Covid-19 caused the biggest stock market crash since 2008-09. And now we have something new to worry about – hantavirus.

The early signs suggest that this isn’t on anything like the same scale. But it might be significant for one FTSE 100 stock in particular.

Not another pandemic?

So far, there have been reports of up to 11 cases of hantavirus reported on a cruise ship in Argentina. And a lot of familiar phrases are coming back again.

Talk of flu-like symptoms, isolating at home, and physical distancing are back in the news. But we’re a long way from a full-blown pandemic – so far.

Nonetheless, there are some familiar goings on in the stock market. Moderna – the mRNA vaccine firm – has seen its stock jump 13.95% in the last week. 

This isn’t just muscle memory. There’s an international effort under way to work on a vaccine and that might be a genuine boost for the company.

Even if the stock market doesn’t crash – and I’m not convinced it will – it’s worth noting. And it might also be significant for a FTSE 100 stock.

Vaccine demand

Shares in Croda International (LSE:CRDA) surged during Covid-19. Sales of the firm’s lipids (used in vaccines) went through the roof and the stock followed.

Since the end of the pandemic, customers focused on using existing inventories. That meant they stopped buying and the company’s sales crashed.

On top of this, the firm didn’t use its Covid-19 windfall particularly well. It made some bold acquisitions at what turned out to be high prices.

Management seemed to be taking the view that mRNA vaccines were the future. But over the last few years, this has looked like a big mistake.

The hantavirus outbreak, however, might be a big boost. And with inventory levels starting to stabilise, could the stock be set to surge again?

Time to buy?

Increased vaccine studies might give Croda a short-term boost. But that – by itself – isn’t a good reason for a long-term investor to think about buying.

Investors have seen once what can happen when a temporary surge in demand wears off. And it would be a huge mistake to forget the last few years.

Renewed interest in mRNA vaccines, however, might be a durable trend. In that situation, windfalls could become much more frequent.

That would meaningfully change the equation for investors. And if this is the case, Croda shares could be really interesting right now. 

The business is already showing signs of recovery. Add the potential for increased vaccine studies over the long term and I think this is worth a look.

Diversification

I’m not a global health expert (though some of my colleagues are). But from what I can see, hantavirus doesn’t look like the next Covid-19.

It’s too early to start seeing the outbreak as a catalyst for a stock market crash. It is, however, worth thinking about what it might mean. 

A lot of the stocks I own could be affected in a big way by another pandemic. But this isn’t a risk I spend a lot of time thinking about.

Maybe I should. And while there’s a lot more to the business, Croda could be a really good way to add some diversification to my portfolio.

The post Hantavirus: why I’m not looking at the next stock market crash… yet appeared first on The Twelfth Magpie.

More reading

• £503 buys 14 shares in this FTSE 250 stock that returned 23.9% annually for the last 15 years
• £1,000 buys 25 shares in this FTSE 100 stock that’s returned 29.2% annually for the last 10 years
• Down 47%, is this growth stock finally worth buying in May?
• 2 REITs yielding 7%+ to consider for passive income in 2026
• Just 97 shares of this UK dividend stock generate £238 in passive income

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Croda International Plc and Moderna. 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.

Diageo (LSE:DGE) shares have started to recover from an almighty hangover. But there’s an important date investors need to mark in their diaries. 

The company is set to release its results for the full (financial) year on 6 August. The more interesting thing, though, is a strategy update.

What’s been going on?

I’m a Diageo shareholder. I haven’t actually owned the stock that long in the grand scheme of things, but it feels like it’s been forever. 

It’s just been one thing after another. We’ve had tariffs, weak consumer spending, and preferences shifting away from alcohol.

To try and get things back on track, Sir Dave Lewis has been appointed CEO. And the early signs have been promising. There are plans to sell off some peripheral assets to focus on core brands. The dividend has also been lowered.

This is a good start. But the firm hasn’t recruited ‘Drastic Dave’ just to divest a stake in an IPL cricket franchise.

The obvious moves have been made – and there’s nothing wrong with that. But investors want to know what the plan is going forward.

What’s coming next?

It’s a little hard to know exactly what Diageo can do. Some of the challenges it’s been facing are beyond its control. 

In the US, consumer sentiment is at its lowest levels in five years. And that’s an ongoing challenge in one of the company’s key markets.

