Finding a FTSE 100 stock that offers the combination of growth, value, and dividends is not easy. Most growth stocks trade at high valuations. Many don’t pay dividends.
However, after screening the FTSE 100 index for stocks that are generating revenue growth, paying a dividend, and trading at a reasonable P/E ratio, I’ve found one stock that ticks all three boxes. If you’re looking for shares to buy right now, I’d check this company out.
This FTSE 100 stock flies under the radar The FTSE 100 company I’m talking about Hikma Pharmaceuticals (LSE: LON:HIK). An under-the-radar healthcare company, Hikma is focused on developing, manufacturing, and marketing branded and non-branded generic medicines. Every day, its products are used by approximately 13m people across the world.
Impressive growth Hikma is growing at an impressive rate. Over the last five years, revenue has climbed from $1,489m to $2,203m – an increase of 48%. And looking ahead, City analysts expect the company to continue growing. Currently, analysts expect top-line growth of 4.4% this year and 5.4% next year.
It’s worth pointing out that, so far, Covid-19 seems to have had little impact on the company. In late February, the group advised that it wasn’t anticipating any material impact from the outbreak. More recently, on 30 April, the company said that it had made a “strong start to the year” and that it was reiterating its full-year guidance for 2020.
Still paying dividends Moving on to dividends, Hikma is a reliable dividend payer that has now notched up eight consecutive increases. The payout has been growing at a fantastic rate too. Over the last five years, it has increased from 22 cents per share to 44 cents per share. The FY2019 payout of 44 cents per share equates to a yield of around 1.4% at the current share price. Not the highest yield in the FTSE, sure, but a higher rate than you’ll get on a savings account right now.
Importantly, Hikma is continuing to pay its dividend in the current environment. Yesterday, it paid shareholders the final FY2019 dividend of 30 cents per share. The company said that its ability to keep paying dividends demonstrates the strength of its balance sheet and its confidence in its ability to maintain strong cash generation and low leverage.
Cheaper than the largest FTSE 100 health stock Given its growth and dividend track record, you would think that Hikma would trade at a high valuation. Yet that’s not the case. Currently, the forward-looking P/E ratio is a reasonable 19.8. By contrast, the largest healthcare stock in the FTSE 100, AstraZeneca, currently has a forward P/E ratio of 27.8. I think Hikma’s current valuation is attractive.
I’m not the only one who thinks Hikma has appeal right now. Of the 13 brokers covering HIK, 10 rate the stock as a ‘buy’ or ‘strong buy.’
A lot to like All things considered, I think there’s a lot to like about Hikma. The FTSE 100 company looks attractive from a growth perspective, but at the same time, it also has defensive attributes. People still need medicine in an economic downturn. The dividend payout adds weight to the investment case.
At its current price, I see the stock as a ‘buy.’
The post Growth, value AND dividends. I think this FTSE 100 stock looks attractive right now appeared first on The Motley Fool UK.
Edward Sheldon has no position in any shares mentioned. The Motley Fool UK has recommended Hikma Pharmaceuticals. 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 2020
First published on The Motley Fool
