Forget Bitcoin! I would rather buy this stock with a high yield
FTSE 100 Income stocks will never make us rich overnight, but I’d much rather buy and hold them than make a wild bet on Bitcoin.
The cryptocurrency has shown 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 as sentiment picks up and may make money for some people, I’d much rather build my wealth in dividend paying stocks.
I would buy this FTSE 100 asset manager
Although I enjoyed short-term capital growth from Bitcoin, I may lose it on the next sale. If I choose the right dividend stocks, they should (with success) give me capital growth for life, and most importantly 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 the Asia-Pacific, while expanding operations in North America.
It has struggled since its 2017 merger with Standard Life, with the stock down 36.43% over five years. However, shares are now up 21.81% over the year and a mighty 63.97% over the past six months, helped by the rally in the stock market.
That’s impressive given that last week it reported a £651m full-year loss for 2022, down from a £1.1bn profit the previous year. Assets under management fell 8%, from £542bn to £500bn.
Investors were in a forgiving mood because they know the reason, with CEO Stephen Bird to blame “One of the hardest years to invest in lifetime memory”. In the same breath, he spoke up about abrdn’s resilience and strong capital position. I expect the next year to be better for investors in general and also. For the most part, I expect the dividend to come.
Crucially, abdn 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. Once it reaches that target, management will go back to increasing shareholder payouts again. It may take some time, with today’s dividend coverage much lower at 0.9.
I want both income and growth
But given that the stock is currently yielding an impressive 6.9%, I won’t complain. This is one of the most generous income streams on the FTSE 100, comfortably above the average return of 4% for the index as a whole.
I thoroughly expect stocks to have a bumpy 2023, and possibly a bumpy 2024 as well. While the FTSE 100 has had a good run, the global economy is not out of the woods yet. The US Federal Reserve is hawkish as inflation proves sticky and interest rates look set to rise even higher.
It will hit the stock market, abrdn and Bitcoin too. If the markets fall, that’s when I buy abrdn. I think the current valuation is a bit high at 16.7 times earnings. I fancy a lower entry point and will be watching this stock closely.
I will not buy Bitcoin no matter what happens. It’s risky and random. Most of all, it pays no interest.
Once I buy abrdn, I will reinvest all my dividends for at least the next 15 years, to build up my holdings before finally drawing income for retirement. That looks like a much better long-term plan than betting on crypto moves.
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Harvey Jones has one Bitcoin but has no position in any of the stocks mentioned. The Motley Fool UK has no position in any of the stocks mentioned. Views on the companies mentioned in this article are those of the author and may therefore differ from the official recommendations we provide 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.
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