I’ve been loading up on dirt cheap FTSE 100 dividend shares lately but now it’s time to balance them with a growth stock or two.
JD Sports Fashion and BT Group immediately sprang to my attention. They were the second-and third-best performing FTSE 100 stocks in Q1, rising 37.1% and 22.6% respectively. Only Rolls-Royce shares beat them by growing 56.6%, but I already own them.
Over 12 months, JD Sports is up 22.25% but BT has well-documented problems and plunged 18.9%. I’ll take a look at these two shares soon, but first I’m targeting a FTSE 100 company that has thrashed the index for a lot longer than one quarter. It’s done it for 20 years, yet still remains an under-the-radar stock for many.
Simply the best
I’ve got figures from investment platform AJ Bell showing that over the last two decades, equipment rental specialist Ashtead Group (LSE: AHT) has given long-term investors an unbelievable return of 45,533%. And yes, I have double-checked that.
In that time the share price jumped from 13p to £53.96, a rise of 41,407% in share price terms alone, with the remainder coming from reinvesting its dividends. This shows the benefit of investing in early stage penny stocks, although a big winner like Ashtead only comes along but once in a blue moon.
If somebody had invested just £1,000 in June 2003, they would have a staggering £415,070 today. Sadly, nothing in my portfolio has matched that.
I suspect many investors overlook Ashtead because it isn’t a household name. Instead, it does the mundane job of renting construction and industrial equipment to builders and other businesses, leasing out everything from diggers, cranes, scaffolding and ventilation systems to crowd barriers for music festivals.
Ashtead has done well in the post-Covid era of supply shortages, which has forced more companies to rent rather than buy. Best of all, it generates more than 80% of its sales in the US, under the Sunbelt Rentals brand. So this gives FTSE 100 investors access to the booming US market.
This means it will benefit from the $1trn US infrastructure bill that’s driving further large-scale projects. The strong dollar has given Ashtead a further lift, boosting its revenues once converted back into sterling.
The share price continues to grow. It’s up 123.85% over five years, and 32.58% over 12 months. It’s up another 15.02% in the last month too. The downside is that it isn’t cheap, trading at 21.83 times earnings. Quality comes at a price.
The forecast dividend is relatively low at 1.4%, but is covered a whopping four times by earnings. Ashtead has spend $1bn buying its own shares over the past two years and plans to buy back a further $500m.
I’m slightly concerned about buying it today, with the US entering a bull market just as its economy flirts with recession. Many expect the greenback to fall from today’s highs, which would hit revenues in sterling terms. Ashtead also faces hefty calls on its wallet, with capital expenditure expected to hit $3.7bn this year, then $4.4bn next.
I wrote similar things last time I looked at this stock, yet should have bought it then. I won’t leave it so long this time.
