than enough cash to pay a dividend of €0.09 a share, as it has every year for the past six years.
    While some analysts think the dividend could be cut, the FTSE 100 telecoms operator reports results next week — investors don’t have long to wait to find out.
    3. M&G
    With a dividend yield of 9.8%, M&G is seemingly going from strength to strength. The savings and investment provider plans to generate operating capital amounting to £2.5 billion by the end of 2024.
    Happily, the FTSE 100 dividend stock has now achieved more than 50% of this three-year target, 18 months in — meaning it is on track. And its shareholder Solvency II Coverage ratio remains at the top end of the target range at 199%, with no defaults in the first half of the year. Yet even having risen by 7.6% year-to-date, it still boasts a near double-digit dividend yield.
    And in half-year results, M&G increased its interim dividend by 5% to 6.5p per share. For context, it saw positive net client inflows of £700 million — remaining positive into a third consecutive year. M&G also saw operating capital generation rise by 17% year-over-year to £505 million, driving adjusted operating profit 31% higher to £390 million.
    CEO Andrea Rossi enthuses that the results ‘demonstrate the underlying strength of our business model, the resilience of our balance sheet… we have made progress against all three pillars of the strategy that we launched in March.’
    The company’s strategy continues to shift with the times; it recently closed its property fund due to weak retail investor demand — but has also unveiled its first European long-term investment fund, which will invest in private credit.

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  5. MongiIG
    These five FTSE 100 dividend stocks could be some of the best to watch next month. These shares have been selected for their highly defensive natures.
    Source: Bloomberg   Indices Shares Dividend yield Revenue Debt FTSE Group  
     Charles Archer | Financial Writer, London What's on this page?
    FTSE 100 2023 Performance Defensive FTSE 100 Stocks Best FTSE 100 Dividend Stocks to Watch   FTSE 100 2023 performance
    2023 was a volatile year for the FTSE 100, but the UK’s premier index nevertheless ended the year up by 3.8%. This compares with a global average growth of 20% when using the MSCI All Country World Index, the 25% growth experienced by the S&P 500 and the 45% NASDAQ Composite leap driven by the artificial intelligence boom.
    However, the FTSE is widely regarded as a defensive index, and compares more favourably when dividend payouts are factored in. And for context, 2022 saw the NASDAQ Composite lose more than a third of its value while the FTSE rose by around 1%.
    Defensive FTSE 100 stocks
    Further, within the FTSE 100 there are some specific dividend stocks with a highly defensive nature. These companies enjoy an underlying business model whereby revenue and profits will continue to be generated regardless of the wider economic environment. Typically, this is because they provide essential products or services, or enjoy a wide economic moat.
    In other words, a hallmark of FTSE 100 defensive stocks is that they benefit from inelasticity of demand — such that they can increase prices to match inflation if necessary. This makes them attractive in downturns, but on the other hand, these types of stocks rarely deliver large capital gains.
    There are several sectors considered as defensive: for example, consumer staples, utilities, healthcare, and tobacco companies.
    When considering the best dividend stocks, key factors to consider include the dividend yield, the dividend coverage ratio (how many times a company could pay the dividend with current net income), the payout ratio, whether there’s a proven history of payouts, and whether the dividend has grown over time. In particular during this high rate environment, debt is a key factor to watch; previously manageable debt piles are becoming more expensive to maintain and could eat into dividends.
    These five FTSE 100 dividend stocks are popular defensive choices. But remember, past performance is not an indicator of future returns, and popularity does not mean an investment is better. In addition, while these are defensive companies, there are higher returns to be found in cyclical industries.
    Best FTSE 100 dividend stocks to watch
    1. Unilever2. Phoenix Group3. National Grid4. Vodafone5. British American Tobacco Unilever (LON: ULVR)
    Unilever is a multinational consumer goods company which produces a wide range of products including food, drinks, cleaning agents, beauty and personal care products. Some of its well-known brands include Dove, Ben & Jerry’s, and Hellmann's.
    Operating in the consumer staples sector, Unilever’s Q3 results saw underlying sales grow by 5.2% year-over-year, while its €billion premium brand portfolio saw underlying sales growth of 7.2%.
    Regardless of price rises, brand loyalty towards certain food staples appears robust.
    However, Unilever shares have fallen by nearly 10% over the past year — and the company has responded with an action plan to improve value creation through 2024. The dividend yield may appear underwhelming, but this is often the trade-off for defensive qualities.
    Dividend Yield: 4%
    Phoenix Group (LON: PHNX)
    Phoenix Group has made a strong recovery since mid-October, but nevertheless remains almost 14% down compared to a year ago. This may appear an opportunity, as H1 results saw the FTSE 100 insurer deliver cash generation of £898 million, allowing the company to boost its interim dividend by 5% to 26p per share.
    Given that Phoenix is now on track to generate £1.3 billion to £1.4 billion of cash generation for the full year, the dividend appears safe — especially with its solvency II ratio of 180% at the top of the 140-180% management target.
    Insurance is often seen as one of the safest defensive dividend sectors. However, the company’s bonds have likely fallen in value with elevated interest rates, and Phoenix also has a large debt pile to manage.
    JP Morgan analysts have cut their price target from 655p to just 430p, and downgraded Phoenix to underweight, arguing that ‘the stock has too much debt leverage relative to peers, which creates numerous capital and growth risks in the long term.’
    Dividend Yield: 9.8%
    National Grid (LON: NG)
    National Grid works within the utilities sector, operating electricity and natural gas transmission across the UK and parts of northeastern United States. It’s hard to think of a more defensive company than the one delivering the country’s energy network.
    Indeed, the FTSE 100 company has risen by 35% over the past five years and still boasts an index-beating dividend yield. National Grid has invested £7.7 billion in build smart, clean energy infrastructure to boost network reliability — and found £236 million of operating cost efficiencies during 2023 to mitigate the impact of high energy prices.
    And the company recently updated its five-year financial framework to 2025/26 to increase total cumulative capital investment to £42 billion — balancing dividends with future proofing.
    Dividend Yield: 5.4%
     
    Vodafone (LON: VOD)
    Vodafone shares have fallen by 56% over the past five years. This may be a cautionary tale — telecoms are widely regarded as defensive and yet the stock has failed to retain its value. On the other hand, new investors might be tempted by the double-digit dividend yield alongside a price-to-earnings ratio of just 2.
    But it’s worth noting this figure is based on asset sales in its last financial year which included the €8.61 billion generated from the sale of Vantage Towers. And in recent half-year results, net debt increased by €2.9 billion to €36.2 billion, raising questions over the dividend’s sustainability.
    However, recent German growth could be encouraging for investors because Vodafone relies on the country for a significant chunk of its revenue. For context, 2021 legislation saw housing associations banned from bundling TV services with rental contracts, hurting Vodafone’s prospects.
    CEO Margherita Della Valle enthused that ‘during the first half of the year, we have delivered improved revenue growth in nearly all of our markets and have returned to growth in Germany in the second quarter.’
    Dividend Yield: 11.2%
    British American Tobacco (LON: BATS)
    British American Tobacco is one of the world’s largest tobacco companies, boasting a brand portfolio including Lucky Strike, Dunhill, and Pall Mall. It’s also highly defensive given the addictive nature of nicotine — and yet, shares have fallen by almost a third over the past year.
    The company continues to face regulatory problems; the UK is considering a ban on single use vapes and both the government and the opposition have confirmed support for a phased ban of traditional tobacco products.
    BATS is also contending with the wider fall in smoking worldwide; recently writing off £25 billion in value due to falling outlook for its brands as cigarette sales struggle in the US. And like Vodafone and Phoenix, the FTSE 100 business also has a large debt pile.
    Nevertheless, the business is investing heavily in alternative products including vapes, though most profits are still derived from traditional products. In half-year results, overall revenue rose by 4.4% driven by these ‘new categories,’ whose revenue rose by 26.6%.
    Dividend Yield: 9.9%
    Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.
    *Based on revenue excluding FX (published financial statements, October 2021).