Source: Trading Economics

Weak consumer sentiment might seem like a reason for a drink. But that’s not how they see it across the Atlantic and that’s why sales are still weak.

There’s not much Diageo can do about inflation or higher mortgage rates. What it can do, however, is focus on being as competitive as possible.

Importantly, it’s not that Diageo’s competitive position is weakening. The firm’s premium spirits aren’t losing much ground.

The trouble is that the market for those drinks is contracting. And Drastic Dave’s job is to figure out how to keep the company moving forward in this environment.

Ready to drink?

Investors are expecting ready-to-drink (RTD) products to be a big part of the company’s strategy. And this makes a lot of sense. 

If consumers are watching their finances, offering them something affordable is key. But while Diageo has been slow off the mark, it has a chance to catch up.

Switching costs in this industry are low. That means there’s always scope for new entrants to win market share from established leaders.

Ordinarily, that’s a risk for Diageo’s market-leading brands. But it’s in the unusual situation of being behind in the RTD market.

That might mean that being fashionably late to this particular cocktail party isn’t the end of the world. And it’s initiatives like this that I’ll be watching for on 6 August. 

Beyond the numbers

When Diageo releases its end-of-year results, I’ll be paying close attention. But it won’t just be the numbers I’ll be looking at. 

We’ve already had three quarters of updates, so most of the data for the year is already in. The big question is what’s coming next.  

Drastic Dave hasn’t wasted time getting to work and that’s a very good thing. But it’s now time for the more difficult bit to get started.

The post Dear Diageo shareholders, mark your calendars for 6 August appeared first on The Twelfth Magpie.

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• Down 53% in the past 5 years. Is this the best value stock in the FTSE 100?
• Down 31%, how much could £5,000 of Diageo shares be worth in 12 months?
• Here’s what is baffling me about the stock market today
• How to build a £20,000-a-year passive income from a Stocks and Shares ISA
• After years of pain, is the Diageo share price looking up?

Stephen Wright has positions in Diageo Plc. The Motley Fool UK has recommended Diageo Plc. 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.

The UK has some terrific shares for dividend investors to consider. And they can generate real passive income – especially inside a tax-efficient Stocks and Shares ISA. 

Charlie Munger – Warren Buffett’s right-hand man – used to say that the first $100,000 (or for britons £100,000) was the hardest. But is that still the case?

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Passive income opportunities

A lot of dividend stocks look pretty attractive. But a high yield can often be a sign that there’s something to worry about. 

Often, but not always. The stock market doesn’t get everything right and it can make mistakes in both directions. 

Games Workshop is one example. 10 years ago, the stock came with an 8% dividend yield.

That counts as high. Since then, though, the dividend per share has climbed 700%.

As a result, the stock is up 3,997%. And that means the dividend yield has actually fallen to 2.9% – less than half of where it was.

Source: Fiscal.ai

Is the stock less risky now than it was 10 years ago? Maybe, but I think this shows that not every high dividend yield is a trap.

Where’s the opportunity?

Regional REIT (LSE:RGL) is a really interesting income stock to consider. It’s a real estate investment trust that owns a portfolio of properties based outside the M25. 

On the face of it, there are two main issues. It has a lot of debt and a significant part of its asset base isn’t the highest quality in the world. 

Both of those are risks and the firm has lowered its dividend recently. But it’s looking to solve one problem with another.

It’s selling some of its weaker assets and using the proceeds to pay down debt. If it works, the result could be a better portfolio with less debt.

What’s not to like about that? And while there are no guarantees, the dividend yield is still 9.14% even after the recent cut. 

Regional REIT takes an unusual approach, prioritising scarce supply over strong demand. The risks are obvious, but so is the potential opportunity.

A £100k portfolio

A 9.14% dividend yield turns a £100,000 portfolio into a £9,142.86 annual income. And reinvesting at that rate makes the returns go up quickly.

After 10 years, the annual return reaches £20,092.78. In Year 15, it gets to £31,118.36, and after 20 years, it becomes £48,194.04.

Inflation means £100,000 (or $100,000) is worth less in real terms than it was in 1998. That’s when Charlie Munger identified it as a turning point.

What hasn’t changed, however, is the maths behind the compounding. A 9.14% return does the same thing to £100,000 as it did 28 years ago. 

