Next time I have some cash to invest, I plan on purchasing one Vodafon (LSE: VOD) i Diageo (LSE: DGE) shares.
This is why!
Vodafon
As one of the largest telecommunications companies in the world, life has not been sleek sailing for Vodafone in recent months. The announcement of the dividend being rebased was not well received by investors and the market.
I think this is reflected in the share price. Vodafone shares have fallen 2% in 12 months from 77p this time last year to their current level of 75p. However, the meander chart below shows the up-and-down journey the company has been on recently.
My interest in the stock is primarily based on its long-term growth prospects, which can provide excellent value and returns for shareholders.
A large part of this is the rollout of 5G, which is gaining momentum. Additionally, Vodafone’s entry into the African market and its already established presence is invigorating. The demand for mobile services has increased in recent years and there is still plenty of room for growth. This can mean increased profits as well as juicy profits.
The natural risk is that a convoluted, potentially problematic geopolitical picture could prevent Vodafone from expanding and therefore profiting. This is something I will be keeping a close eye on moving forward.
Otherwise, Vodafone will be a profitable business, with a wide presence and brand strength. From a fundamental point of view, the stock is a decent value for money with a price-to-earnings ratio of 10. Moreover, the dividend yield of close to 7% is attractive. However, I understand that dividends are not guaranteed.
Diageo
If you crave a drink from time to time, there’s a good chance you’ve been drinking one of Diageo’s popular brands. The spirit producer is a dominant player on the market and is present all over the world.
The stock hasn’t had the best of times lately, down 21% in 12 months. This time last year they were trading at 3,332p, down from the current level of 2,630p.
I believe this is largely due to weakening consumer spending due to economic uncertainty. In recent updates, the company has indicated this in its Latin America, Caribbean and even United States segments. Since most of the brand’s brands fall into the premium segment, consumers buy less or turn to cheaper alternatives. This is an ongoing risk that I will monitor.
From a bullish point of view, it’s tough for me to ignore the strength of the Diageo brand, as well as its investor returns policy. Known as a dividend aristocrat, the company has been increasing its payouts for 37 years. However, I understand that past results are not a guarantee of the future.
Diageo’s dividend yield is currently 3.1%, which is not the highest. However, I believe that once economic volatility subsides, the company will be positioned to deliver growing returns in the coming years.
Finally, Diageo’s share price-to-earnings ratio is 19. While not at an all-time low, it is at a significant discount to the historical average of closer to 24 in recent years.
The post Two Great FTSE 100 Shares I’ll Be Buying in June appeared first on The Motley Fool UK.
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More reading
- Should I buy Diageo shares or stay away from them?
- Investors of 2 FTSE 100 shares should consider buying for powerful passive income!
- 2 Bargain FTSE 100 Shares I’d Buy to Make £1,300 of Passive Income!
- Why does the Diageo share price continue to fall?
- Vodafone’s share price looks very economical. I still wouldn’t touch it with a barge pole
Sumayya Mansoor has no position in any of the stocks 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 we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering diverse insights makes us better investors.