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  6. MongiIG
    Vodafone, Phoenix Group, British American Tobacco, M and G, and Imperial Brands could be the five best FTSE 100 dividend shares to watch next month. These shares are currently the highest yielding on the index.
    Source: Bloomberg   Indices Shares FTSE 100 Dividend Dividend yield Share  
     Charles Archer | Financial Writer, London What's on this page?
    1. Vodafone2. Phoenix Group3. British American Tobacco4. M&G5. Imperial Brands   The FTSE 100 has experienced somewhat of a volatile 2023 — falling to a recent low of 7,291 points on 27 October before recovering to 7,686 points today, up 1.75% year-to-date, and that excludes the £78.7 billion in dividends expected to be paid out this year.
    Of course, this volatility reflects wider macroeconomic concerns; while predictions are ten a penny, analysts are seemingly on the fence over whether the UK will enter recession, see a soft landing, or experience growth in 2024.
    But yesterday, the US Federal Reserve kept rates steady, maintaining the target range of between 5.25% and 5.5% — and policymakers have now forecast three rate cuts in 2024. While the S&P 500 responded positively, it’s worth noting that rate cuts do not always correspond with increased growth. This matters to the FTSE 100, because the UK’s largest companies derive the majority of their revenue from overseas — and the Bank of England has also voted to maintain the current 5.25% base rate.
    On the fiscal side, some analysts consider a spring election a distinct possibility — Capital Economics consider the Chancellor may have an extra £11 billion for tax cuts as a result of falling rates, but UK GDP fell by 0.3% in October and significant fiscal movement may not be possible after the recent NI cut.
    This leaves 2024 perhaps as uncertain as 2023, both for the FTSE 100, and for the currently highest yielding stocks on the index. As an example, housebuilder Persimmon was consistently one of the highest-yielding FTSE 100 stocks for several years and has now been demoted to the FTSE 250 in the face of the weaker housing market. Past performance is not an indicator of future returns.
    Top FTSE 100 dividend stocks to watch
    Vodafone (LON: VOD)
    Vodafone shares have fallen by 58% over the past five years, leaving the FTSE 100 telecoms operator with a double-digit dividend yield alongside a price-to-earnings ratio of just 2. While this may appear to be remarkable value at first glance, it’s worth noting this figure is based on asset sales in its last financial year which included the €8.61 billion generated from the sale of Vantage Towers.
    In recent half-year results, CEO Margherita Della Valle enthused that ‘during the first half of the year, we have delivered improved revenue growth in nearly all of our markets and have returned to growth in Germany in the second quarter.’
    German growth could be particularly encouraging because Vodafone relies on the country for a significant chunk of its revenue — and 2021 legislation saw housing associations banned from bundling TV services with rental contracts, hurting Vodafone’s prospects.
    However, while the dividend remained unchanged, net debt increased by €2.9 billion to €36.2 billion, raising questions over the dividend’s sustainability.
    Dividend Yield: 11.9%
    Phoenix Group (LON: PHNX)
    This popular FTSE 100 insurance company may be tempting to value investors eyeing its sharp recovery since mid-October. For context, the company paid out 50.8p to investors last year — and the average analyst expectation is that this will increase to 52.6p in 2023.
    In H1 results, the FTSE 100 business reported cash generation of £898 million, above analyst predictions, allowing the company to boost its interim dividend by 5% to 26p per share.
    Given that Phoenix Group is now on track to generate £1.3 billion to £1.4 billion of cash generation for the full year, the dividend could now be safe — especially with its solvency II ratio of 180% at the top of the 140-180% management target.
    However, there are risks. Its bonds are likely falling sharply in value as rates continue to rise, and Phoenix also has a debt pile to manage. JP Morgan analysts have cut their price target from 655p to just 430p, and downgraded Phoenix to underweight, arguing that ‘the stock has too much debt leverage relative to peers, which creates numerous capital and growth risks in the long term.’
    Dividend Yield: 10.5%
    British American Tobacco (LON: BATS)
    British American Tobacco is one of the world’s largest tobacco companies, boasting a brand portfolio including Lucky Strike, Dunhill, and Pall Mall. It’s also highly defensive given the addictive nature of nicotine.
    However, the company continues to face regulatory problems; the UK is planning to ban single use vapes and both the government and the opposition have confirmed support for a phased ban of traditional tobacco products. It also faces the wider fall in smoking worldwide, and a large debt pile as rates rise.
    However, the 29% share price dip year-to-date may be attractive to income investors. The company is investing heavily in alternative products including vapes, though most profits are still derived from traditional products. In half-year results, overall revenue rose by 4.4% driven by these ‘new categories,’ whose revenue rose by 26.6%.
    However, the company recently wrote off £25 billion in value due to falling outlook for its brands as cigarette sales struggle in the US.
    Dividend Yield: 10.1%
    M&G (LON: MNG)
    M&G is becoming a well-known FTSE 100 dividend share. The company plans to generate operating capital amounting to £2.5 billion by the end of 2024 and has now achieved more than 50% of this three-year target, 18 months in.
    Moreover, its shareholder Solvency II Coverage ratio remains at the top end of the target range at 199%, with no defaults in the first half of the year.
    And in half-year results, M&G increased its interim dividend by 5% to 6.5p per share. For context, it saw positive net client inflows of £700 million — remaining positive into a third consecutive year. M&G also saw operating capital generation rise by 17% year-over-year to £505 million, driving adjusted operating profit 31% higher to £390 million.
    CEO Andrea Rossi enthuses that the results ‘demonstrate the underlying strength of our business model, the resilience of our balance sheet… we have made progress against all three pillars of the strategy that we launched in March.’
    Dividend Yield: 9.2%
    Imperial Brands (LON: IMB)
    Imperial Brands is the second FTSE 100 tobacco stock — and faces many of the same issues as BATS: regulatory clampdowns and changing consumer habits.
    However in recent results, BATS saw adjusted operating profit grow in line with its five year plan, including 10 basis points aggregate market share growth in its top-five priority combustible tobacco markets.
    Further, next generation product net revenue rose by 26% — and increased by a whopping 40% in Europe. Accordingly, the dividend was hiked by 4% alongside a 10% increase in share buybacks, leaving investors with total FY24 returns of £2.4 billion.
    Dividend Yield: 8.2%
    Trade and invest in over 17,000 UK, US and global shares from zero commission with us, the UK’s No.1 trading provider.* Learn more about trading or investing in shares with us, or open an account to get started today.
    *Based on revenue excluding FX (published financial statements, October 2021).
          This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  7. MongiIG
    These five FTSE 100 dividend shares could be some of the best to watch next month. They are currently the highest yielding on the index.
    Source: Getty   Indices Shares Dividend FTSE 100 Investment Dividend yield
    Written by: Charles Archer | Financial Writer, London   The FTSE 100 may be continuing to underperform international indices, but the index nevertheless has risen by an impressive 5.5% year to date — and this excludes dividends. Having smashed through the symbolic 8,000-point barrier, the index currently rests on 8,143 points.
    FTSE 100 macroeconomics
    CPI inflation rose by 3.2% in the 12 months to March 2024 — down from 4% in January — and far below the peak of 11.1% in October 2022.
    Accordingly, all eyes are on potential Bank of England interest rate cuts. The base rate remains at 5.25%, and the market is expecting cuts later this year. However, the bank is concerned that inflation may resurge later this year. And chief economist Huw Pill recently warned that cuts are still ‘some way off,’ despite being ‘somewhat closer.’
    Indeed, rate-setters have very publicly disagreed on the direction of travel for some time, though arguably this is a sign of healthy debate. However, with the FTSE 100 now cruising near record highs, it’s possible that investors are placing too much faith in near-term rate cuts, which may not be forthcoming in a volatile economic environment.
    For context, after Brexit, the pandemic, the inflation crisis, Russia’s invasion of Ukraine, Silicon Valley Bank and Credit Suisse, alongside several other black swans, investors may not be taking rate cuts for granted. And continued strong wage data and relatively low unemployment means inflation could start to rise again later on in the year.
    On the other hand, businesses may need a helping hand. The Insolvency Service recently noted that the number of companies declared insolvent in England and Wales in February 2024 rose by 17% year-over-year to 2,102 firms. And there’s the delistings crisis to contemplate too, with Shell the latest company to warn it may move stateside.
    Then there’s the AI-fuelled surge of the US tech stocks to consider. This may be a sustainable rise given the tech advances at hand or may be a bubble that eventually bursts. If the latter, this excess capital may find itself within FTSE 100 dividend stocks until the storm blows over.
    This all makes investing in FTSE 100 dividend stocks complex. In particular, the highest dividend yields can be hostage to economic policy — where individual investment cases and changing financial landscapes can create value traps or payout irregularities.
    Best FTSE 100 dividend shares to watch
    These shares are the highest yielding on the index as of 1 May 2024. They may not be the best investments and the dividends and capital itself are not guaranteed.
    Vodafone Phoenix Group British American Tobacco M&G Legal & General Vodafone
    Vodafone's recent Q3 results saw total organic revenue grew by 4.7%, a significant improvement on the 1.8% growth of a year ago. Meanwhile, global services revenue rose by 8.8% while the B2B division grew by 5% year-over-year.
    CEO Margherita Della Valle enthuses that ‘going forward, our businesses will be operating in growing telco markets - where we hold strong positions - enabling us to deliver predictable, stronger growth in Europe. This will be coupled with our acceleration in B2B, as we continue to take share in an expanding digital services market.’
    The company remains one of the largest telecoms companies in Europe, and the current strategy may be delivering. For context, the all-important German sales rose by 0.3% in the quarter. However, the company is actually losing customers in the region, with the revenue growth driven by price increases.
    The key risk could remain the debt mountain, which remains multiples of Vodafone’s market capitalisation. However, the FTSE 100 operator has agreed an €8 billion sale of Vodafone Italy to bolster cash reserves and also return €4 billion to investors via share buybacks.
    Vodafone remains confident in previous guidance for future underlying earnings — and with a price to equity ratio of just 2 (despite this figure being affected by asset sales), it may be attractive to value investors.
    Dividend Yield: 10.98%
    Phoenix Group
    Phoenix Group saw another excellent set of results in March, with total cash generation of more than £2 billion — in excess of its upgraded target of £1.8 billion for 2023. This included a significant benefit of circa £400 million from the previously announced part VII transfer of Standard Life and Phoenix Life.
    CEO Andy Briggs notes that ‘Phoenix's vision is to be the UK's leading retirement savings and income business, and we are making great progress in delivering our strategy to achieve this, as our strong 2023 financial results demonstrate.’
    And PHNX also generated just over £1.5 billion in incremental new business long-term cash generation, beating its self-imposed target two years early.
    Despite the healthy dividend, the FTSE 100 insurer also maintains a strong balance sheet — a Solvency II surplus of £3.9 billion and a SII shareholder capital coverage ratio of 176%, towards the top end of its operating range of 140% to 180%.
    The company now plans to reduce its debt pile by at least £500 million by the end of 2026 and recommended a 2.5% increase in its final 2023 dividend, bringing the total payout for the year to 52.65p. Phoenix also intends to grow its operating cash generation from £1.1 billion in 2023 to £1.4 billion in 2026.
    However, mid-April saw Barclays ‘double-downgrade’ its outlook for Phoenix, moving to ‘underweight’ with a 500p price target — the share has now fallen below this figure. Analysts argued that ‘Phoenix faces insufficient cash from operations alone to support management's targets, a weaker capital position than peers, and a change in strategy from historical areas of strength to areas where the group is not meaningfully differentiated.’
    Dividend Yield: 10.66%
    British American Tobacco
    British American Tobacco full-year results saw the FTSE 100 dividend company’s revenue fall by 1.3% at constant currency rates, though rise by 3.1% on an organic basis at constant rates. This was driven by ‘new categories’ growth with revenue from non-combustibles now worth 16.5% of group revenue.
    CEO Tadeu Marroco enthuses that ‘2023 was another year of resilient financial performance and delivery in line with our guidance, underpinned by our global footprint and multi-category strategy, despite a challenging macro-environment. New Categories delivered continued volume-led revenue growth and increased profitability.’
    However, the FTSE 100 tobacco company will have to pivot fast, having written off £27.3 billion of its US brand portfolio after acknowledging they have ‘no long-term future.’ Compounding the weak combustibles growth, the UK recently announced a ban on disposable vapes which could hit BATS’ long-term ambitions in non-combustible categories — and is also imposing a specific vaping tax as well. This could hit margins if similar legislation is adopted more broadly.
    Positively, the titan and competitor Philip Morris International have finally agreed an eight-year long resolution to long running patent disputes on their cigarette alternatives technology. And in addition to the elevated dividend, BATS just revealed plans for a £700 million share buyback in 2024, with a further £900 million pencilled in for 2025 — partially funded by a part disposal in India’s ITC.
    Looking ahead, it continues to anticipate low-single digit organic growth in both revenue and underlying operating profit in 2024. But by 2026, the tobacco stock hopes to be achieving between 3% and 5% organic revenue growth.
    Marocco recently had to defend the London listing, arguing that moving to the US is not a ‘no-brainer.’
    Dividend Yield: 10.04%
    M&G
    M&G's recent full-year results saw adjusted operating profit before tax rise by 28% year-over-year to £797 million, reflecting ‘a resilient performance in Asset Management, and improved contribution from Life, Wealth and Corporate Centre.’
    Accordingly, operating capital generation rose by 21% to £996 million, driven by strong underlying capital generation of £752 million. Over the course of 2022 and 2023, M&G generated £1.8 billion in operating capital — leaving the FTSE 100 company on course to achieve its three-year cumulative operating capital generation target of £2.5 billion by end of 2024.
    The Shareholder Solvency II coverage ratio now stands at an impressive 203%, while the company announced a 2023 total ordinary dividend of 19.7p per share.
    CEO Andrea Rossi enthuses that ‘this financial performance underscores the importance of our balanced and diversified business model, with strong growth achieved despite continued macroeconomic uncertainty… I am confident about the prospects for M&G as we remain focused on executing our strategic plan.’
    Dividend Yield: 9.88%
    Legal & General
    Legal & General has for years consistently been one of the more popular FTSE 100 dividend shares — in common with Phoenix, insurance is perhaps viewed as a reliable dividend sector.
    In full-year 2023 results, LGEN saw operating profit rise slightly to £1,667 million — with Solvency II capital generation at a stable £1.8 billion. However, it also saw record volume across the insurance businesses, including £13.7 billion of institutional annuities and £1.4 billion of individual annuities.
    The business generated cumulative Solvency II capital generation of £6.8 billion and is on target to achieve between £8 billion and £9 billion by 2024. This left cumulative net surplus generation over the dividend commitment of £800 million — and for context, Legal & General intends to grow the dividend by 5% for FY24.
    CEO António Simões enthused that ‘We are on course to achieve our five-year targets and demonstrated resilience in challenging markets to achieve record new business volumes in pension risk transfer, UK annuities and US protection, increasing our store of future profit. Our international assets under management and alternative assets portfolio continue to grow, as does our position in the UK defined contribution pensions market.’
    The company’s Capital Markets Day is scheduled for 12 June.
    Dividend Yield: 8.56%
     

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  8. MongiIG
    These five FTSE 100 dividend shares could be some of the best to watch next month. They are currently the highest yielding on the index.
    Source: Bloomberg   Indices Shares Dividend FTSE 100 Investment Stock market index
    Written by: Charles Archer | Financial Writer, London Down 1.4% year-to-date, the FTSE 100 has once again started the year by underperforming the S&P 500 and Nasdaq Composite. Of course, the index is famously viewed as a more conservative investment — filled with mature banks, oilers and miners which pay out dividends rather than focus on capital growth.
    For context, the FTSE 100 rose slightly in 2022 as interest rates rose sharply, while the Nasdaq fell into a bear market. Over the longer term, the US stocks have historically outperformed the UK (though past performance is not an indicator of future returns), but the best FTSE 100 dividend stocks are often included in portfolios for the relatively reliable income.
    Of course, many FTSE 100 companies deliver high dividend returns — though many are cyclical and the highest returns on offer may not be sustainable. It’s worth noting that popular dividend companies tend to attract significant investment in times of macroeconomic stress, which can become a problem as the economy improves and investors sell shares to seek more lucrative opportunities elsewhere.
    On the monetary policy front, the Bank of England has once again kept the base rate at 5.25% — a rate it has kept since September 2023 — though now expects CPI inflation to fall to 2% by May. While it has signalled that rate cuts may be incoming, the Bank has also warned that it would need to see evidence that inflation was sticking to the target level first.
    For context, the Bank still expects that inflation will rise back above the target range later this year due to robust pay growth and the fading impact from lower energy prices. Governor Andrew Bailey has specifically noted that ‘we need to see more evidence that inflation is set to fall all the way to the 2% target, and stay there, before we can lower interest rates.’
    On the fiscal policy front, the government will issue the spring budget on 6 March. While Chancellor Jeremy Hunt has tried to make clear the scope for tax cuts is limited — especially after the recent IMF intervention — the political reality is that this may be the last major fiscal policy in place before the General Election.
    Top FTSE 100 dividend shares to watch
    These shares are the highest yielding on the index as of 5 February 2024. They may not be the best investments and the dividends and capital itself are not guaranteed.
    Vodafone Phoenix Group British American Tobacco M&G St James's Place Vodafone
    Today’s Vodafone quarterly update received a mixed reaction from the markets —total organic revenue grew by 4.7%, a significant improvement on the 1.8% growth of a year ago. The company remains one of the largest telecoms companies in Europe, and the current strategy may be delivering. Global services revenue is up by 8.8% while the B2B division grew by 5% year-over-year.
    Further, the all-important German sales rose by 0.3% in the quarter. However, the company is actually losing customers in the region, with the revenue growth driven by price increases.
    The key risk could remain the circa £55 billion debt mountain, which remains multiples of Vodafone’s market capitalisation. However, the company remains confident in previous guidance for future underlying earnings — and with a price to equity ratio of just 2, it may be attractive to value investors.
    Dividend Yield: 11.2%
    Phoenix Group
    Phoenix Group's recent trading update saw the company deliver £1.5 billion of new business long-term cash generation in 2023, achieving its 2025 target much earlier than expected.
    CEO Andy Briggs remains ‘delighted that Phoenix Group has delivered another year of strong organic growth in 2023, with increased new business net fund flows supporting us… we have achieved our 2025 new business long-term cash target two years early, reflecting the focus and investment we have put into our growth strategy.’
    For context, new business net fund inflows rose by circa 80% year-on-year to £7 billion, driven by improved performances at the Standard Life branded Pension & Savings and Retirement Solutions segments.
    Within pensions and savings, Phoenix’s workplace business saw net fund flows nearly double year-over-year to circa £4.5 billion. According to Briggs, this included ‘the transfer of one of the largest workplace schemes tendered in the UK market in recent years.’
    Dividend Yield: 10.3%
    British American Tobacco
    British American Tobacco is due to report full-year results this week — but despite the high dividend, the company is once again bracing for poor numbers. Analysts consider that the company will deliver revenue growth of between just 3% and 5% due to difficulties in the US market. For context, the FTSE 100 tobacco company wrote off £25 billion of its US brand portfolio recently after acknowledging they have ‘no long-term future.’
    Compounding the weak combustibles growth, the UK recently announced a ban on disposable vapes which could hit BATS’ long-term ambitions in non-combustible categories — though may also drive out cheaper brands, especially if similar bans are introduced elsewhere.
    Positively, the titan and competitor Philip Morris International have finally agreed an eight-year long resolution to long running patent disputes on their cigarette alternatives technology.
    Dividend Yield: 9.8%
    M&G
    M&G plans to generate operating capital amounting to £2.5 billion by the end of 2024 and had achieved more than 50% of this three-year target, 18 months in. Moreover, its shareholder Solvency II Coverage ratio remains at the top end of the target range at 199%, with no defaults in the first half of the year.
    In half-year results, M&G increased its interim dividend by 5% to 6.5p per share. For context, it saw positive net client inflows of £700 million — remaining positive into a third consecutive year. M&G also saw operating capital generation rise by 17% year-over-year to £505 million, driving adjusted operating profit 31% higher to £390 million.
    CEO Andrea Rossi enthused that the results ‘demonstrate the underlying strength of our business model, the resilience of our balance sheet… we have made progress against all three pillars of the strategy that we launched in March.’
    Full-year results will be released in March.
    Dividend Yield: 9%
    St James’s Place
    Shares in St James's Place have nearly halved over the past year, with the wealth manager now reporting that it saw only £5.1 billion in net inflows in the 2023 calendar year — compared to £9.8 billion in 2022.
    However, it remains the largest wealth manager in the UK, with more than 900,000 clients and total funds under management now standing at a record £168.2 billion, up from £148.4 billion at the end of 2022.
    New CEO Mark FitzPatrick plans to launch an efficiency review into the business within the next few months — partially driven by its October announcement to radically overhaul its fee structure in response to pressure from the Financial Conduct Authority, including scrapping exit fees to clients withdrawing from pension and bond investments early.
    Dividend Yield: 8.2%
     

