Value stocks are often seen as those that could provide future growth and returns. So, it’s nice to see some available that offer enticing returns at present too.
Two examples of this are Legal & General (LSE: LGEN) and UK Greencoat Wind (LSE: UKW).
Here’s why I believe investors should consider snapping up some shares.
Legal & General
Financial services stalwart Legal & General may not stand out immediately as being in the value category, especially when you consider its long track record, as well as superb passive income opportunity.
However, the shares currently trade on a price-to-earnings ratio of close to 10. This is lower than the FTSE 100 average of 12. Plus, based on forecasts tipping the business for growth, this could come down in the future too. However, I do understand that forecasts don’t always come to fruition.
It’s worth mentioning that the share price has struggled in the past 12 months, due to macroeconomic turbulence. The shares are up a marginal 2%, from 226p at this time last year, to current levels of 232p. This has aided the current valuation, and provides an excellent entry point, if you ask me. Plus, once volatility dissipates, there could be the opportunity for some capital growth too.
At present, the shares offer a mammoth dividend yield of 8.8%. However, it’s worth remembering that dividends are never guaranteed.
I’m excited about the direction of travel for Legal & General under new CEO Antonio Simoes. He’s expressed plans for a simpler, leaner, more effective business, with a continued focus on shareholder value. I’ll be keeping a keen eye on what this looks like moving forward.
The obvious risk that could hurt the business, earnings, and returns is continued economic volatility. In recent times, this has led to money being withdrawn from assets under management. If this continues, earnings and returns could come under pressure.
UK Greencoat Wind
Renewable energy firm UK Greencoat Wind has the potential to provide stellar shareholder returns for years to come. This is due to the green revolution, and the transition away from traditional fossil fuels.
The icing on the cake when it comes to Greencoat is the fact that it’s set up as a real estate investment trust (REIT). This means it must return 90% of profits to shareholders.
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As economic issues have hurt the commercial property market, it’s not a surprise to see Greencoat shares meander up and down in the past year. Over this period, they’re up only 1% from 138p at this time last year, to current levels of 140p.
The shares are currently valued on a price-to-book ratio of 0.9. Usually, any reading below one can indicate value. Add to this its current dividend yield of over 7%, and there’s a compelling investment case, in my eyes.
The natural risk that could hurt sustained returns and growth is that of the complex nature of the wind farms that Greencoat makes money from. They’re expensive to set up and maintain, not to mention land for these endeavours is highly regulated and complex to obtain. These factors could dent earnings and returns going forward.
