Stock market

2 brilliant FTSE 100 stocks I’ll be picking up in June

Next time I have investable cash, I plan to buy. Vodafone (LSE: VOD) and Diageo (LSE: DGE) shares.

Here’s why!

Vodafone

As one of the world’s largest telecom businesses, it hasn’t been a smooth ride for Vodafone in recent months. The dividend hike announcement has not been well received by investors and the market.

I think this is reflected in the share price. Vodafone shares are down 2% over the 12-month period to a current level of 75p from 77p at this time last year. However, the meandering chart below shows the up and down journey the business has been on recently.

My attraction to stocks is primarily related to the long-term growth potential that can provide excellent shareholder value and returns.

A big part of that is the rollout of 5G, which is accelerating. Also, Vodafone’s foray into the African market, as well as its existing presence, is interesting. Demand for mobile services has declined in recent years and there is still plenty of room left. This can mean increased earnings as well as juicy returns.

The inherent risk here is that a complicated geopolitical picture with potential problems could hinder Vodafone’s path and consequently profitability. This is something I will keep a close eye on going forward.

Otherwise, Vodafone is a profitable business, with a wide presence and brand strength. From a fundamental perspective, the shares look reasonable value for money at a price-to-earnings ratio of 10. Also, the dividend yield around 7% is attractive. However, I understand that profits are not guaranteed.

Diageo

If you like a tipple now and then, there’s a good chance you’ve tried one of Diageo’s popular brands. The spirit maker is a dominant player in the market, and has a worldwide presence.

Shares haven’t had the best of times recently, down 21 percent over the 12-month period. At this time last year they were trading for 3,332p, compared to current levels of 2,630p.

I think a big part of that is a reduction in consumer spending due to economic uncertainty. The business has pointed this out in recent updates to its Latin American, Caribbean, and even American divisions. As most of its brands are on the premium side, consumers are buying less, or turning to cheaper alternatives. This is a constant threat that I will keep an eye on going forward.

From a bullish perspective, it’s hard for me to ignore Diageo’s brand power as well as its investor return policy. Known as the Dividend Aristocrat, the firm has increased payouts for 37 years. However, I understand that past performance is no guarantee of the future.

Diageo’s dividend yield is currently 3.1%, which is not the highest. However, I believe that once the economic volatility subsides, the firm can deliver increasing returns in the coming years.

Finally, shares of Diageo are trading at a price-to-earnings ratio of 19. While this is not the lowest, it is significantly discounted compared to its historical average of around 24 in recent years.

The post 2 brilliant FTSE 100 stocks I’ll be buying in June appeared first on The Motley Fool UK.

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Further reading

  • Should I buy Diageo shares or leave them out of the barge pool?
  • 2 FTSE 100 shares investors should consider buying for powerful passive income!
  • 2 FTSE 100 bargain shares I’ll buy to target passive income of £1,300!
  • Why is Diageo’s share price constantly falling?
  • Vodafone’s share price looks cheap. I still wouldn’t touch it with a barge pool.

Samia Mansoor has no position in any of the shares mentioned. Motley Fool UK recommends Diageo Plc and Vodafone Group Public. The views expressed about the companies mentioned in this article are those of the author and therefore may differ from the official recommendations given in our subscription services such as Share Advisor, Hidden Winner and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.


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