In that sense, I think Munger’s advice still holds true. And it’s especially interesting in a Stocks and Shares ISA with a £20,000 annual contribution limit. 

At £100,000, though, the portfolio starts to make a real contribution to the annual growth. That’s why it’s still a key level for investors.

9.14% dividend yield

Going all-in on one stock – any stock – is risky. So Regional REIT isn’t by itself a way to turn a £100,000 portfolio into a £9,142.86 second income.

What it does show, however, is that not every high dividend yield is a trap. And where there’s one opportunity, I think there might be more.

The post How much passive income can you earn with a £100k portfolio of dividend shares? appeared first on The Twelfth Magpie.

More reading

• £503 buys 14 shares in this FTSE 250 stock that returned 23.9% annually for the last 15 years
• £1,000 buys 25 shares in this FTSE 100 stock that’s returned 29.2% annually for the last 10 years
• Down 47%, is this growth stock finally worth buying in May?
• 2 REITs yielding 7%+ to consider for passive income in 2026
• Just 97 shares of this UK dividend stock generate £238 in passive income

Stephen Wright has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Games Workshop Group Plc. 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.

It’s been a strong week for the S&P 500. But shares in insurance broker Brown & Brown (NYSE:BRO) continue to go down and down. 

I’m now well down on my investment and signs of a turnaround are hard to come by. So should I cut my losses and move on to something else?

What’s been going wrong?

There’s been a lot going on in the insurance industry recently. But Brown & Brown has had a tougher time than its rivals. The biggest story has been staff leaving – 275 in a day, to be precise. Importantly, they took their clients with them. 

Brown & Brown is taking legal action on grounds of foul play. They’re far from alone in this and the early signs are very promising. Leaving the details of the case aside, it does illustrate something important. In the insurance industry, clients go with their brokers.

It’s not okay for a competitor to steal them. But they can decide to leave of their own free will and that creates a risk for Brown & Brown.

AI threat?

I expect Brown & Brown’s case to result in a settlement and for life to go on. But the point about human relationships is important – and it might be a good thing.

Another reason the stock is down is the emergence of artificial intelligence (AI). AI platforms have started to emerge for personal insurance lines. 

This isn’t the kind of thing that Brown & Brown deals in – it focuses on much more specialised commercial lines. But how long until AI figures this out?

That’s been weighing on the share price recently. The risk, however, might not be as significant as the stock market seems to think. 

There are a couple of reasons for this. But the most important might be to do with the staff issues that Brown & Brown has been facing recently.

Human relationships

One of the things that Brown & Brown’s recent challenges highlight is the importance of client relationships. But that might help the firm with AI. The more important these relationships are, the harder it is for AI to disrupt the existing operators. And that might be very valuable. 

Another advantage Brown & Brown has is scale. This provides value to both parties in an insurance transaction. It gives them the ability to negotiate lower prices with carriers, which helps customers. And it helps carriers with data and visibility across the industry.

It’s never wise to dismiss the threat of AI entirely. But this might be an industry that isn’t so easy to disrupt as it looks. 

Looking ahead

The situation is by no means settled. But the stock is trading at an unusually low multiple as a result of the recent challenges.

Despite this, analyst expectations for future earnings are still pretty positive. The current consensus is for $4.51 this year, rising to $5.26 by 2028.

That could obviously change. But it implies a price-to-earnings (P/E) multiple for this year of just under 13, which is historically cheap. 

On that basis, I’m interested in buying. I don’t have a strong sense of when I think the stock might turn around, but I’m happy to wait at today’s prices.

The post This S&P 500 stock continues to underperform in my ISA. What’s my next move? appeared first on The Twelfth Magpie.

More reading

• £503 buys 14 shares in this FTSE 250 stock that returned 23.9% annually for the last 15 years
• £1,000 buys 25 shares in this FTSE 100 stock that’s returned 29.2% annually for the last 10 years
• Down 47%, is this growth stock finally worth buying in May?
• 2 REITs yielding 7%+ to consider for passive income in 2026
• Just 97 shares of this UK dividend stock generate £238 in passive income

Stephen Wright has positions in Brown & Brown. The Motley Fool UK has no position in any of the shares mentioned. 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.

UK stocks fell on Friday (8 May). But I don’t think some interesting local election results are something investors need to spend much time thinking about.