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  9. MongiIG
    These five FTSE 100 dividend shares could be some of the best to watch next month. They are currently the highest yielding on the index.
    Source Bloomberg   Indices Shares FTSE 100 Dividend Investment Dividend yield  
    Written by: Charles Archer | Financial Writer, London   The FTSE 100 may be continuing to underperform international indices, but the index nevertheless has risen by 2.3% year to date (excluding dividends) and nearly broke the symbolic 8,000-point barrier yesterday before correcting downwards.
    FTSE 100 macroeconomics
    In the recent budget, Chancellor Jeremy Hunt introduced the ‘British ISA,’ which when rolled out will allow UK-based investors an additional £5,000 allowance on top of the current £20,000, which can only be invested specifically in ‘UK companies.’
    The government is trying to spur internal investment, in an attempt to stem UK delistings, the IPO drought, and continued private equity bids for ‘undervalued’ businesses listed in London.
    On the macroeconomic front, the base rate remains at 5.25%, while CPI inflation stands at 3.4% and is expected to fall below 2% within the next few months. However, strong wage data and relatively low unemployment means inflation could start to rise again later on.
    On the other hand, Bank of England Governor Andrew Bailey has advised that rate cuts are ‘on the way.’ But after Brexit, the pandemic, the inflation crisis, Russia’s invasion of Ukraine, Silicon Valley Bank and Credit Suisse, alongside several other black swans, investors may not be taking rate cuts for granted.
    Then there’s the AI-fuelled surge of the US tech stocks to consider. This may be a sustainable rise given the tech advances at hand or may be a bubble that eventually bursts. If the latter, this excess capital may find itself within FTSE 100 dividend stocks until the storm blows over.
    This all makes investing in FTSE 100 dividend stocks complex. In particular, the highest dividend yields can be hostage to economic policy — where individual investment cases and changing financial landscapes can create value traps or payout irregularities.
    FTSE 100 dividend shares to watch
    These shares are the highest yielding on the index as of 4 April 2024. They may not be the best investments and the dividends and capital itself are not guaranteed.
    Vodafone British American Tobacco Phoenix Group M & G Imperial Brands Vodafone
    Vodafone's recent Q3 results saw total organic revenue grew by 4.7%, a significant improvement on the 1.8% growth of a year ago. Meanwhile, global services revenue rose by 8.8% while the B2B division grew by 5% year-over-year.
    The company remains one of the largest telecoms companies in Europe, and the current strategy may be delivering. For context, the all-important German sales rose by 0.3% in the quarter. However, the company is actually losing customers in the region, with the revenue growth driven by price increases.
    The key risk could remain the debt mountain, which remains multiples of Vodafone’s market capitalisation. However, the FTSE 100 operator has agreed an €8 billion sale of Vodafone Italy to bolster cash reserves and also return €4 billion to investors via share buybacks.
    CEO Margherita Della Valle enthuses that ‘Going forward, our businesses will be operating in growing telco markets - where we hold strong positions - enabling us to deliver predictable, stronger growth in Europe. This will be coupled with our acceleration in B2B, as we continue to take share in an expanding digital services market.’
    Vodafone remains confident in previous guidance for future underlying earnings — and with a price to equity ratio of just 2 (despite this figure being affected by asset sales), it may be attractive to value investors.
    Dividend Yield: 10.96%
    British American Tobacco
    British American Tobacco full-year results saw the FTSE 100 dividend company’s revenue fall by 1.3% at constant currency rates, though rise by 3.1% on an organic basis at constant rates. This was driven by ‘new categories’ growth with revenue from non-combustibles now worth 16.5% of group revenue.
    CEO Tadeu Marroco enthuses that ‘2023 was another year of resilient financial performance and delivery in line with our guidance, underpinned by our global footprint and multi-category strategy, despite a challenging macro-environment. New Categories delivered continued volume-led revenue growth and increased profitability.’
    However, the FTSE 100 tobacco company will have to pivot fast, having written off £27.3 billion of its US brand portfolio after acknowledging they have ‘no long-term future.’ Compounding the weak combustibles growth, the UK recently announced a ban on disposable vapes which could hit BATS’ long-term ambitions in non-combustible categories — and is also imposing a specific vaping tax as well. This could hit margins if similar legislation is adopted more broadly.
    Positively, the titan and competitor Philip Morris International have finally agreed an eight-year long resolution to long running patent disputes on their cigarette alternatives technology. And in addition to the elevated dividend, BATS is continuing with its share buyback programme, most recently buying 280,000 shares on 28 March that it plans to cancel.
    Dividend Yield: 9.80%
    Phoenix Group
    Phoenix Group saw another excellent set of results in March, with total cash generation of more than £2 billion — in excess of its upgraded target of £1.8 billion for 2023. This included a significant benefit of circa £400 million from the previously announced part VII transfer of Standard Life and Phoenix Life.
    And PHNX also generated just over £1.5 billion in incremental new business long-term cash generation, beating its self-imposed target two years early.
    Despite the healthy dividend, the FTSE 100 insurer also maintains a strong balance sheet — a Solvency II surplus of £3.9 billion and a SII shareholder capital coverage ratio of 176%, towards the top end of its operating range of 140% to 180%.
    The company now plans to reduce its debt pile by at least £500 million by the end of 2026 and recommended a 2.5% increase in its final 2023 dividend, bringing the total payout for the year to 52.65p. Phoenix also intends to grow its operating cash generation from £1.1 billion in 2023 to £1.4 billion in 2026.
    CEO Andy Briggs notes that ‘Phoenix's vision is to be the UK's leading retirement savings and income business, and we are making great progress in delivering our strategy to achieve this, as our strong 2023 financial results demonstrate.’
    Dividend Yield: 9.59%
    M&G
    M&G's recent full-year results saw adjusted operating profit before tax rise by 28% year-over-year to £797 million, reflecting ‘a resilient performance in Asset Management, and improved contribution from Life, Wealth and Corporate Centre.’
    Accordingly, operating capital generation rose by 21% to £996 million, driven by strong underlying capital generation of £752 million. Over the course of 2022 and 2023, M&G generated £1.8 billion in operating capital — leaving the FTSE 100 company on course to achieve its three-year cumulative operating capital generation target of £2.5 billion by end of 2024.
    The Shareholder Solvency II coverage ratio now stands at an impressive 203%, while the company announced a 2023 total ordinary dividend of 19.7p per share.
    CEO Andrea Rossi enthuses that ‘This financial performance underscores the importance of our balanced and diversified business model, with strong growth achieved despite continued macroeconomic uncertainty… I am confident about the prospects for M&G as we remain focused on executing our strategic plan.’
    Dividend Yield: 9.24%
    Imperial Brands
    Imperial Brands is the second FTSE 100 tobacco stock — and faces many of the same issues as BATS: regulatory clampdowns and changing consumer habits.
    However in recent results, the company saw adjusted operating profit grow in line with its five year plan, including 10 basis points aggregate market share growth in its top-five priority combustible tobacco markets.
    Further, next generation product net revenue rose by 26% — and increased by a whopping 40% in Europe. Accordingly, the dividend was hiked by 4% alongside a 10% increase in share buybacks, leaving investors with total FY24 returns of £2.4 billion.
    CEO Stefan Bomhard enthuses that ‘means we are well placed to deliver on our commitment to enhance returns to investors, with increases to both our dividend and buyback programme. Looking ahead, we expect the continuing benefits of our transformation to enable a further acceleration in our adjusted operating profit growth in the final two years of our five-year strategy.’
    Like BATS, Imperial is continuing to buy back shares, and recently kicked off the second half of its previously announced £1.1 billion program.
    Dividend Yield: 8.34%
     
        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  10. MongiIG
    Phoenix Group, M&G, and British American Tobacco could be the three best FTSE 100 dividend shares to watch next month. These shares are currently the highest yielding on the index.
    Source: Bloomberg   Indices Shares Dividend FTSE 100 Dividend yield British American Tobacco  
     Charles Archer | Financial Writer, London The FTSE 100 continues to remain volatile in 2023, having fallen to 7,412 points on 4 October but recovering to 7,601 points today. This mirrors similar peaks and troughs experienced throughout the year, perhaps reflecting the volatility not just in the UK, but in the international markets where most FTSE 100 corporate income is derived.
    So far this month, the best FTSE 100 dividend stocks have been affected by three key pieces of news:
    First, Metro Bank — which has been struggling for some time — was forced to agree a £925 million rescue package. Investors in FTSE 100 banks and perhaps the wider fintech sector may now be looking nervously for the next problem.
    Second, the Hamas attacks on Israel and subsequent response have driven the oil price higher for myriad complex reasons. One component is that a US-backed deal to bring Saudi Arabia and Israel closer together, which would have included increased Saudi Arabian oil output, is now unlikely to come to fruition anytime soon. Another is that Israel has been forced to suspend production at its Tamar gas field for fear of Hamas rockets.
    Third, the International Monetary Fund announced today that it now expects the UK to have the highest inflation and slowest growth within the G7 economy in 2024. While this prediction came with some caveats, and the outfit’s past predictions regarding the UK last year were perhaps off the mark, FTSE 100 investors may be concerned.
    But the best FTSE 100 dividend shares continue to pay out inflation-beating returns. As a caveat, the following three shares are simply the highest-yielding stocks and may or may not be capable of paying out these outsized returns sustainably.
    Past performance is not an indicator of future returns.
    Best FTSE 100 dividend stocks to watch
    1. Phoenix Group
    With an 11% dividend yield, Phoenix Group shares may be tempting to value investors as the FTSE 100 insurer has fallen by 23.2% year-to-date to 473p. For context, the company paid out 50.8p to investors last year — and the average analyst expectation is for 52.6p in 2023.
    In H1 results, the company saw cash generation of £898 million, above expectations, allowing the company to boost its interim dividend by 5% to 26p per share. Given that the company is on track to generate £1.3 billion to £1.4 billion of cash generation for the full year, the dividend may appear safe for now — especially with its solvency II ratio of 180% at the top of the 140-180% management target.
    However, there are risks. Its bonds are likely falling sharply in value as rates continue to rise, and Phoenix also has its own debt pile to manage. JP Morgan analysts have cut their price target from 655p to just 430p, and downgraded Phoenix to underweight, arguing that ‘the stock has too much debt leverage relative to peers, which creates numerous capital and growth risks in the long term.’
    2. M&G
    M&G is fast becoming a popular FTSE 100 dividend stock among some investors. The savings and investment provider plans to generate operating capital of £2.5 billion by the end of 2024.
    Happily, the company has now achieved 53% of this three-year target 18 months in — remaining firmly on track. And its shareholder Solvency II Coverage ratio remains at the top end of the target range at 199%, with no defaults in the first half of the year. Yet even having risen by 4.4% year-to-date, it still boasts a double-digit dividend yield of 10%.
    In half-year results, the company saw positive net client inflows of £700 million — remaining positive into a third consecutive year. M&G also saw operating capital generation rise by 17% year-over-year to £505 million, driving adjusted operating profit 31% higher to £390 million. Accordingly, it also managed to increase its interim dividend by 5% to 6.5p per share.
    CEO Andrea Rossi enthuses that the results ‘demonstrate the underlying strength of our business model, the resilience of our balance sheet… we have made progress against all three pillars of the strategy that we launched in March – maintaining our financial strength through capital discipline; mobilising the Transformation programme to simplify our business and improve client outcomes; and delivering growth with positive net client inflows.’
    3. British American Tobacco
    British American Tobacco is one of the world’s largest tobacco companies, boasting a brand portfolio including Lucky Strike, Dunhill, and Pall Mall. It’s also highly defensive given the addictive nature of nicotine.
    And the FTSE 100 stock offers a 9.2% dividend yield after falling by 23.8% year-to-date. Despite ESG concerns, this dip may be attractive to income investors.
    The company is investing heavily in alternative products such as vapes as governments continue to crack down on smoking, though most profits are still derived from traditional products. In half-year results, overall revenue rose by 4.4% driven by these ‘new categories,’ whose revenue rose by 26.6%. Accordingly, BATS is making good progress on its long-standing target to generate £5 billion from this sector by 2025.
    New CEO Tadeu Marroco is ‘pleased with the resilient performance of BAT in the first half of 2023 and the renewed sense of energy across the organisation...I remain confident that New Categories will deliver a positive contribution in 2024. However, we do not expect contribution growth to be linear, as levels of investment will align with the phasing of our big innovation platforms.’
    However, the company continues to face regulatory problems; the UK is planning to ban single use vapes and both the government and the opposition have confirmed support for a phased ban of traditional tobacco products. It also faces the wider fall in smoking worldwide, and a large debt pile as rates rise.

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  11. MongiIG
    Glencore, M&G, and Imperial brands could constitute the three best FTSE 100 dividend shares to watch in October 2023. These shares have been picked for their elevated dividends, currently much higher than the index average.
    Source: Bloomberg   Indices Shares Inflation Dividend FTSE 100 Investment
     Charles Archer | Financial Writer, London The FTSE 100 has experienced a volatile 2023, starting the year at 7,554 points, before breaking the symbolic 8,014 points barrier in February, and then falling to as low as 7,258 points during August.
    The index now stands at 7,499 points after yet more volatility — widely expected given the FTSE’s overweighted composition of oilers, miners, and banks. For context, FTSE Russell data shows that 82% of FTSE 100 companies’ income is derived from overseas.
    The next couple of weeks will be critical to deciding where the Bank of England may go regarding monetary policy. Unemployment figures, GDP data for July, and August’s CPI inflation statistics are all to come before the next Monetary Policy Committee meeting.
    And perhaps more importantly, the Office for Budget Responsibility is compiling economic forecasts which will inform the Chancellor’s Autumn Statement on 22 November. For context, the March budget forecast was that the Bank of England base rate would peak at 4.3%, and it’s already at 5.25%. Ten-year UK borrowing rates were forecast to be an average of 3.6% in March, and they reached 4.8% last month.
    And the OBR had at the time stated that a 1% point rise in borrowing costs would end up ‘wiping out headroom’ the Chancellor might want for tax cuts. In a pre-election era, one where the government must now fork out the cash to repair or replace school buildings while also hoping to deliver some tax cutting, it continues to be an uncertain environment.
    The Chancellor even told Bloomberg that an increase in fiscal headroom was ‘unlikely’ given that inflation has remained stickier than predicted in March — and noted that ‘when you're trying to bring down inflation, you have to be really careful not to pump extra money into the economy.’
    Regarding inflation, while CPI dipped from 7.9% in June to 6.8% in July, the Bank thinks rising petrol prices will push this crucial figure back up to 7.1% in August. However, Governor Andrew Bailey told MPs last week that inflation should still fall ‘markedly’ by the end of 2023, with rates ‘much nearer now to the top of the cycle.’
    Nevertheless, MPC member Catherine Mann has warned that she would ‘rather err on the side of tightening.’ If CPI inflation does indeed rise the day before the MPC meeting, a 25 basis points rise in the base rate may become likely — particularly when you consider the revised GDP figures, showing the UK has recovered from the pandemic far faster than previously through.
    As an aside, £9 billion packaging titan Smurfit Kappa plans to merge with rival WestRock and leave the London Stock Exchange for the NYSE — adding to the UK’s market woes.
    But of course, where there’s uncertainty, there’s opportunity.
    Best FTSE 100 dividend shares to watch
    1. Glencore
    Glencore's half-year adjusted core earnings were perhaps disappointing, falling by more than 50% to $9.39 billion, a far worse result than average city analyst estimates.
    However, the dividend yield remains at 8%, indicating a potentially attractive entry point for a company that may be a little oversold. As CEO Gary Nagle notes, this period ‘may not be the bonanza that everybody was expecting, but China is not all that bad,’ referencing the country’s increased governmental economic support promises as it fights creeping deflation.
    Further, the company is gearing up for the next bull cycle, especially in the critical minerals space. It’s made a $22.5 billion bid for Teck’s coal assets, and has increased interests at various companies while simultaneously selling off 20 non-core assets.
    2. M & G
    M&G is fast becoming a popular FTSE 100 dividend stock among some investors. The savings and investment provider plans to generate operating capital of £2.5 billion by the end of 2024, and yet still boasts a double-digit dividend yield of 10%.
    In Q1 results in June, CEO Andrea Rossi enthused that ‘M&G started the year building on our strong momentum from 2022. At the full-year results we identified three priorities for the Group: maintain financial strength through capital discipline, simplify the business, and deliver profitable growth focusing on Asset Management and Wealth. I am pleased to say we have made good progress on each of those fronts and are on track to deliver on our ambitious targets.’
    Encouragingly, the company saw £1 billion in net client inflows in the wholesale asset management division — an excellent result in a high rate environment. Having returned close to £1 billion to shareholders via buybacks and dividends, the all-important Solvency II coverage ratio still stands at an impressive 200%, and the company may report another excellent set of results later in September.
    3. Imperial Brands
    Imperial Brands — despite potential ESG considerations — remains a popular FTSE 100 dividend stock, with a dependable dividend currently yielding 8%. Tobacco companies are highly defensive companies which are also typically highly cash generative given the addictive nature of nicotine.
    While traditional tobacco products may be declining in some markets, the company is investing heavily in new categories including vaping. Half-year results saw ‘next generation product’ net revenue rise by 19.8% year-over-year, with this acceleration ‘driven by product launches across categories.’
    Meanwhile, operating profits rose by 28% year-over-year to £1.5 billion, mostly as the comparative period included the costs of exiting Russia. However, revenue also increased slightly by 0.3% to £15.4 billion, while volume falls in Germany and the UK were offset by rising sales in Australia, Spain, and the US.
    While net debt is rising due to increasing investment in its next generation products, the dividend rose by 1.5% — and Imperial remains on track to complete its promised £1 billion share buyback program this year.
    Remember, past performance is not an indicator of future returns.

