If you’re wondering how to invest £10k today, I’d suggest starting with a portfolio of FTSE 100 dividend shares. In this article, I’m going to look at two stocks I think should provide a market-beating mix of growth and income over the long term.
As always, I’d use a Stocks and Shares ISA to ensure future capital gains and income are tax-free.
Long-term growth My first pick is FTSE 100 healthcare and pharmaceutical group GlaxoSmithKline (LSE: GSK). This Brentford-based group has a big presence in several important markets, including respiratory illness, vaccines and cancer treatments.
Although Glaxo is working on a Covid vaccine with French firm Sanofi (PA:SASY), the firm has pledged to not take a profiteering approach to the pandemic. However, GSK’s vaccine division reported a profit margin of 41% last year, making it the most profitable part of the business. I believe this division should support attractive long-term growth.
I’m also attracted to the break-up potential at GSK. The group plans to spin out its consumer healthcare division — which makes products such as Nicorette and Sensodyne — into a new business in the next couple of years. Existing Glaxo shareholders will receive shares in the new business.
GSK has been transforming itself for a while now. It’s fair to say that profit growth hasn’t been all that impressive. But I expect this to change over the coming years, as the split creates two smaller and more focused businesses.
The shares currently offer a dividend yield of 5.6% and trade on just 12 times forecast earnings. If you’re looking for ideas on how to invest £10k, I reckon GSK shares are a good starting point.
Luxury looks safe to me My next choice takes us from pharma to luxury fashion. Burberry Group (LSE: LON:BRBY) is a well-known name in the luxury sector, with a particularly strong following in Asia. Although I don’t expect to ever be a customer myself, I can appreciate this company’s financial style.
Burberry’s sales were hit hard by Covid-19 and fell by 45% during the three months to 27 June. Despite this slump, the company says that sales in China continued to grow during the first quarter. By June, sales were said to be ahead of January levels.
Clearly, Burberry needs to stage a recovery in its European and US markets too. But new product development hasn’t stopped this year. New ranges include leather goods and more frequent ‘capsule’ collections designed to attract younger buyers.
The partnership of CEO Marco Gobbetti and designer Riccardo Tisci appears to be delivering results.
In the meantime, Burberry’s financial situation looks bulletproof to me. Although the shares look pricey on 31 times 2020/21 forecast earnings, this business has historically generated high profit margins and regular dividend growth. I believe now could be a good time to add this FTSE 100 dividend share to a long-term portfolio.
How to invest £10k? Start now! The ongoing coronavirus pandemic means that the outlook for the economy is uncertain. However, I believe that the risks we can see are already reflected in the share prices of these FTSE 100 firms.
Some of my best investment results have come from stocks I’ve bought during market downturns. I reckon now could be a great time to start investing.
The post How I’d invest £10k today: an ISA filled with FTSE 100 dividend shares appeared first on The Motley Fool UK.
Roland Head owns shares of GlaxoSmithKline. The Motley Fool UK has recommended Burberry and GlaxoSmithKline. 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