The results might give some indication about future UK elections and — by extension — policy. And that can obviously impact businesses in different ways. But the biggest takeaway is that the volatility of the past decade may be about to get worse.

Importantly though, there are companies that do well in just about any situation. One stands out to me.

Essential maintenance 

Renew Holdings (LSE:RNWH) undertakes essential maintenance for rail, energy, and water infrastructure. But there’s more to it than meets the eye.

Utilities in the UK operate as regulated monopolies. But in exchange for protection from competition, they have to invest in their assets. Regardless of who’s in charge of local councils, this is an industry that’s likely to be pretty durable in the face of volatility.

This isn’t about growth, it’s about mandatory maintenance. It may sound like work any engineering firm can do. But it isn’t – it’s highly specialised and requires sector-specific skills and expertise. 

Renew has been turning itself into a leader in this area in the last 10 years. And the results have been more than impressive.

Growth

In the last decade, Renew’s more than doubled its revenues. But that’s not just the result of increased maintenance spending. The firm’s made a series of acquisitions. In doing so, it’s gone from a general construction company to a specialist maintenance outfit.

A good example is its latest move. Edwards Diving Services doesn’t just bring sales and profits – it adds specialist skills, giving the firm the ability to undertake underwater projects. And with water maintenance set to rise, this could be very valuable.

Maintenance might not be the most dynamic growth industry. But that hasn’t held Renew back over the last 10 years.

What could go wrong?

What we have then, is a business in a politically agnostic industry with unusually strong growth prospects. And it trades at a price-to-earnings (P/E) ratio of 15. There’s also no major debt on the balance sheet and I doubt that any government is going to want to cut spending on infrastructure maintenance. So what could go wrong?

The biggest risk, in my view, is that Renew could overpay for an acquisition. The firm has a great record, but even the best make mistakes. The way to assess this is to keep an eye on metrics like the firm’s return on capital employed. That’s where warning signs will start to show up.

So far, so good. But this is something for investors to pay attention to if the company keeps using acquisitions to drive growth.

All-weather investing

Investing isn’t about predicting the next political development. I can however, see why it might feel like that recently. 

It’s about identifying companies that generate good returns in the future. And I think Renew is an unusually good example. It operates in an industry where demand’s likely to be resilient even in a recession. But it also has an impressive growth record and good prospects.

That’s an unusual combination. The company doesn’t get the most attention from analysts, but I think it’s well worth a closer look.

The post What do local election results mean for UK stocks? appeared first on The Twelfth Magpie.

More reading

• £503 buys 14 shares in this FTSE 250 stock that returned 23.9% annually for the last 15 years
• £1,000 buys 25 shares in this FTSE 100 stock that’s returned 29.2% annually for the last 10 years
• Down 47%, is this growth stock finally worth buying in May?
• 2 REITs yielding 7%+ to consider for passive income in 2026
• Just 97 shares of this UK dividend stock generate £238 in passive income

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

The stock market has been all over the place this year. But things suddenly seem to be going right all at once.

A stock market melt-up is the opposite of a crash. And investors need to think about this as a real possibility.

Tail risks? What tail risks?

Here’s the list of threats to the stock market identified by fund managers surveyed by Bank of America in April:

Source: HedgeFundTips

The most obvious point is that things are far more stable in the Middle East than they were. And there’s reason to think this might continue. 

An offensive around Kharg Island – or anywhere in the Persian Gulf – is difficult between May and September. The heat makes it incredibly hard. The US has also been using ammunition faster than it can produce it. That also acts as a deterrent to continued hostilities.

It’s never wise to dismiss the threat of a stock market crash entirely. But I think investors need to be alive to the idea that the next big move might be up. 

The big question is what to do. Getting ready for a melt-up doesn’t mean buying indiscriminately. But it does involve thinking carefully.

What should investors do?

The thing to do is to figure out what stocks are worth. That helps give an indication of what might still be worth buying if things do go higher.

One way to do this is with a reverse discounted cash flow (DCF) calculation. It helps investors figure out how much it’s reasonable to pay for a stock. 

A reverse DCF analysis uses two inputs. The first is a desired rate of return and the second is the company’s enterprise value and cash flows. 

From this it calculates an implied growth rate. And investors can assess whether or not they think this is plausible.