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  12. MongiIG
    British Land, Persimmon and PureTech Health could constitute the three best FTSE 250 shares to watch next month. These shares have been selected for recent market news.
    Source: Bloomberg   Indices Unemployment FTSE 100 Anxiety disorder Clinical trial Stress
     Charles Archer | Financial Writer, London The FTSE 250 — unlike its older brother the FTSE 100 — is domestically focused. And the UK’s economic outlook remains as precarious as it has through much of 2023, with Office for National Statistics GDP data showing that the economy saw no growth in the three months to September.
    The data body has also released information showing that wages in the same period rose at an annual rate of 7.7%, faster than price rises. For context, CPI inflation is currently at 6.7% — and a Reuters poll of analysts considers this key metric will fall to just 4.8% at the next reading tomorrow.
    Meanwhile, though the unemployment rate remains unchanged at 4.2%, job vacancies between August and October fell by 58,000 to 957,000 — the sixteenth month in a row where vacancies have fallen. And the Bank of England has already warned that higher rates could drive unemployment to 5% in 2024, resulting in slower wage growth and 150,000 job losses.
    For context, 2,315 companies fell into insolvency in England and Wales in October, 18% more than in October 2022, and also 18% more than in September 2023.
    While there may be some movement on the fiscal side with the Autumn Statement this month, growth can be dependent on interest rates. Morgan Stanley analysts think that rate cuts could arrive as soon as May 2024, and the base rate could fall to 4.25% by the end of next year.
    But as usual, Monetary Policy Committee members remain divided — chief economist Huw Pill has already argued that it ‘doesn’t seem totally unreasonable’ to expect a rate cut by next August — but Governor Andrew Bailey still thinks it’s ‘really too early’ to talk about the subject.
    And this makes the macroeconomic landscape complex for FTSE 250 companies — on 2 November, the index was the best performing in the world. But of course, past performance is not an indicator of future returns.
    Best FTSE 250 shares to watch?
    1. British Land
    British Land shares rose by 9.1% today after on the back of solid half-year results and positive broker comments. In the six months to 20 September 2023, the company saw underlying earnings rise by 3.4% — while the interim dividend also rose by almost 5%.
    While British Land shares are still down by more than 40% over the past five years, this can be where value is found in the FTSE 250. CEO Simon Carter enthuses that underlying profits are increasing because of strong leasing and cost control — and occupancy is at an excellent 96%. The CEO also notes that as rates start to fall, the quality of British Land’s assets will ‘reassert themselves as the primary drivers of performance.’
    In other words, this cyclical company may be at the bottom of its cycle. Stifel has hailed the results as ‘resilient…given the market backdrop’ and that ‘given the clear slowdown in valuation declines and increased clarity of future interest rates, we think the shares look oversold at a 44% discount to spot NTA.’ The 6.8% dividend yield could also look attractive.
    2. Persimmon
    Persimmon shares have lost more than 40% of their value over the past five years, with the housebuilder ejected from the FTSE 100 as its market capitalisation fell with rising rates. However, it increased its full-year build target to 9,500 homes this month — 500 more than its August prediction.
    Of course, most of its quarterly earnings make for poor reading. Completions are down by more than a third in the three months to September 2023 at just 1,439 homes — and the order book has also fallen by a third to just £930 million. The FTSE 250 operator has also warned that market conditions ‘will remain highly uncertain’ going into 2024.
    Further, market leading property portal Rightmove data shows that asking prices for homes in the UK have fallen by 1.7% — or more than £6,000 — this month to £362,143. This represents the steepest fall in five years for the time of the year.
    But Persimmon shares hit just 960p on 25 October and have now recovered to 1,239p today. Arguably, much of the negative news could be priced in — and housebuilding stocks are well-known as cyclical opportunities. For context, US CPI data has come in under expectations, and the stock has reacted positively today.
    3. PureTech Health
    PureTech Health is definitely not a household name — unlike the shares above — but the smaller FTSE 250 company today announced that its LYT-300 (Oral Allopregnanolone) clinical trial candidate achieved its primary endpoint in a Phase 2a acute anxiety trial within healthy volunteers.
    Specifically, it achieved a statistically significant reduction in the stress hormone response, as measured by salivary cortisol, compared to placebo. And this ‘proof-of-concept’ trial, which demonstrates a reduced physiological stress response, could support the further development of LYT-300 as a treatment for a range of anxiety disorders.
    For perspective, anxiety affects nearly 30% of all US adults, but just like antidepressants, anti-anxiety medications have drawbacks including mixed efficacy, the potential for abuse, delayed onset of action and poor tolerability — and this treatment could overcome these negative side effects.

    LYT-300 was well-tolerated across the trial, with only transient mild or moderate adverse events. Of course, the company has more than one asset — with 27 current candidates, one filed for FDA approval and two taken from inception to regulatory clearance.
    But despite this success, all early stage clinical trials carry some risk.

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  13. MongiIG
    Persimmon, easyJet, Halfords, Baltic Classifieds and Currys could be the five best FTSE 250 shares to watch next month. These shares have been selected for recent market news.
    Source: Bloomberg   Indices Shares FTSE 100 EasyJet Tax Dividend    Charles Archer | Financial Writer, London What's on this page?
    1. Persimmon2. easyJet3. Halfords4. Baltic Classifieds5. Currys   Heading into the new year, the UK’s macroeconomic environment is perhaps more encouraging than has been the case for most of 2023. CPI inflation has fallen to 4.6% and appears on a downwards trajectory — and while the base rate remains at a relatively elevated 5.25%, many analysts consider that monetary policy will start to ease in 2024.
    However, UK GDP fell unexpectedly in October — by 0.3% in the month, after a 0.2% growth in September. Meanwhile last month, The Financial Times reported on Insolvency Service data indicating that company insolvencies are at their highest level since 2009.
    Analysts remain divided on whether the UK will experience a recession in 2024, or scrape through to a relatively soft landing. Indeed, whether equities, commodities or real estate, there appears to be no shortage of fence sitting — making considering the best FTSE 250 shares to watch next month somewhat of a challenge.
    For perspective, the index is essentially flat for the year, reflecting this ambiguity. The FTSE 250 started out at 19,134 points, rose sharply to 20,615 points in early February, fell to 16,783 points by late October and is now at 19,221 points.
    However, where’s there’s uncertainty, there’s also often opportunity. But of course, past performance is not an indicator of future returns.
    Top FTSE 250 Shares to watch
    Persimmon (LON: PSN)
    Persimmon shares sunk dramatically over the course of 2023 to just 960p as recently as late October — and was ejected from the FTSE 100. But the housebuilder has since recovered sharply to 1,343p as investors digest whether the selloff was perhaps an overreaction.
    For context, mortgage rates now appear to be cooling, with some fixed deals currently falling below 4%. And while new home completions were 37% lower year-over-year in Q3 2023, Halifax is predicting that UK house prices will fall by just 2-4% in 2024.
    Of course, Persimmon’s market capitalisation remains at less than 50% of its mid-2021 value, reflecting weaker results and a poor outlook. But housing is well-known as a cyclical industry; and long-term investors with an eye on value may take note. Any significant upside in 2024 could well see the housebuilder readmitted to the FTSE 100.
    easyJet (LON: EZJ)
    easyJet shares enjoyed a volatile 2023 — and were worth just 360p in mid-October but have recovered to 499p today. The airline recently reported a record H2 2023 financial performance and now maintains a ‘positive outlook’ for FY 2024.
    For perspective, the FTSE 250 airline saw FY23 headline profit before tax of £455 million — a £633 million year-on-year improvement — while easyJet holidays jumped by 221%, delivering £122 million in profit before tax. Total revenue rose by 42% to £8.17 billion, driven by pricing power, increased capacity, improved load factors and the aforesaid growth of easyJet holidays.
    On the other hand, costs rose by 30%, but easyJet remains on track to restart dividends, with 4.5p per share worth £34 million to be paid out in early 2024. And it even expects this payout to ‘increase to 20% of headline PAT on FY24's result’ with the ‘potential to increase level of future returns to be assessed over the coming years.’
    With substantial fleet expansion promised, the long-term ambition is to deliver more than £1 billion of profit before tax.
    Halfords (LON: HFD)
    Halfords shares sunk late last month after issuing tightened guidance to the lower end of previous expectations. The auto and bicycle retailer now expects FY24 underlying pre-tax profits to come in at between £48 million and £53 million, down from £48 million to £58 million.
    The FTSE 250 company attributed this fall to weaker demand for discretionary expensive purchases, but also noted that needs based and B2B sales displayed strong growth. And despite the ‘challenging macro environment,’ the retailer still saw revenue in the 26 weeks to 29 September rise by 13.9% to £873.5 million.
    Further, it remains confident in its mid-term target of £90 million to £110 million underlying pre-tax profit — and is going into the typically higher-demand Christmas period.
    Baltic Classifieds
    Baltic Classifieds shares have risen by 60% year-to-date as the Lithuanian company — which specialises in classifieds portals — rebounded after a weak 2022 to 232p.
    In recent half-year results, the group saw operating profit rise by 36% to £19.4 million and increased annual revenue growth guidance to between 18% and 19%. At the time, CEO Justinas Šimkus enthused that ‘we have seen record numbers of advertisers, as well as an improved competitive position and increased yields across our entire portfolio.’
    Peel Hunt has upgraded its price target to 245p, arguing that the business model is now proven and further, that there are significant opportunities for growth through 2024. Accordingly, the interim dividend is up by 25%, and the company has also delivered €7 million in share buybacks.
    Currys (LON: CURY)
    Currys shares spent some time in 2023 suffering in the doldrums — but enjoyed a good day after releasing a half-year trading update described by CEO Alex Baldock as ‘a really good self-help job.’
    The FTSE 250 company is maintaining profit guidance for the year, but has also advised that group sales have fallen by 4% year-over-year to £4.2 billion in the six months to October. However, there are some silver linings; the Nordic business has seen profit margins recover to similar levels experienced two years ago, and the company has also seen some cash inflow as a result of its decision to sell its Greek and Cypriot divisions for £172 million.
    Encouragingly, while this cash is earmarked for paying down debt and funding the pension scheme, Currys is also exploring ‘the potential to return any surplus capital to shareholders.’ And it’s also worth noting that the current half of the retailer’s trading year may be more profitable as it contains Black Friday alongside the crucial Christmas trading period.
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          This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  14. MongiIG
    Begbies Traynor, Ascential, and easyJet could be the best FTSE 250 shares to watch next month. These shares are selected for recent market news.
    Source: Bloomberg   Indices Shares Insolvency United Kingdom Tax Digital economy
     Charles Archer | Financial Writer, London Down 10.3% year-to-date, the FTSE 250 has been irregularly falling since hitting 24,195 points in early September 2021, to just 17,165 points today.
    The UK’s domestically focused index is highly sensitive to the country’s changing fiscal and monetary policy — and while there is more nuance — the bottom line is that the Bank of England base rate has risen from 0.1% to 5.25% over the past couple of years, while corporation tax for larger companies has jumped from 19% to 25%.
    And further volatile macroeconomic changes are coming up in November.
    First, there’s the Monetary Policy Committee meeting on 2 November to decide where rates go next, then the CPI inflation reading on 15 November, followed by the Autumn Statement on 22 November. This statement — among other things — is rumoured to include changes to ISA products that will likely benefit UK investors, after a period of tax rises and allowance cuts.
    Accordingly, it’s worth considering that the economic picture may change markedly over the next few weeks. But for now, here’s three of the best FSTE 250 shares to watch — all of which have seen recent news.
    1. Begbies Traynor
    Begbies Traynor is an insolvency expert specialising in corporate restructuring. In recent full-year results, it saw another ‘successful year of continued growth with results ahead of original market expectations.’
    Revenue grew by 11% year-over-year, free cash flow hit £14.1 million, the dividend increased by 9% to 3.8p for the year, the sixth year of increases in a row. The FTSE 250 company remains confident of ‘a further year of growth in line with market expectations... (with a) strong order book of insolvency revenue (up 19% in the year), driven by continued increase in insolvency market volumes.’
    Today, the firm has released analysis prepared by Red Flag showing that the number of firms in ‘critical financial distress’ — defined as having county court judgements exceeding £5,000 — has jumped by 25% to nearly 38,000 businesses over the past three months.
    Regional Managing Partner Julie Palmer notes that ‘tens of thousands of British companies are now in financial dire straits now that the era of cheap money is firmly behind us.’
    Further, The UK Insolvency Service has announced that the last two quarters have seen the highest quarterly insolvency numbers since Q2 2009, alongside the highest number of creditors’ voluntary liquidations since 1960.
    Begbies shares have fallen by 21.7% year-to-date, but this may be a chance to buy the dip.
    2. easyJet
    easyJet shares have fallen by 23.7% over the past six months, including a sharp fall even after reporting its positive Q4 results. The FTSE 250 airline delivered record Q4 profit before tax, expected to be between £440 million and £460 million, while passenger numbers increased by 8% and ticket yields by 9%.
    The mid-cap company expects that capacity will grow by circa 15% in Q1 and has set a medium-term target to deliver more than £1 billion of profit before tax. To deliver this growth, easyJet has confirmed 157 ‘firm orders’ for additional aircraft, with a further 100 ‘purchase rights’ — which could see the fleet almost double in size to 587 aircraft over the next decade.
    The company is also promising to restart dividends, and it’s perhaps this dual ambition which is sending shares lower — usually, companies focus either on capital growth or shareholder returns.
    Of course, there are other issues brewing in the background. Over the past few months, air traffic control strikes, wildfires in Greece, and seemingly endless UK technical IT glitches have all helped to pile pressure on easyJet’s share price. And then there’s fears that the Israel-Hamas war could escalate into a regional conflict; an outcome that the World Bank thinks could send oil to $150.
    However, the airline is well hedged for jet fuel over the medium term — and better hedged than competitor IAG. This could see shares recover over the next month as investors consider the long-term outlook.
    3. Ascential
    UK-based data and technology company Ascential rose sharply after announcing that it now plans to offload two divisions to focus on its events business. The small cap tech sector has been significantly impacted by rising rates — and the numbers achieved for these assets may have taken the markets by surprise.
    US-listed advertising titan Omnicom is spending £741 million on Ascential’s digital commerce business, while private equity-founded Wind UK Bidco 3 is buying the product design segment for up to £700 million. This will yield a combined enterprise value of circa £1.4 million and cash proceeds of £1.2 billion.
    Ascential plans to return £850 million to shareholders, and thereafter focus solely on events such as the Money 20/20 fintech conference in Las Vegas or the Cannes Lions marketing festival. The company has been undergoing a strategic review since April 2022, and this step forward could unlock significant value.
    CEO Duncan Painter enthuses that ‘Omnicom's and Digital Commerce's complementary technology and data platforms, together with their strong client relationships will be instrumental in accelerating the realisation of Digital Commerce's strategy, and WGSN is also well set for its next chapter of growth under new ownership. Ascential's continuing business with its world-leading Events brands remains well-positioned to succeed as a high quality, independent UK-listed business.’
    Ascential shares have fallen since their peak yesterday, perhaps marking an opportunity for high-risk investors.
    Past performance is not an indicator of future returns.

