FTSE 100 income stocks will never make us rich overnight but I would much rather buy and hold them than take a wild punt on Bitcoin.
The cryptocurrency has been showing signs of life again, jumping 35% year-to-date to $22,313 as I write, but I don’t care. While the price will no doubt climb higher when sentiment picks up again and can make money for some people, I would much rather build my fortune on top dividend-paying stocks.
I’d buy this FTSE 100 asset manager
Even if I did enjoy short-term capital growth from Bitcoin, I could lose it in the next sell-off. If I choose the right dividend stocks, they should (with luck) give me capital growth for life, and most crucially, income.
Global asset manager abrdn (LSE: ABRDN) has caught my eye. It has a strong UK presence but offers diversification as it also operates in Europe and Asia-Pacific, while expanding its operations in North America.
It has struggled since the 2017 merger with Standard Life, with its stock down 36.43% over five years. However, the shares are now up 21.81% over one year and a mighty 63.97% over the last six months, helped by the stock market recovery.
That’s impressive given that last week it reported a full-year £651m loss for 2022, down from a £1.1bn profit a year earlier. Assets under management fell 8%, from £542bn to £500bn.
Investors were in a forgiving mood because they know the reason, with CEO Stephen Bird blaming “one of the hardest investing years in living memory”. In the same breath, he was talking up abrdn’s resilience and strong capital position. I’m banking on the next year being better for investors generally and abrdn too. Mostly, I’m banking on that dividend coming through.
Crucially, abrdn remains committed to its policy of continuing to pay its full-year dividend of 14.6p, until it is covered at least 1.5 times by adjusted capital generation. When it hits that target, management will go back to increasing shareholder payouts again. That may take a little time, with current dividend cover much lower at 0.9.
I want both income and growth
However, given that the stock currently yields an impressive 6.9%, I won’t be complaining. This is one of the most generous income streams on the FTSE 100, comfortably above the average 4% yield for the index as a whole.
I thoroughly expect the shares to have a bumpy 2023, and possibly a bumpy 2024 too. While the FTSE 100 has had a good run, the global economy isn’t out of the woods yet. The US Federal Reserve is being hawkish as inflation proves sticky, and interest rates look set to climb higher still.
That will hit the stock market, abrdn and Bitcoin too. If markets fall, that’s when I’ll buy abrdn. I think today’s valuation is a little high at 16.7 times earnings. I fancy a lower entry point, and I’ll be watching this stock closely.
I won’t buy Bitcoin whatever happens. It’s risky and random. Most of all, it doesn’t pay any interest.
Once I’ve bought abrdn, I will reinvest all my dividends for at least the next 15 years, to build my stake before I finally draw income for my retirement. It looks a much better long-term plan than gambling on crypto movements.
The post Forget Bitcoin! I’d rather buy this high-yielding income stock appeared first on The Motley Fool UK.
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Harvey Jones holds one Bitcoin but 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.
Motley Fool UK 2023