One stock I’ve been thinking about is Informa (LSE:INF). It’s a FTSE 100 company that organises trade shows and conferences. I’ve been buying the stock recently. But will it still be cheap if it surges 20% from here?

Valuation

Informa has an enterprise value of 13.94bn and made £849m in free cash in 2025. My desired rate of return from the stock is 9%.

If the stock surges 20%, the enterprise value will reach £16.08bn. On that basis, the required growth rate is 3.5% a year.  I think that’s highly achievable. Informa’s trade shows are industry leaders and have some very attractive unit economics. 

A global recession might threaten sales in any given year. And the firm has heavy exposure to the Middle East, which is obviously a risk. 

The firm is targeting 5% annual sales growth and earnings per share to increase by 8% a year. That’s over the medium term.

Those numbers are well ahead of what I think the company needs to do. So I expect to keep buying even if the stock market rips higher.

Stock market moves

In some cases, higher prices can be a chance to take profits. But this isn’t always the case. With Informa, there’s a long way to go before it stops being a buy for me. And that’s good to know.

The key — as always – is valuation. That’s what distinguishes stocks that are still in buying territory from ones where it’s time to think about moving on.

The post Get ready for a stock market melt-up appeared first on The Twelfth Magpie.

More reading

• £503 buys 14 shares in this FTSE 250 stock that returned 23.9% annually for the last 15 years
• £1,000 buys 25 shares in this FTSE 100 stock that’s returned 29.2% annually for the last 10 years
• Down 47%, is this growth stock finally worth buying in May?
• 2 REITs yielding 7%+ to consider for passive income in 2026
• Just 97 shares of this UK dividend stock generate £238 in passive income

Bank of America is an advertising partner of Motley Fool Money. Stephen Wright has positions in Informa Plc. The Motley Fool UK has recommended Informa Plc. 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.

The FTSE 100 has had a steady week. But shares in Admiral (LSE:ADM) haven’t done so well – the stock is down 5.76%.

Most of the decline came on Thursday (7 May) when the stock fell 5.41%. Am I worried? No. Am I buying more? Maybe…

Why Admiral?

The FTSE 100 has a lot of insurance stocks. And the vast majority, I’ve no interest in buying whatsoever.

Admiral, however, is the exception. The reason is simple – it has a massive competitive advantage in a really important industry.

Car insurance is something people have to buy (if they want to drive). And insurance is about pricing risk accurately. 

Admiral’s big advantage comes from its data. Its telematics products give it better information about how people drive than its competitors.

That allows it to be more accurate with its pricing. And it’s why the company’s underwriting margins are consistently ahead of the industry.

What could go wrong?

When it comes to car insurance, I think Admiral is the best in the business. But I’m always aware of what could go wrong.

The most obvious candidate is inflation. If car repairs become more expensive, costs go up and this weighs on profits. 

That’s not the biggest issue – Admiral can adjust its prices the following year. But I’m also mindful of longer-term threats. 

Artificial intelligence (AI) is the thing to keep an eye on. Even with weaker data, it might allow Admiral’s competitors to close the gap a bit. 

That, however, isn’t why the stock fell on Thursday. It’s something much more predictable and much less significant.

What actually happened?

On Thursday, the stock reached its ex-dividend date. So anyone who bought the stock after the open doesn’t receive the next dividend. 

In this case, it’s actually a pretty big payout. It combines a 17p normal distribution with a 73p special dividend for a total of 90p. 

That means the stock on Thursday was genuinely worth 90p less than it was on Wednesday. It’s the same business, but without a 90p distribution.

Admiral shares immediately fell 181p, or 5.41%. But the dividend accounts for half of that leaving a decline of around 2.7%.

On a day when the FTSE 100 fell 1.44%, I’m not sure that’s a big deal. It’s certainly not a huge unjustified sell-off that creates a buying opportunity.

Should I buy it?

I bought my stake in Admiral in February, when the stock was trading at £28.24. After this week’s declines, it’s currently at £31.66. 

On top of this, any shares I buy today won’t come with the next dividend, which is due to be paid in June. That’s also worth noting.

My Admiral stake is currently neither here nor there. It’s not a big part of my portfolio, but I’m ideally looking for a cheaper price.

I’m going to bide my time on this one. That might turn out to be a mistake, but it’s probably better to miss an opportunity than to overpay.