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  15. MongiIG
    Games Workshop, Hilton Food, Grainger, & Trainline could be the four best FTSE 250 shares to buy now. These shares have been selected for recent market news.
    Source: Bloomberg   Indices Shares Inflation FTSE 100 Renting Landlord  
     Charles Archer | Financial Writer, London The FTSE 250 has experienced a volatile 2023 thus far — starting the year at 19,134 points, rising to 20,615 points by the start of February — and then falling to a 2023 low of 17,899 points towards the end of August.
    Despite recovering to 18,625 points today, the UK’s domestically focused index remains down by circa 2.7% year-to-date.
    This is a comparatively weak performance — the FTSE 100 is up by 1.7%, the S&P 500 up by 16.4%, and the ASX 200 up by 4.1% over the same period. But in a monetary era where NS&I is offering 6.2% returns risk-free, while simultaneously the UK’s economy continues to be unpredictable, this relative underperformance is perhaps understandable.
    However, where an entire index is dragged down, there can be excellent value opportunities affected by wider negative sentiment.
    But there is still macroeconomic uncertainty. 64 out of 65 economists polled by Reuters over the past few days think that the Bank of England will increase the base rate by a further 25 basis points to 5.5%. This near unanimity is supported by a general expectation that CPI inflation could rise slightly when figures are released on Wednesday.
    On the other hand, GDP data shows that the UK economy shrink by 0.5% in July, while the unemployment rate is up to 4.3% from 3.8% in just three months. The Bank’s mandate means it must balance keeping inflation in check with preventing a recession — and therefore, a further increase is not guaranteed.
    For context, Governor Andrew Bailey thinks inflation should still fall ‘markedly’ by the end of 2023, with rates ‘much nearer now to the top of the cycle. Nevertheless, MPC member Catherine Mann has warned that she would ‘rather err on the side of tightening.’
    And then there’s the fiscal side to consider, with the Chancellor’s Autumn Statement on 22 November. Rising rates may have wiped out any potential fiscal headroom, though pressure to announce some financial sweeteners for hard-pressed businesses and consumers will be intense.
    Best FTSE 250 shares to watch
    1. Games Workshop
    Games Workshop shares have risen by 59% over the past year, and its brief 15 September trading update could indicate further upside to come.
    Ahead of the AGM, the company enthused that trading was ‘ahead of the Board’s expectations,’ with core revenue for the three months to 27 August coming in at circa £121 million, up from £106 million in the same period last year, while licensing revenue doubled to £6 million.
    Accordingly, profit before tax has been estimated at circa £57 million, an £18 million increase reflecting ‘healthy growth across all channels.’
    The company also declared yet another dividend — this time worth 50p per share — bringing the dividend so far this year to £1.95 per share. When you consider last financial year’s dividend was £1.20 per share in total, and that the company only distributes ‘truly surplus cash,’ Games Workshop could be an excellent FTSE 250 choice for next month.
    2. Hilton Food
    Hilton Food shares have risen sharply after announcing it has signed a deal with market titan Walmart to supply the company’s Canada-based shops. The food packaging company will now build a new manufacturing plant in eastern Canada which will deliver mostly meat-based products to Walmart supercentres.
    This will be debt-funded through a new subsidiary, with robotics-based picking hoped to start in 2026. The company notes that the deal ‘represents a significant step forward’ for both businesses to help meet the growing demand in Canda for high quality meat products.
    CEO Steve Murrells enthuses that ‘Hilton Foods and Walmart share the same high standards of sustainability, and we are looking forward to providing Walmart with the service and range of quality products for which Hilton Foods is known.’
    This announcement came hot on the heels of relatively positive half-year results, which saw sales at the FTSE 250 company rise by 5.2% to £2.1 billion during the 28 weeks to 16 July, despite adjusted pre-tax profits falling sharply.
    3. Grainger
    Grainger shares have dipped by 7.8% year-to-date as one of the UK’s largest listed landlords comes under pressure from the wider macroeconomic environment.
    Grainger rents out circa 10,000 properties to tenants, offering several advantages over typical smaller landlords, such as tenancies lasting up to three years rather than the standard six months. While this can reduce flexibility, it’s also a significant benefit for renters looking for security of tenure. Indeed, the FTSE 250 company even won the 2023 RESI Awards Landlord of the Year award.
    Given the expense and complexity of entering the buy-to-let market, Grainger could be an attractive investor alternative. Hamptons now notes that the cost of renting has risen by 12% year-on-year, a growth rate at near record highs, with average rent for a new contract now stands at £1,300 per month.
    In half-year results to 31 March, net rental income rose by 12% with occupancy at an industry-beating 98.5%.
    CEO Helen Gordon noted that ‘with positive expectations for the occupational market and rental growth, resilience in valuations backed by strong active investor demand, and an institutional landlord-friendly investment landscape, the outlook for Grainger remains strong as we continue to lead the sector.’
    4. Trainline
    Trainline shares recently enjoyed solid half-year results, with ticket sales up sharply to £2.6 billion in the six months to the end of August — and revenue rising by 19% to £197 million.
    The UK market was strong, with ticket sales rising by 19% to £1.7 billion as travellers move from paper to digital tickets, perhaps encouraged by under-fire government-backed proposals to shut down hundreds of ticket offices.
    However, the company lost between £5 million and £6 million in sales from each strike day, and strikes are still ongoing. More encouragingly, demand in Italy and Spain saw international sales rise by 24% — and the company reiterated strong overall annual revenue guidance.
    Trainline also launched a £50 million share buyback programme, and Canaccord Genuity analysts have remarked that high levels of free cash flow generation could see the FTSE 250 company create scope for up to £500 million of buybacks over the next five years.
    As ‘the majority of the regulatory risk has subsided, with the key risk around commissions removed,’ the analysts maintain a ‘buy’ recommendation with a 271p target price.
        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  16. MongiIG
    Greggs, ITV, Ocado, Greencoat UK Wind and Direct Line could be the best FSTE 250 shares to watch next month. These shares have been selected for recent market news.
    Source: Bloomberg   Indices Shares Dividend FTSE 100 United Kingdom Ocado
    Written by: Charles Archer | Financial Writer, London   The FTSE 250 is now essentially flat, both over the past year and year-to-date, at 19,592 points. Unlike its older brother — the FTSE 100, whose constituents derive the majority of their income from overseas — the FTSE 250 is far more domestically focused.
    And the economic trajectory of the UK remains perhaps as uncertain as it looked throughout 2023. CPI inflation remains at 4% and is expected to fall to 2% relatively soon — though analysts then expect the crucial measure to start rising thereafter.
    With the base rate at 5.25%, investors are looking to rate cuts in 2024. However, Bank of England Governor Andrew Bailey has previously noted that ‘we need to see more evidence that inflation is set to fall all the way to the 2% target, and stay there, before we can lower interest rates.’ This implies rate cuts may come later than the market currently expects — though central banks do pivot as evidence changes.
    With an election likely coming within the next few months after the budget which saw another, potentially unaffordable long-term, two percentage points cut from National Insurance, the winds of political and economic change continue to blow for the best FTSE 250 shares.
    Best FTSE 250 shares to watch
    These shares have been selected for recent market news.
    Greggs ITV Ocado Greencoat UK Wind Direct Line Greggs
    Greggs has once again impressed the market — full-year results saw the baker’s profit before tax rise by 27% year-over-year to £188.3 million — with a year-end cash position of £195.3 million. Accordingly, the FTSE 250 operator is paying a 40p per share special dividend on top of the ordinary 46p special dividend.
    The company opened a record 220 new shops in 2023, a net increase of 145 to 2,473 locations. And looking forward, it expects to open between 140 and 160 net shops in 2024, with a target to have more than 3,000 Greggs locations open by 2026.
    With inflationary pressures ‘reducing,’ the company also saw total sales rise by 19.6% year-over-year to £1.8 billion. CEO Roisin Currie enthused that ‘we are very much on track to deliver our bold five-year growth plan to double sales by 2026 and to have significantly more than 3,000 shops in the UK over the longer term.’
    ITV
    ITV shares have jumped a couple of times recently. To start with, it announced that it has sold its stake in BritBox to BBC Studies for £255 million — with the £235 million net of loan repayments and tax to be used to fund share buybacks.
    Then the media company delivered mixed full-year results; 2023 revenue fell by 2% to £4.3 billion as advertising revenue dipped by 8% to £1.6 billion. Accordingly, pre-tax profits crashed by 41% to just £396 million — with the ‘challenging advertising market’ blamed for the financial adversity.
    However, production arm ITV Studios saw revenue rise by 4% to a record £2.2 billion — while adjusted EBITDA increased by 10% to £286 million. And having disposed of BritBox, investors were also cheered by growth in ITVX.
    And the company is also delivering on its cost cutting promises. It had originally planned to deliver £150 million of savings by 2026 and hit £130 million by the end of 2023. At the end of this calendar year, ITV expects to have generated annualised gross savings of al least £50 million per annum.
    Ocado
    Ocado also enjoyed some mixed results; adjusted earnings came in at £51.6 million, up from a £74.1 million loss in 2022. Importantly, this was driven by a maiden £15.4 million underlying profit from Ocado’s Technology Solutions segment — where the investment in robot-operated warehousing is finally delivering. Indeed, CEO Tim Steiner noted that opening these customer fulfilment centres were key to cost efficiencies.
    The Joint Venture with Marks & Spencer — which is now subject to some legal issues — returned to positive adjusted EBITDA of £10.4 million.
    However, the FTSE 250 company still generated a loss before tax of £393.6 million — while a £100 million improvement, this includes the £187 million settlement received from Sweden’s AutoStore. While Steiner argues, perhaps fairly, that the business has made ‘tangible steps forward,’ there remains some way to go to group profitability.
    Greencoat UK Wind
    Greencoat UK Wind has delivered strong results; increasing its dividend to 10p per share against a target of 8.76p, and informing investors it is now confident it will pay the same dividend in 2024.
    As one of the UK’s largest windfarm operators — it generated 1.5% of total UK demand last year — the trust saw total shareholder return hit 5.4%. On the other hand, net asset value fell by 3p per share to 164.1p, in common with many renewable energy trusts. But cash generate hit £405 million — and the dividend is covered more than two times over.
    Chair Lucinda Riches enthuses that ‘with our continuing strong cash flow and dividend cover, we can confidently target a dividend of 10p per share with respect to 2024, extending our track record of attractive dividends and returns. We are now delivering net returns to investors of 10% on NAV, and we remain confident in our ability to continue to meet our objectives of dividend growth in line with RPI and capital preservation in real terms.’
    The company invested £821 million into windfarms in the year, increasing its net generating capacity by 397MW and taking the gross value of its portfolio to some £6.2 billion.
    Direct Line
    Direct Line shares recently surged after reports that Belgium-based insurer Ageas has made a bid for the FTSE 250 company. While management has rejected the advance, it is the latest in a line of potentially undervalued UK companies which have received offers in the recent past — including Hotel Chocolat and Currys.
    Indeed, Ageas is potentially considering a follow-up bid worth some £3.1 billion. For context, Direct Line has suffered through several profit warnings and a CEO exit in 2023. But recent quarterly results may demonstrate an improvement in the business, with motor insurance growing by some 115%.
    And the company is shortly set to welcome ex-Aviva stalwart Adam Winslow as CEO — though if the takeover occurs, this may be a moot appointment before long.
     

