The markets have been a bit choppy recently. The FTSE 100 has fallen sharply since the summer and Brexit is doing little to ease the nerves of business and investors. Nonetheless, investing in stocks that pay dividends does, I believe, create a strong opportunity for investors to keep growing their wealth, even against the backdrop of the final stages of the Brexit negotiations and a potentially escalating US-China trade war.
The banking Goliath
HSBC (LSE: HSBA) is one dividend Goliath that could potentially help investors increase their wealth. Buying the stock now would give investors access to a yield of around 5.75% – well above the Bank of England base rate, and the interest paid on high street savings accounts. This mighty dividend, when coupled with HSBC’s focus on China and Asia generally, makes it a dividend stock I’d buy right now.
The latest results from the bank were encouraging. Profit before tax for the third quarter, at $5.9bn, was 28% higher than the same quarter last year. Crucially, for the share price, it beat analysts’ forecasts, showing the business is outperforming expectations. This is a good sign looking ahead. The bank is investing in the future, with plans to spend $15bn-$17bn on technology and growth over three years. This should help the bank grow as a result of moving services online and reducing the costs of staff and branches.
The need for drugs is only growing
Globally, an ageing population means the need for medicines is growing and GlaxoSmithKline (LSE: GSK) is one company well positioned to take advantage of this. Glaxo yields over 5%, which makes it interesting for income seekers and the share price has been rising as the company positions itself for future growth.
At the end of last month, Glaxo updated investors with the news that full-year adjusted earnings per share (EPS) growth should be 8%-10%, slightly up from previous guidance of 7%-10%. This shows good momentum and, at the same time, the company’s results showed sales in the three months to the end of September were up 3% on the same period last year. The latest results follow on from a first half that showed total operating profit up 19%. Glaxo is delivering a flow of positive news for investors which should push up the share price.
The big hitter
Aviva (LSE: AV) is a stock I’d buy right now because it combines a big dividend yield at over 6.5% with a low price-to-earnings (P/E) ratio of under 12, indicating it’s good value. The stock looks cheap now, with no obvious reason as to why this would be the case. The lower share price is a major attraction, giving investors the opportunity to pick up a solid company at a great price and the change of CEO next year may well be a further boost for the share price.
The departing CEO, Mark Wilson, has done a good job in turning Aviva around since 2013 and the poor state it was in after the recession. The business is now on a very solid footing as shown by the fact the company is buying back its own shares and I believe it’s ready for future growth. It’s also maintained its targets for growing earnings per share in 2018 and, in the first half of the year, excluding businesses sold, operating profit rose 4% to £1.42bn.
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Andy Ross owns shares in HSBC. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.