The bottom line, though, is that Admiral shares are down 5.76% this week. But I’m neither concerned by the decline nor looking to seize an opportunity.

The post My top FTSE 100 insurance stock fell 5.76% this week! Here’s what I’m doing appeared first on The Twelfth Magpie.

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• These 5%-yielding FTSE 100 dividend shares are on sale today!

Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Admiral Group Plc. 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.

I worked out the dividend yield on my Stocks and Shares ISA recently. Overall, it comes in at 1.81%, which might be a surprise. That’s unlikely to excite passive income investors.

But there’s a very good reason why I’m not chasing a higher yield in my portfolio.

Why’s the yield so low?

In general, the stocks I own in my ISA don’t have huge dividend yields. But that’s not because they aren’t making money – they are. 

Rather than returning that cash to shareholders though, the businesses retain it internally. And I’m generally a big fan of them doing this. 

To see why, think about what happens to the cash retained by a company. It doesn’t go to the CEO or get spent on the staff Christmas party. Instead, it gets invested by the business. And it can be used to open new sites, develop products, or even acquire other firms.

Importantly, these can generate better returns than I can find in the stock market. So it’s better for me if they use their cash internally. 

An example

A good example is Bunzl (LSE:BNZL). The company does pay a dividend, but it’s what happens with the rest of its net income that I’m interested in. 

The firm uses the cash it retains to finance its growth. And a big part of this is buying other businesses that can expand its operation. 

There are always risks with investing. And one is the danger of paying too much to acquire a new business. As with any investment, it’s impossible to eliminate the risk entirely. But there are some key metrics to pay attention to.

One of these is the return on capital employed. This measures how much profit the firm is generating relative to the cash it retains.

What to look for 

There are a couple of things to note about Bunzl’s returns on capital employed. The first is that it’s consistently been pretty high.

Source: Fiscal.ai

In recent years, the metric’s been well above 12%. And it isn’t easy to find that kind of return in the stock market elsewhere right now. 

The metric’s fallen in recent years. A big part of this is deflationary pressures following the pandemic lasting longer than expected.

Those however, look largely temporary to me. And I think Bunzl has a lot of scope for future acquisition growth still to come. A highly fragmented market means a large number of potential targets. And I expect the firm to make the most of this.

Building wealth

Building wealth involves compounding returns at high rates over a long time. But while reinvesting dividends is one way of doing this, I don’t think it’s my best way. By reinvesting dividends, I think I can manage a return of around 7%. That’s not bad, but it’s well short of what the likes of Bunzl achieve.

Despite some recent difficulties, the firm’s still earning over 12% on its capital. And that’s the number that matters to me, not the dividend yield.

The post Here’s the dividend yield I get from my Stocks and Shares ISA appeared first on The Twelfth Magpie.

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• Here’s how someone could aim for a million with a handful of shares!

Stephen Wright has positions in Bunzl Plc. The Motley Fool UK has recommended Bunzl Plc. 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.

Looking to start earning a second income? The FTSE 100 is a great place to hunt for high-quality opportunities.

One example is Unilever (LSE:ULVR). It’s a giant in the consumer goods industry and it’s unusually cheap right now.

Consumer staples

Unilever has been one of the FTSE 100’s most consistent sources of dividends. And that’s not a big surprise – it makes the products people use every day.

That means demand is generally pretty stable, even in a recession. People might not always go on holiday, but it takes a lot for them to stop buying deodorant.

There is a downside to this. A bit like my wardrobe, Unilever’s products never go out of fashion – but they also never come into fashion.

As a result, it can be hard for the firm to generate meaningful growth. It’s already huge and the market it competes in isn’t really getting bigger.

The other risk is that it’s very easy for customers to switch to other products. So Unilever has to work hard constantly to keep them coming back.

Those are real challenges. But the FTSE 100 firm has some key strengths when it comes to generating growth and fending off competition.

Brand power

Unilever doesn’t just make stuff that people use. It has some of the top products in various categories, with brands including Domestos, Persil, and Vaseline.

This matters for more reasons than you might think. The obvious point is that these are names that consumers associate those names with quality. 

In some cases, having the right brand can be even more important than having the best product. But there’s another reason why it’s valuable.