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  17. MongiIG
    These five companies could be the best FTSE 250 shares to watch next month. They have been selected for recent market news.
    Source: Bloomberg   Indices Shares FTSE 100 Profit Inflation Dividend
    Written by: Charles Archer | Financial Writer, London   Despite having risen by 2.3% year-to-date to almost 20,000 points, the FTSE 250 index continues to underperform both older brother the FTSE 100, in addition to alternative index choices including the S&P 500 and tech-heavy NASDAQ 100 in 2024.
    FTSE 250 macroeconomics
    The FTSE 250 remains arguably an indicator of the UK’s wider economy, which continues to remain on an uncertain trajectory. This is because unlike the FTSE 100, whose companies derive the lion’s
    share of their income from overseas, FTSE 250 businesses are primarily domestically focused.
    Perhaps the most worrying trend for the FTSE 250 is delistings. Offers from larger businesses or private equity for the likes of Hotel Chocolat, Currys, or recently tech darling Darktrace all go to highlight perceived UK under valuations — and of course, this also applies to FTSE 100 businesses as well. Shell is again considering a move to the US, following in the footsteps of CRH, Arm, Flutter and Smurfit Kappa.
    And the UK’s economy remains on an uncertain trajectory. Of course, where there’s uncertainty there is often opportunity — with certain FTSE 250 shares in the spotlight recently for arguably good news.
    CPI inflation rose by 3.2% in the 12 months to March 2024 — down from 4% in January — and far below the peak of 11.1% in October 2022. Accordingly, all eyes are on potential Bank of England interest rate cuts. The base rate remains at 5.25%, and the market is expecting cuts later this year.
    However, the bank is concerned that inflation may resurge, with chief economist Huw Pill recently warning that cuts are still ‘some way off,’ despite being ‘somewhat closer ’ — especially amid continued strong wage data and relatively low unemployment. Conversely, the Insolvency Service recently noted that the number of companies declared insolvent in England and Wales in February 2024 rose by 17% year-over-year to 2,102 firms.
    Best FTSE 250 stocks to watch
    These shares have been selected for recent market news.
    Just Group Telecom Plus WH Smith Mobico Group PureTech Health Just Group
    Just Group, the financial services company specializing in retirement, recently reported full-year results which saw a 47% year-over-year rise in underlying operating profit to £377 million — driven by increases in new business and in-force profits.
    For context, retirement income sales grew by 24% to £3.9 billion, while new business profits rose by a third to £355 million. And the company’s defined benefit market enjoyed a record year, while the guaranteed income for life market increased by 46% to £5.3 billion, hitting its highest level in a decade.
    The business also saw a healthy capital coverage ratio of 197% and a return on equity of 13.5%. The dividend was increased by 20% to 2.08p per share, and it expects a further 15% growth in underlying operating profit into the future.
    CEO David Richardson enthused ‘We are delighted with our financial performance in 2023, a record year for the group, and are confident of exceeding our medium term profit growth pledge…Given the multiple opportunities available and strong structural growth drivers in our chosen markets, we have never been more confident in our ability to deliver sustainable and compounding growth.’
    Telecom Plus
    Telecom Plus — which owns the Utility Warehouse brand — recently released a fiscal year end trading update to 31 March 2024, in which the business saw record customer numbers, profits and dividend payout.
    Customer numbers grew by an organic 14.1%, ‘against a background of normalized competition and falling energy prices.’ And the company passed the 1 million customer milestone in Q4., having delivered compound double-digit percentage customer growth for each of the last five half-year periods.
    Telecom Plus also noted that FY24 adjusted profit before tax is expected to be towards the upper end of market expectations — with continued strong interest in its partner income opportunity, with the number of partners now up by 14% to 68,000. The dividend was also hiked in line with inflation from 80p to 83p.
    Co-CEO Steve Burnett enthuses that ‘Our innovative multiservice customer proposition, together with our unique word of mouth route to market, has put us firmly on track to deliver another set of record results…we expect to continue delivering record customer numbers, profits and returns to shareholders over the years ahead.’
    WH Smith
    WH Smith's ‘good’ interim results to 29 February 2024 saw the retailer’s revenue rise by 8% year-over-year to £926 million, driving headline group profit before tax and non-underlying items to £46 million. The retailer is also investing in future growth, with £140 million in capital expenditure and around 110 new stores expected in this financial year.
    WH Smith also paid an interim dividend of 11p per share, ‘reflecting strong trading and cash generation combined with confidence in future prospects’ and noted that trading momentum has continued ahead of the key summer period.
    CEO Carl Cowling noted that the company ‘is in its strongest ever position as a global travel retailer. We have had a good first half and our businesses are well positioned for the peak summer trading period…I am particularly pleased with the outstanding performance from our UK Travel business which has seen a 19% increase in trading profit.’
    The CEO also highlighted North America, in which WH Smith has recently opened a further 13 shops as part of its international expansion strategy.
    Mobico Group
    In recent delayed results, Mobico — formerly National Express Group — saw revenue grow by 12.2%, driven by a ‘record year at ALSA and driver & route recovery in North America School Bus.’ However, adjusted operating profit fell from £197.3 million in FY22 to £168.6 million as the business was hit with by cost inflation, reduction in Covid subsidies, and lower profitability in Germany.
    On the other hand, its strategic shift is expected to deliver potentially £50 million of annualised savings across two stages — and Mobico won 43 new contracts worth over £1 billion in total contract value and circa £126 million in annualised revenue.
    And for FY24, it expects to generate an adjusted operating profit of between £185 million and £205 million.
    CEO Ignacio Garat notes that ‘Our 2023 results are below the expectations we set ourselves at the beginning of the year…I am nevertheless encouraged by the progress we have made in transforming the business, with the new leadership we have appointed in North America School Bus and the UK & Germany making a tangible impact and the first phase of our Accelerate cost efficiency program delivering ahead of expectations.’
    PureTech Health
    PureTech Health has been having an excellent 2024 after the schizophrenia treatment business — Karuna — which it helped establish, was bought by Bristol-Myers Squibb for $14 billion.
    As part of the deal, PureTech realised $293 million proceeds from its remaining stake in Karuna, which means it has generated $1.1 billion from an initial investment of $18.5 million — and is evidence of a working business model.
    In full-year results, the company highlighted significant operational and clinical progress, with the maturation of its Internal Programs, the launch of two new Founded Entities, including a $100 million Series A financing for Seaport. It also maintains a robust balance sheet, with cash, cash equivalents and short-term investments of $573.3 million as of the end of March.
    CEO Dr Bharatt Chowrira noted that ‘2023 was a landmark year for PureTech, in which we made strong strategic and clinical progress. We've carried this momentum into 2024, with our hub-and-spoke R&D model continuing to deliver value for both patients and shareholders. PureTech pioneered the hub-and-spoke model, and we believe this novel approach has never been more important than in recent years.’

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  18. MongiIG
    easyJet, Royal Mail, PZ Cussons, Wizz Air and Crest Nicholson could be the five best FTSE 250 stocks to watch next month. These shares have been selected for recent market news.
    Source: Bloomberg   Indices Shares Royal Mail EasyJet Inflation FTSE 100
    Written by: Charles Archer | Financial Writer, London   The FTSE 250 has fallen by 2.1% year-to-date, 5.9% over the past year, and by more than 5,000 points since September 2021 to circa 19,100 points today. Unlike its older brother — the FTSE 100, whose constituents derive the majority of their income from overseas — the FTSE 250 is far more domestically focused.
    And on the question on whether the UK will see the desired soft landing — the jury is still out.
    In terms of fiscal policy, the spring budget is due to be announced on 6 March. Chancellor Jeremy Hunt has intoned that the scope for tax cuts is limited, a position also held by the International Monetary Fund.
    On the other hand, a general election must be held within the next 11 months, the Conservatives are trailing in the polls, and tax cuts can be popular with voters.
    In terms of monetary policy, there appears to be good news on the horizon. While the Bank of England has kept the base rate at 5.25% since September 2023, it now expects CPI inflation to fall to 2% by May. For context, Governor Andrew Bailey has specifically noted that ‘we need to see more evidence that inflation is set to fall all the way to the 2% target, and stay there, before we can lower interest rates.’
    There is a danger that inflation could resurge later on in the year, as the impact of above-inflation pay rises and new supply chain challenges in the Red Sea poses fresh problems. But the markets are pricing in rate cuts in 2024, and this in theory will help the best FTSE 250 shares to grow.
    Of course, this potential advantage must also be weighed against recession risk, making investing decisions increasingly more complex.
    Top FTSE 250 shares to watch
    These shares have been selected for recent market news and are not investment advice.
    Crest Nicholson PZ Cussons Wizz Air easyJet Royal Mail Crest Nicholson
    Crest Nicholson's 2023 full-year results may make for poor reading — but for perspective, the UK housing market slowed drastically last year in response to rising mortgage costs and falling sales volume.
    Consequentially, the housebuilder saw revenue fall by 28% year-over-year to £657.5 million, reflecting ‘weakness in the housing market.’ And completions fell steeply from 2,734 in 2022 to just 2,020 in 2023 — with pretax profit falling from £137.8 million to just £41.4 million in the year.
    Profitability has been hit by increased costs at legacy sites including its Brightwells Yard regeneration scheme in Farnham, alongside a possible £13 million legal bill to settle costs arising from a 2021 fire at one of its apartment sites.
    Issuing its third profit warning in six months, outgoing CEO Peter Truscott noted that these were ‘a disappointing set of results in FY23.’ However, the company is getting a new CEO in the form of Persimmon’s chief commercial officer Martyn Clark. And the Barratt-Redrow merger could spark further interest in the company — especially at its current valuation.
    PZ Cussons
    PZ Cussons is also in hot water. The consumer goods titan’s half-year results saw the stock slump as it slashed adjusted operating profit forecasts for the full year to between £55 million and £60 million — down from previous expectations of between £61.5 million and £68.2 million, and also a significant drop from the £73.3 million generated in fiscal 2023.
    For context, revenue fell by 17.8% to £277.1 million between June and November — and the interim dividend was almost halved to just 1.5p per share.
    The key problem is arguably the devaluation of the Naira (Nigeria’s currency) as the country is responsible for more than a third of the company’s revenue. However, PZ Cussons still retains significant brand labels including Carex and Imperial Leather, and the current weakness may feel attractive to investors who are prepared to accept the risks.
    Wizz Air
    Wizz Air's recent Q3 results made for better reading: revenue jumped by 16.8% to €1,064.8 million, while passenger ticket revenue increased by 19.2% to €553.9 million. Meanwhile, the airline saw Available Seat Kilometres (multiply available seats on any given aircraft by the number of kilometres flown on a given flight) rise by a significant 26.9% year-over-year. And it saw record traffic of 15.1 million passengers in the quarter compared to just 12.4 million the year before.
    CEO József Váradi enthuses that ‘Wizz Air continued to deliver industry-leading capacity growth during the third quarter…while financial performance in the last quarter was materially affected by the suspension and reallocation of Israel capacity, we maintain our expectations for F24 net income.’
    easyJet
    easyJet's Q1 results also appeared to be positive — while it made a headline loss before tax of £126 million, this was an improvement on the £133 million of a year ago. Passenger numbers grew by 14%, and easyJet Holidays remain a highlight, with profit more than doubling to £30 million.
    Perhaps most importantly in a forward-looking market, the airline reported ‘strong turn of year bookings with seats sold and yield ahead YoY.’ Further, is expects to see more than 25% year-on-year customer growth in easyJet Holidays for FY24.
    CEO Johan Lundgren enthuses that ‘we delivered an improved performance in the quarter which is testament to the strength of demand for our brand and network. The popularity of easyJet holidays also continues to grow, with 48% more customers in the period.’ However, the airline did take a £40 million hit from the Middle East conflict.
    Royal Mail
    Royal Mail’s parent International Distribution Services has seen adjusted operating losses in its recent half-year results rise by 45% year-over-year to £319 million. This was driven by lower parcel volumes and the cost of the pay settlement agreed with the Communication Workers Union.
    For context, the parent was fined £5.6 million recently for missing first and second class delivery targets over the 2022-23 financial year. However, regulator OFCOM is considering allowing Royal Mail to reduce its letter delivery service from the current six days a week to as little as three days a week — which could see profitability rise sharply.
     

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  19. MongiIG
    These five companies could be the best FTSE 250 shares to watch next month. They have been selected for recent market news.
    Source: Bloomberg   Indices Shares FTSE 100 Royal Mail Cash Inflation   Written by: Charles Archer | Financial Writer, London   Despite having risen by 1.8% year-to-date to 19,855 points, the FTSE 250 index continue to outperform alternative index choices including the S&P 500 and tech-heavy NASDAQ 100 in 2024. The FTSE 100’s little brother is arguably an indicator of the UK’s wider economy, which continues to remain on an uncertain trajectory.
    Naturally, where there’s uncertainty there is often opportunity — with certain FTSE 250 shares in the spotlight recently for arguably good news.
    FTSE 250 macroeconomics
    In terms of the wider picture, CPI inflation has now fallen to 3.4% and is expected to fall below 2% within the next few months. However, strong wage data and relatively low unemployment means inflation could start to rise again later on this year — and the base rate remains at a relatively elevated 5.25%.
    While Bank of England Governor Andrew Bailey recently advised that rate cuts are ‘on the way,’ language from the US Federal Reserve appears perhaps a little more hawkish after strong than expected employment numbers. Further, JP Morgan CEO Jamie Dimon has just warned that interest rates stateside could rise to ‘8% or even higher’ in the coming years in his annual letter to shareholders.
    The surge of the so-called ‘magnificent seven’ is perhaps also relevant — as the largest US tech stocks continue to rise, they are swallowing ever more investor capital. However, should this prove to be a bubble that eventually bursts, value stocks on the FTSE 250 could benefit over the longer run.
    And of course, the UK just entered a new tax year — with new ISA and SIPP allowances.
    Best FTSE 250 stocks to watch
    These shares have been selected for recent market news.
    Future PLC Royal Mail Carnival Direct Line JD Wetherspoon Future PLC
    Future PLC's recently released trading statement saw the company report that ‘expected revenue improvement to the Q4 2023 exit rate has continued, resulting in a return to organic revenue growth in Q2 for the Group.’
    The long-awaited return to growth was driven by a strong performance by the Go Compare brand, B2B, and magazines. However, Future continues to contend with challenges in affiliate products and digital advertising given the wider macroeconomic pressures.
    But its Growth Acceleration Strategy appears to be working, and there has been a ‘stronger performance in US direct advertising.’ Overall, the company is now highly cash generative, with cash conversion in the past six months described as strong. This leaves Future on track to deliver on previously set out positive expectations for FY24.
    Shore Capital analyst Roddy Davidson noted that with Future’s valuation at 4.8 times earnings and a 0.6% yield as "anomalously low and leaves it vulnerable" to being taken over. Meanwhile, Panmure Gordon’s Jessica Pok noted that the company is showing ‘encouraging sings’ and the shares ‘, trading on 5x FY25E PE, continue to look attractive.’
    Royal Mail
    Royal Mail shares are down sharply over the past three years, but a significant part of the business’s woes is tied up in the universal service obligation, which is the minimum service level that must be provided by Royal Mail for letter deliveries set out by legislation.
    The current obligation is for the company to deliver letters six days a week, and parcels five days a week — to every address in the UK, at affordable uniform prices.
    Royal Mail’s parent International Distribution Services is calling for second-class post to be delivered only every other weekday, and further that more ‘realistic’ speed targets could be introduced from April 2025. These changes would not require legislative change.
    OFCOM has now acknowledged that the obligation ‘risks becoming financially and operationally unsustainable in the long term’ especially as letter sending has dramatically decreased over the past decade or so. The regulator notes that the net cost to Royal Mail was between £325 million and £675 million in 2021/22.
    For context, Royal Mail made an operating loss of £1 billion last year — and OFCOM plans to provide an update on the proposals in the summer.
    Carnival
    Carnival recently saw Q1 revenues hit a record $5.4 billion and reported an all-time high of booking levels. This has seen the stock rise by more than 50% over the past year, but it also announced in the earnings call that it expects a $10 million hit as a result of the Baltimore bridge collapse disaster.
    Specifically, this is because it will need to change its homeport — it noted ‘our guidance does not include the current estimated impact of up to $10 million on both adjusted EBITDA and adjusted net income for the full year 2024.’
    However, this setback may prove temporary both in terms of operations and share price, as Carnival continues to expect record revenues and EBITDA for the full year.
    At the end of 2023, CEO Josh Weinstein enthused that the company ‘entered the year with the best booked position we have ever seen, and now have nearly two-thirds of our occupancy already on the books for 2024, at considerably higher prices (in constant currency).’
    Direct Line
    Direct Line shares are now flat year-to-date after losing much of its gains due to a takeover approach from Belgian insurer Ageas — which has now decided not to make a further takeover offer.
    For context, Ageas had made two bids, both of which were rejected by Direct Line’s board. Ageas CEO Hans de Cuyper noted that he is ‘convinced that given the circumstances we took the right decision not to make an offer, staying true to who we are and what we stand for in terms of maintaining a friendly approach and respecting our financial discipline.’
    The initial bid, comprised of cash and shares, had an implied value of 231p per share of Direct Line — and the second was for 237p, worth some £3.17 billion.
    However, Ageas was ‘not able to identify additional elements based on publicly available information that would justify significant adjustments to the terms of its possible offer.’ But further offers from alternative bidders may come, and at the least, the interest has highlighted a potential value disconnect.
    JD Wetherspoon
    JD Wetherspoon's half-year results may not have been warmly welcomed by the market, perhaps due to narrow margins on sales. For context, while margins improved from 4.1% to 6.6%, this remains below 7.1% pre-pandemic margins amid a desire to remain a value offering.
    And debt increased by 5% year-over-year to £1.11 billion, while free cash flow fell to an outflow of 4.9p per share compared to an inflow of 132.4p last year. This was attributed to payments owed to entities including the tax office and suppliers.
    But operating profit was up by 81% year-over-year to £67.7 million, while revenue increased by 8.2% to £991 million and like-for-like sales rose by 9.9%.
    CEO Tim Martin notes that ‘the company currently anticipates a reasonable outcome for the financial year, subject to our future sales performance.’
     
          This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  20. MongiIG
    FTSE 250 favourite Marks and Spencer, alongside underperformers Crest Nicholson and ABRDN, could be the three best FTSE 250 shares to watch next month. These shares are selected based on certain value investor metrics.
    Source: Bloomberg   Indices Shares Inflation Share Dividend FTSE 100    Charles Archer | Financial Writer, London The FTSE 250 has experienced an unpleasant August thus far, with the index having now fallen by 6.5% year-to-date to 17,899 points. While this is far above the 16,611 point low of October 2022, it’s also a big drop from the 20,615 points of early February 2023.
    For context, the UK’s domestically focused index has been relatively volatile this year, perhaps reflecting the wider volatility within the UK economy. Importantly, CPI inflation fell to 6.8% in the year to July, down from 7.9% in June. And with the Bank of England still predicting that this crucial measure will fall to 5% by the end of 2023, this is clearly good news.
    But this most recent reading masks some potentially worrying trends. Leisure inflation — a good measure of consumer discretionary demand — increased. Services inflation rose to 7.4%, a 30-year record high. And the all-important core inflation metric remained sticky at 6.9%.
    The picture is complicated by mixed news out of the ‘real’ economy. Companies from Thames Water to Wilko are under serious financial pressure — but others including Marks & Spencer are doing far better than expected.
    This reflects the complex data underlying UK corporate income; wages including bonuses rose by 8.2% in June, the fastest rate of growth since records began in 2001 — meaning wage growth is now above inflation. On the other hand, retail sales fell by a hefty 1.2% in July underscoring the reality that wages have some time to catch up to the inflation of the past two years.
    Overall, the markets are expecting the base rate to now peak at 6% — but these predictions seem to change with the winds. It was only a few short weeks ago that Schroders was predicting a terminal rate of 6.5%, and JP Morgan even speculating that it could reach as high as 7%.
    But where there’s uncertainty, there’s often opportunity. But remember, past performance is not an indicator of future returns.
    Best FTSE 250 shares to watch
    1. Marks & Spencer
    Under the transformational leadership of CEO Stuart Machin, Marks & Spencer Group has gone from strength to strength in 2023. The FTSE 250 company increased its profits guidance last week after declaring a period of ‘strong trading.’
    Over the past 19 weeks, food sales have risen by 11% while clothing and homeware is up by over 6%. And the company is selling more items at full price, in stark contrast to competitors who are in the throes of price cuts. The only recent cloud is that chief digital and technology officer Jeremy Pee — who only started in January — is leaving to return to Canada.
    Regaining its place in the FTSE 100 is now on the cards, with the FTSE 250 stock up 73% year-to-date to 219p. For context, annual revenues came in at £11.9 billion in May, a full £1 billion higher than in the prior full year.
    As a caveat, it’s worth considering that the tighter monetary environment may make achieving growth less complex than maintaining it.
    2. Crest Nicholson
    Crest Nicholson issued in some ways the opposite guidance to investors this morning, warning that full-year adjusted profit before tax is now expected to be circa £50 million, down from analyst expectations of £73 million. Shares have fallen by 8.3% today, and are now close to their pandemic crash low, at 178p.
    The mid-tier housebuilder blamed the ‘poor trading environment’ and legacy costs at its Brightwells Yard development — with its sales rate per outlet per week falling to just 0.25 in the 7 weeks to August 18, down from 0.50 in the first half. And the FTSE 250 company does not expect any material improvement before the end of October.
    Further, while it’s negotiating bulk land deals to support future delivery volumes, management is actively reducing overheads and scaling back growth plans. For context, Rightmove data shows that UK asking prices fell by 1.9% month-on-month in the five weeks to 12 August.
    But with Help to Buy now over, mortgage rates peaking, and the likelihood of further stimulus slim, it might be the case that much of the headwinds is now priced in.
    It’s worth noting that average house prices are still circa 20% higher than pre-pandemic. Crest retains a strong financial position, plans to pay the dividend as usual, and boasts experienced leadership used to the cyclical nature of the housing market.
    3. ABRDN
    ABRDN shares have fallen by 56% over the past five years, and 30% over the past month alone, with many analysts blaming a botched rebrand alongside nimbler competitors. In recent half-year results, the investment management company saw net outflows of £4.4 billion, with the investor reaction perhaps to be expected.
    However, the FTSE 250 company may now be appealing to value investors. There’s still £496 billion of assets under management (AUM0 to consider, alongside a dividend yield of 9%. If you compare the fundamentals to its competitors, ABRDN may be considered oversold — though it’s worth observing that the interim dividend of 7.3p is only just covered, at 1x adjusted capital generation.
    But on the bright side, adjusted operating profit rose by 10% to £127 million, while adjusted capital generation also increased by 33% to £142 million. IFRS losses before tax came in at £169 million, but much of this can be accounted for by a £181 million reduction in the value of shares in companies on its balance sheet — and these paper losses could well be recovered over the longer term.
    The key point is that the company is cyclical; with interest rates comparatively high, cash is currently attractive compared to ABRDN’s asset management returns. When — or if — rates start to fall, a strong recovery could be in the works.
     
     
     
     
     
    This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  21. MongiIG
    After January's market sell-off, some of the best metaverse shares are at their lowest in months. But as February begins, they could be ripe for recovery.
    Source: Bloomberg   Indices Shares Metaverse Advanced Micro Devices Nvidia Investor  Charles Archer | Financial Writer, London | Publication date: Monday 31 January 2022 Investors who are feeling a strange sense of déjà vu over January’s market sell-off are not alone. With tech stocks shattered, and CNN reporting Warren Buffett as ‘having the last laugh’, a new era of tightening monetary policy has seen investors reassess outlandish growth prospects.
    But this isn’t anything new. March 2020 saw the FTSE 100 lose a third of its value in a month. 2008 was the year of the credit crunch and the collapse of the US sub-prime bubble. And between March 2000 and October 2002, the dot-com bubble burst saw the NASDAQ Composite fall 78%.
    Moreover, the best metaverse stocks can be more volatile than most; their valuations are usually based on future aspirations built on foundations of cheap debt. But there are signs of an overcorrection, with the NASDAQ Composite up more than 400 points since its low last week. And as Buffett says, it can pay to be ‘greedy when others are fearful.’
    Best metaverse stocks: work hard, play hard
    With over a billion users worldwide, DocuSign is an e-signature pioneer. Its share price hit $310 last September, representing a ten-fold increase over its Initial Public Offering price. But at $117 right now, it’s down 60% in the past six months. The metaverse stock fell hard after Q3 results, as CEO Dan Springer told investors that customers would ‘return to more normalised buying patterns’ when workers begin the return to offices.
    And it predicts Q4 revenue will be around $560 million, below previous analyst expectations. On the plus side, revenue increased 42% year-over-year in Q3 to $545.5 million. And while companies from Morgan Stanley to Alphabet are pushing for a full return to in-person work, research from Slack shows one in six workers will quit if forced back to the office full-time. And with the bar to beat expectations now so low, decent Q4 results could spark a recovery.
    Then there’s metaverse darling Roblox, which shot up to $135 in November after its March IPO. But the online gaming company is down 44% over the past month to $58 a share, as broader concerns of interest rate rises begin to bite. However, the company has an edge over its competitors, as its user-generated content can respond rapidly to changing trends. And CEO Craig Donato believes ‘there’s an incredible amount of innovation’ needed to build the metaverse. Moreover, in Q3 results, revenue increased 103% year-over-year to $509.3 million, with average daily users up 31% to 47.3 million people. With collaborators from Nike to Paris Hilton, it’s a metaverse stock to watch if the recovery gets underway.
    Source: Bloomberg Semiconductor shortages
    Advanced Micro Devices is down 27% since the start of the year to $105. But with Q4 results due tomorrow, it has plenty of reasons to be optimistic. The company has been given the green light by China to buy fellow chip manufacturer Xilinx for $35 billion, which will lift its total addressable market from $79 billion to $110 billion. Meanwhile, competitor Intel's ambitions to acquire ARM are all but over.
    And according to FactSet, the average analyst estimate for revenue tomorrow is $4.47 billion, up from $3.24 billion a year ago, and above the top end of previously issued guidance. Bernstein analyst Stacy Ragson has a $130 target on the metaverse stock, believing ‘AMD is capitalizing well as Intel enters transition, and seems better positioned than their larger counterpart.’ And KeyBanc sees ‘AMD benefiting from strong demand in cloud data center,’ which will see it nearly double its server market share of 11%-12% in 2021 to 20% by the end of 2022.
    Meanwhile, fellow metaverse stock Nvidia is down 22% to $228 this month, as the market sell-off continues. But it’s still up 700% over the past five years. And this best metaverse stock just announced that it will be Meta Platform's (Facebook’s) primary partner as it begins to build the fastest supercomputer in the world. According to Meta CEO Mark Zuckerberg, the AI Research Supercluster will facilitate ‘experiences we’re building for the metaverse (that) require enormous compute power.’ And in Q3 results, Nvidia posted $7.1 billion in revenue, up 50% year-over-year, driven by its best-ever gaming and data centre results.
    Moreover, this month’s survey from the US Commerce Department found ‘there is a significant, persistent mismatch in supply and demand for chips, and respondents did not see the problem going away in the next six months.’
    A reversal of fortunes for these best metaverse stocks may become a February reality.
    Go short and long with spread bets, CFDs and share dealing on 16,000+ shares with the UK’s No.1 platform.* Learn more about trading shares with us, or open an account to get started today.
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  22. MongiIG
    Explaining the significance of semiconductor companies, and a rundown of some of the best semiconductor stocks to watch. These are the five largest semiconductor stocks in the world by market capitalisation.
    Source: Bloomberg   Shares Semiconductor Integrated circuit ASML Holding Nvidia Artificial intelligence  
     Charles Archer | Financial Writer, London Semiconductor companies are those involved in the design, manufacturing, and distribution of semiconductor devices and related technology.
    Semiconductors — or microchips — are essential to the functioning of electronic devices and have seen particular investor interest in 2023 given the rise of the AI sector. Without semiconductors, there would be no computers, smartphones, gaming, or a hundred other applications, all of which are essential to 21st century living.
    OpenAI’s revolutionary ChatGPT chatbot, the growing political importance of AI development, and Nvidia’s dizzying rally are all testament to the importance of the sector. With significant growth in AI interest expected through the next decade and beyond, investing in semiconductor stocks within a diversified portfolio could be an attractive proposition.
    For context, giants including Intel and ASML consider that annual global spending on semiconductors will rise to $1 trillion by 2030, up from just $570 billion in 2022.
    It’s also worth noting that China and the US are both attempting to harm each other’s ability to use advanced semiconductors to develop AI technology; the US through export bans of certain semiconductors and China through export bans of certain critical minerals.
    Finally, while the five stocks listed below are considered to be the largest in the world by market capitaliaton right now, analysts disagree on what exactly constitutes a semiconductor stock, and further, these may not be the best value opportunities. And remember, past performance is not an indicator of future returns.
    Best semiconductor stocks to watch
    Before delving into some of the most popular individual semiconductor shares, it’s worth highlighting that there are many popular, diversified ETFs which offer exposure into multiple companies on a low cost basis.
    For example, the Vaneck Semiconductor UCITS ETF holds 25 of the world’s largest semiconductor companies and is a common choice for investors who want broad exposure to the sector without the need to conduct additional research.
    1. Nvidia
    Nvidia shares have been on a dizzying rally this year to a $1.2 trillion valuation. The microchip behemoth is arguably the most popular semiconductor stock of 2023 — though of course, popularity does not mean it is the best investment available.
    Q3 results were remarkable; revenue came in at $18.12 billion compared to the LSEG analyst consensus of $16.18 billion, a rise of 206% year-over-year. The al-important data-centre revenue rose by a whopping 279% to $15.51 billion — with half of this cash coming from cloud infrastructure providers including Amazon.
    And Nvidia also expects to generate 231% revenue growth in Q4 — equivalent to $20 billion. On the other hand, it has a huge price-to-earnings ratio, alongside significant exposure to a faltering Chinese economy and rising Sino-US export tensions.
    2. Taiwan Semiconductor Manufacturing Co
    While Nvidia is touted as the ‘picks and shovels’ semiconductor stock for 2023, this crown could arguably belong to TSMC. Most chip producers — including Nvidia — outsource actual production to the Taiwanese company, with the country responsible for making circa 90% of the world’s most advanced chips.
    TSMC shares have done well in 2023 given the AI-driven demand, its colossal manufacturing capacity and the wide economic moat surrounding starting up any sizeable competitor.
    However, Taiwan’s complex political status, including its relationship with China remains a long-term
    risk.
    3. Broadcom
    Broadcom may not be the most fashionable name in the semiconductor world, but the company’s designs and manufacturing acumen underpins masses of data centre, networking, software, broadband, wireless, storage, and industrial markets.
    In Q3 results, the company saw revenue rise by 5% year-over-year to $8.88 billion, and it issued Q4 guidance for a 4% year-over-year increase to $9.27 billion. CEO Hock Tan enthused that the results were ‘driven by demand for next generation networking technologies as hyperscale customers scale out and network their AI clusters within data centers.’
    With Broadcom shares up 71% year-to-date, further growth in 2024 seems possible.
    4. Samsung
    Samsung is a South Korean titan that is well-known as one of the world’s largest producers of electronic devices — ranging from appliances to digital media devices, semiconductors, memory chips, and integrated systems.
    Recent results saw titan’s total consolidated revenue rise by 12% to KRW67.4 trillion, driven by new smartphone releases and higher sales of premium display products.
    Operating profit rose to KRW2.43 trillion, based on strong sales of flagship mobile phone models and strong demand for displays. Samsung also signed a supply deal with Nvidia in September, and further collaboration remains a key opportunity in the new year.
    5. ASML
    ASML is a world leader in chip-making equipment. It’s a common misconception that the company actually makes semiconductors; it does not. It designs and manufactures the lithography machines that are an essential component in microchip manufacture and is therefore indispensable within the wider supply chain.
    You could argue that ASML is an even more crucial to the manufacturing line than TSMC, but the stock has only risen by a comparatively smaller 23% year-to-date.

    In recent Q2 results, Q2 net sales came in at €6.9 billion, with a gross margin of 51.3% and net income of €1.9 billion. And it expects Q3 2023 net sales to be between €6.5 billion and €7.0 billion alongside a gross margin of around 50%.
    ASML shares have risen by 23% year-to-date yet remains some distance from previous highs — leaving possible room for further rises in 2024.