Unilever’s products battle for shelf space with competitors. And there’s a big advantage to being in the best position to attract customers. Suppliers have to negotiate with retailers for these spaces. But having a strong brand portfolio is a big advantage on this front. Retailers want to stock Unilever’s products to attract customers. And that gives the company more power when it comes to negotiating.

Why is the stock down?

All of this sounds pretty good, so why is the stock down? The short answer is that not all brands are created equal. Some of Unilever’s brands have been performing less well than others. And the company has been making moves to divest these.

Most recently, the food division has been sold. But it will take time and won’t be as straightforward as investors were hoping.

Nonetheless, a falling share price means higher dividend yields. Investors who buy 702 shares for £30,807 right now can earn £1,200 a year.

That’s a 3.9% dividend yield. And it’s extremely unusual to see Unilever shares available to buy with that kind of starting return.

Ultimately, the company looks like it’s getting itself into a stronger competitive position. If that’s the case, it’s got to be worth a look at today’s prices.

Income investing

For investors looking for income, Unilever is a really interesting stock. It has long-term strengths in an industry where demand is relatively durable.

It’s unusual to find shares in this kind of business going cheap. But that might be the opportunity that’s on the table right now.

The post 702 shares in this FTSE 100 stalwart earn a £100 a month second income appeared first on The Twelfth Magpie.

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Stephen Wright has positions in Unilever. The Motley Fool UK has recommended Unilever. 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.

Shares in UK housebuilders have been struggling recently. High inventory levels combined with affordability issues have been weighing on the industry. 

One of the worst-affected has been Vistry (LSE:VTY), which is down 47.59% in the last 12 months. But the firm might have a huge opportunity ahead.

Company overview

Unlike other UK builders, Vistry builds houses for institutional partners. These include housing associations, local authorities, and the private rental sector.

In theory, there are two big advantages to this. The first is that it doesn’t have to finance the build itself, which makes it more capital efficient.

The second is that a lot of its houses are sold before they’re built. This reduces the firm’s exposure to the ups and downs of the housing market. 

On the other side of the coin, there are drawbacks. Selling to partners typically means lower margins – that’s the trade-off for financing and certainty. 

There’s also a risk of complexity. External partners rely on funding and delays to this can create working capital challenges for Vistry. 

The partnership model has pros and cons. But right now, it means the company could be looking at a huge opportunity. 

SAHP

The UK government is committed to building around 300,000 new homes a year. A big part of this is the Social and Affordable Homes Programme (SAHP). 

This offers £39bn in funding for new homes that meet certain affordability criteria. And it’s a big deal for Vistry in two ways. 

First, the company is one of two organisations that has Strategic Partner Plus status. That means it can bid directly for up to £700m in funding. 

Second, the main bidders are likely to be housing associations and local authorities. But these are exactly the organisations Vistry already partners with.

These existing relationships give the company a huge advantage over competitors. And this hasn’t gone unnoticed by its competitors. 

In the context of a firm with a £1.25bn enterprise value, the opportunity could be huge. The stock market, however, appears to be focused on other issues.

Why is the stock down?

Housebuilders have been offering discounts to shift inventory in a weak market. And that includes Vistry as it winds down its open market division.

This is never a good thing. But it’s more of a problem for the company than some of its rivals. 

Vistry carries more debt than most housebuilders. That’s a feature of its partner-focused model, which means it needs less cash to operate.

It means, however, that the firm can find itself needing to raise cash more urgently. And that’s why it’s been discounting more aggressively.

The stock market – rightly – isn’t impressed with this. But I think the company is at a major turning point. 

Vistry plans to focus on SAHP projects from H2 onwards. And when it does, I expect things to change dramatically.

Hard to resist

At £3.36, I think the share price is hard to resist. I own the stock in my ISA, but another £1,000 for 297 shares won’t ruin my diversification.

It’s one I’m looking very carefully at right now. And I’m expecting to add to my investment before the second half of the year.

The post £1,000 buys 297 shares in this beaten-down UK housebuilder with a £700m opportunity appeared first on The Twelfth Magpie.

More reading

• Down 55%! Is this one of the FTSE 250’s greatest value shares?
• Down 73%, Vistry’s the worst-performing FTSE 250 share in my portfolio. Time to sell?

Stephen Wright has positions in Vistry Group Plc. The Motley Fool UK has recommended Vistry Group Plc. 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.