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  23. MongiIG
    Explaining the significance of semiconductor companies, and a rundown of some of the best semiconductor stocks to watch. These are the five largest semiconductor stocks in the world by market capitalisation.
    Source: Bloomberg   Shares Semiconductor Nvidia TSMC Integrated circuit Manufacturing
    Written by: Charles Archer | Financial Writer, London Reviewed by: Axel Rudolph FSTA | Senior Financial Analyst, London Semiconductor companies are those involved in the design, manufacturing, and distribution of semiconductor devices and related technology.
    Semiconductors — or microchips — are essential to the functioning of electronic devices and have seen particular investor interest in 2023 given the rise of the AI sector. Without semiconductors, there would be no computers, smartphones, gaming, or a hundred other applications, all of which are essential to 21st century living.
    OpenAI’s revolutionary ChatGPT chatbot, the growing political importance of AI development, and Nvidia’s dizzying rally are all testament to the importance of the sector. With significant growth in AI interest expected through the next decade and beyond, investing in semiconductor stocks within a diversified portfolio could be an attractive proposition.
    For context, giants including Intel and ASML consider that annual global spending on semiconductors will rise to $1 trillion by 2030, up from just $570 billion in 2022. It’s also worth noting that China and the US are both attempting to harm each other’s ability to use advanced semiconductors to develop AI technology; the US through export bans of certain semiconductors and China through export bans of certain critical minerals.
    Best semiconductor stocks to watch
    Before delving into some of the most popular individual semiconductor shares, it’s worth highlighting that there are many popular, diversified ETFs which offer exposure into multiple companies on a low cost basis.
    For example, the Vaneck Vectors Semiconductor UCITS ETF holds 25 of the world’s largest semiconductor companies and is a common choice for investors who want broad exposure to the sector without the need to conduct additional research.
    In terms of individual shares, the five stocks listed below are widely considered to be the largest AI companies in the world by market capitalisation right now. However, analysts disagree on what exactly constitutes a semiconductor stock, and further, these may not be the best value opportunities.
    Nvidia Taiwan Semiconductor Manufacturing Company Broadcom Samsung ASML Nvidia
    Nvidia shares have been on a dizzying rally to a $1.77 trillion valuation, rising by 1,720% over the past five years. This is more than the entire Chinese stock market.
    The microchip behemoth was arguably the most popular semiconductor stock of 2023 — though of course, popularity does not mean it is the best investment available.
    Q3 results were remarkable; revenue came in at $18.12 billion compared to the LSEG analyst consensus of $16.18 billion, a rise of 206% year-over-year. The al-important data-centre revenue rose by a whopping 279% to $15.51 billion — with half of this cash coming from cloud infrastructure providers including Amazon.
    And Nvidia also expects to generate 231% revenue growth in Q4 — equivalent to $20 billion. On the other hand, it has a huge price-to-earnings ratio, alongside significant exposure to a faltering Chinese economy and rising Sino-US export tensions.
    Q4 results are expected on 21 February.
     
    Taiwan Semiconductor Manufacturing Company
    While Nvidia is touted as the ‘picks and shovels’ semiconductor stock for 2023, this crown could arguably belong to Taiwan Semiconductor Manufacturing Company. Most chip producers — including Nvidia — outsource actual production to the Taiwanese company, with the country responsible for making circa 90% of the world’s most advanced chips.
    TSMC shares have did well in 2023, and have continued to rise in 2024, given the AI-driven demand, its colossal manufacturing capacity and the wide economic moat surrounding starting up any sizeable competitor.
    However, Taiwan’s complex political status, including its relationship with China remains a long-term risk. The company recently announced plans to build a second semiconductor manufacturing plant in Japan.
    Broadcom
    Broadcom may not be the most fashionable name in the semiconductor world, but the company’s designs and manufacturing acumen underpins masses of data centre, networking, software, broadband, wireless, storage, and industrial markets.
    The company’s 2023 fiscal year served up many highlights: revenue grew by grew 8% year-over-year to a record $35.8 billion, driven by investments in accelerators and network connectivity for AI by hyperscalers.
    President and CEO Hock Tan enthused that ‘the acquisition of VMware is transformational. In fiscal year 2024 we expect semiconductor to sustain its mid to high single digit revenue growth rate, with the contribution of VMware driving consolidated revenue to $50 billion, and adjusted EBITDA to $30 billion.’ And the company delivered a record adjusted EBITDA margin of 85%, delivering $17.6 billion in free cash flow.
    Broadcom shares now up by 115% over the past year.
    Samsung
    Samsung is a South Korean titan that is well-known as one of the world’s largest producers of electronic devices — ranging from appliances to digital media devices, semiconductors, memory chips, and integrated systems.
    In recent fiscal 2023 results, it reported KRW 258.94 trillion in annual revenue and KRW 6.57 trillion in operating profit — and in the current quarter is focusing on improving profitability by increasing sales of high value-added products. The company further indicated that the second half of this fiscal year should show ‘more significant improvement.’
    Samsung also signed a supply deal with Nvidia in September, and further collaboration remains a key opportunity in the new year.
    ASML
    ASML is a world leader in chip-making equipment. It’s a common misconception that the company actually makes semiconductors; it does not. It designs and manufactures the lithography machines that are an essential component in microchip manufacture and is therefore indispensable within the wider supply chain.
    You could argue that ASML is an even more crucial to the manufacturing line than TSMC, but the stock has only risen by a comparatively small 43% over the past year.
    In 2023 full-year results, the semiconductor stock delivered €27.6 billion in net sales, on a gross margin of 51.3% Accordingly, it delivered a significant €19.91 of earnings per share.
     

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
  24. MongiIG
    Explaining the significance of semiconductor companies, and a rundown of some of the best semiconductor stocks to watch. These companies have been chosen for their historical earnings growth, market size, and sector dominance.
    Source: Bloomberg   Shares Semiconductor Nvidia Artificial intelligence Integrated circuit AMD    Charles Archer | Financial Writer, London Semiconductor companies are those involved in the design, manufacturing, and distribution of semiconductor devices and related technology.
    Semiconductors — or chips — are essential to the functioning of electronic devices and have seen particular interest in 2023 given the rise of the AI sector. Without semiconductors, there would be no computers, smartphones, gaming, film CGI, or a hundred other applications, all of which are essential to 21st century living.
    OpenAI’s revolutionary ChatGPT chatbot, the US ban on some semiconductor exports to China, and Nvidia’s dizzying rally are all testament to the importance of the sector. With significant growth in AI interest expected through the next decade and beyond, investing in semiconductor stocks within a diversified portfolio could be an attractive proposition.
    For context, giants including Intel and ASML consider that annual global spending on semiconductors will rise to $1 trillion by 2030, up from just $570 billion in 2022.
    But remember, past performance is not an indicator of future returns.
    Best semiconductor stocks to watch
    Before delving into some of the most popular individual semiconductor shares, it’s worth highlighting that there are many popular, diversified ETFs which offer exposure into multiple companies on a low cost basis.
    For example, the Vaneck Semiconductor UCITS ETF holds 25 of the world’s largest semiconductor companies and is a common choice for investors who want broad exposure to the sector without the need to conduct additional research.
    In addition, the ARM IPO could see the tech giant become one of the most valuable semiconductor stocks in the world when it relaunches to the public later this year.
    Of course, some companies will do better than others, and this is not an exhaustive list. No returns can be guaranteed.
    1. Oxford Instruments
    While the largest semiconductor stocks are dominated by non-UK entities, London-listed Oxford Instruments is a £1.3 billion established leader and the largest semiconductor company in the country. It serves multiple markets across the sector, but the key focus is currently on its semiconductor and communications division.
    In recent full-year results, the company saw orders grow by 20.9% to £511.6 million, while adjusted operating profit rose by 21.4% to £80.5 million.
    CEO Ian Barkshire enthuses that the company ‘delivered growth in orders, revenue and profit, as well as maintaining margin, with performance strengthened in the second half as we converted our order book and realised the benefits of new pricing structures...our strong balance sheet positions us well to invest in people, infrastructure and innovation, and to make synergistic acquisitions to augment our organic growth.’
    However, the company is much smaller than its stateside competitors.
    2. Nvidia
    Nvidia shares have been on a dizzying rally this year to a $1.2 trillion valuation. The semiconductor champion is clearly the most popular semiconductor stock of 2023 — though of course, popularity does not mean it is the best investment available.
    However, the company once again delivered analyst-beating results in Q2 2023, with revenue up by 88% quarter-on-quarter to $13.51 billion, and its critical Record Data Center revenue up by 171% compared to Q2 2022.
    CEO and co-founder Jensen Huang believes that ‘a new computing era has begun. Companies worldwide are transitioning from general-purpose to accelerated computing and generative AI... (our) leading enterprise IT system and software providers announced partnerships to bring NVIDIA AI to every industry.’
    Of course, Nvidia now has a huge price-to-earnings ratio, and perhaps too much exposure to a faltering Chinese economy.
    3. Taiwan Semiconductor Manufacturing Co
    While Nvidia is touted as the ‘picks and shovels’ semiconductor stock for 2023, this crown could arguably belong to TSMC. Most chip producers — including Nvidia — outsource actual production to the Taiwanese company, with the country responsible for making circa 90% of the world’s most advanced chips.
    TSMC shares have done well in 2023 given the AI-driven demand, its colossal manufacturing capacity and the wide economic moat surrounding starting up any sizeable competitor.
    However, Taiwan’s complex political status, including its relationship with China remains a long-term risk.
    4. Qualcomm
    Qualcomm shares may be largely flat in 2023, but this could change soon. The NASDAQ titan returned $1.3 billion to stockholders in Q3 2023, including $893 million in dividends and $400 million through share buybacks.
    The company has struggled in 2023 due to low consumer demand for smartphones through the cost-of-living crisis, but it’s now pivoting towards the AI business.
    CEO Cristiano Amon is ‘pleased with our technology leadership, product roadmap and design-win execution, which position us well for growth and diversification in the long term. As AI use cases proliferate to the edge, on-device AI has the potential to drive an inflection point across all our products. Qualcomm remains best positioned to lead this transition given the unmatched accelerated computing performance with the power efficiency of our platforms.’
    5. Advanced Micro Devices
    Advanced Micro Devices — commonly abbreviated to AMD — is a distant second to Nvidia, but it has several near-term catalysts to consider. For example, in mid-June 2023, AMD rolled out its new Instinct MI300 series chips, which should become popular for customers looking to accelerate their generative artificial intelligence chip processing.
    While Nvidia may control circa 80% of the AI market, this new AMD chip could be a gamechanger — and its shares have climbed sharply this year as a result.
    Chair and CEO Dr Lisa Su notes that the company ‘delivered strong results in the second quarter as 4th Gen EPYC and Ryzen 7000 processors ramped significantly...we made strong progress meeting key hardware and software milestones to address the growing customer pull for our data center AI solutions and are on-track to launch and ramp production of MI300 accelerators in the fourth quarter.’
  25. MongiIG
    A brief description of ETFs and five of the best ETFs for UK investors to consider in Q1 2024. These ETFs are selected for their widespread popularity — though this does not equivalate positive performance.
    Source: Bloomberg   Forex Indices Shares Commodities ETF Investment
     Charles Archer | Financial Writer, London Investing in Exchange Traded Funds (ETFs) is an incredibly popular trading strategy, especially among newer investors. ETFs allow you to buy into a ‘basket of securities’ based on a specific sector or investing approach, without having to buy the assets individually.
    Investing in an ETF allows for increased exposure to a diversified range of investments, the trading liquidity of equity instead of the rigidity of a mutual fund, and the ability to manage risk by trading futures just like an individual stock.
    Of course, ETFs can contain all sorts of investments, from stocks to commodities to bonds. Other than the convenience, ETFs usually offer low expense ratios and lower broker commissions than buying the constituent assets individually.
    And with inflation still high, a potential recession inbound, and uncertainty soaring, the diversification of ETFs appears more attractive than ever.
    However, it’s worth noting that an ETF will only ever perform as well as its underlying constituents. We do offer an ETF screener that can help to inform your investing decisions. But remember, past performance is not an indicator of future returns.
    Best UK ETFs to watch
    1. Vanguard FTSE All-World UCITS ETF
    This exchange traded fund is one of the most popular in the world, as it aims to track the performance of the FTSE All-World index, made up of large and mid-sized companies in both developed and emerging markets.
    This index offers possibly the most diversified portfolio of stocks possible, providing exposure to almost 4,000 companies from across 50 countries at a low annual fee.
    However, it does have a geographical bias, with 60% of companies in the ETF based in the US. And because of the relative size of the US tech giants, the FTSE All-World’s biggest sector is usually technology — which can be volatile given the sensitivity of tech stocks to monetary policy. Further, over the longer term the index is usually beaten by the S&P 500.
    But it’s worth noting the benefits of diversification — investors may wish to protect themselves from unpredictable global events, such as the occasional US stock market bubble, and also benefit from emerging markets.
    2. iShares S&P 500 Information Technology Sector ETF
    This ETF seeks to track the performance of an index composed of U.S. Information Technology Sector companies as defined by the Global Industry Classification Standard. It boasts diversified exposure to titanic US tech stocks including top holdings Apple, Microsoft, and NVIDIA — but with the caveat that it only invests in the US.
    US information technology stocks have recovered significantly across 2023 — rates across the pond may have peaked amid hopes that generative AI could drive further capital growth. Of course, as noted above, tech shares — even the blue chips — are more volatile than other sectors.
    3. WisdomTree Brent Crude Oil ETF
    The WisdomTree Brent Crude Oil ETF is designed to closely track the Bloomberg Brent Crude subindex, collateralised by swaps held with the Bank of New York Mellon. Buying shares in this popular ETF gives investors exposure to Brent Crude, globally recognised as the most popular oil benchmark, which is based on oil drilled in the North Sea.
    Oil prices remain elevated as a result of post-pandemic demand, alongside wars in Ukraine and the Middle East. In particular, some investors fear that if Iran enters into a regional conflict with Israel, the ‘world’s oil chokepoint, the Strait of Hormuz, could be closed.
    4. iShares UK Dividend UCITS ETF
    The iShares UK Dividend UCITS ETF is a selective ETF which focuses on the most appealing strength of the some of the best FTSE 100 companies — reliable dividend returns.
    Instead of investing in all 100 companies in the UK’s premier index, it instead offers diversified exposure to the top 50 UK companies within the FTSE 350 with the highest dividend yield (excluding investment trusts). Of course, there are risks — dividends are not guaranteed and cyclical companies like Rio Tinto or Barratt can see dividend yield fall fast in poor years.
    Many investors look to pair this fund with a NASDAQ 100 index tracker ETF, allowing for some exposure to growth for a balanced portfolio.
    5. Invesco Physical Gold ETC
    Invesco Physical Gold ETC seeks to replicate the performance of the London Gold Market Fixing Ltd PM Fix Price/USD, with the fund backed one-to-one with gold bullion held by JP Morgan Chase in London bank vaults.
    Gold continues to flirt with near-record $2,000/oz levels, as the traditional real asset inflation-hedge, which preserves purchasing power and acts as a protective asset in times of severe market stress, once again performs admirably in this inflationary environment.
    It’s worth noting that central banks bought a record 1,136 tons of the precious metal in 2022 and continue to buy huge amounts this year.
    And of course, gold’s price trades in an unofficial pair with the US Dollar; usually, rate rises tend to see gold fall as defensive investors seek the safe haven of the world’s reserve currency. However, gold has continued to rise even as rates increase, highlighting its attractiveness in the current environment.

        This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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