An investor may choose to buy stocks at both valuations and dividends for several reasons. Aiming for a balance between potential long-term growth and income, here are five companies our underwriters have in their portfolios…
Computacenter
What it does: Computacenter is a value-added IT reseller, providing hardware and software solutions and professional services to customers.
Written by Roland Head. I think so Computacenter (LSE: CCC) is a top player in a sector where demand is likely to continue to grow for the foreseeable future.
The company’s size means it is one of the few businesses able to service large corporate and public sector clients. More than 50%. FTSE 100 companies are customers, for example.
Meanwhile, the group’s continued growth in the US has seen it become a trusted supplier to hyperscalers – large cloud and AI operators.
Another risk with this business is that it operates in small areas and relies on large capital to deliver attractive profits. This requires skillful management.
However, longtime CEO Mike Norris has an excellent track record. Computacenter’s operating profit has risen from £77m to £266m since 2014.
The company’s dividend rose from 19.8p to 70.7p per share in the same period. That’s an average increase of 13% per year.
I plan to continue holding this stock.
Roland Head is a shareholder of Computacenter.
Games Workshop
What it does: Games Workshop designs, produces and distributes figures and mini-games.
Written by Paul Summers. Games Workshop (LSE: GAW) offers a compelling combination of growth and income, in my view. Probably my favorite UK listed company!
On the growth side, the company has already signed an agreement with it Amazon turning its Warhammer 40k world into films and a television series. This may attract new followers and improve sales. The new production facility – due to open in 2026 – should help meet this demand.
But this company is no slouch when it comes to benefits either. The stock is yielding a respectable 4%, as I write.
One challenge it faces is continuing to satisfy the desires of its older customers (who have a lot of disposable income) while making sure it doesn’t fall behind as gaming becomes more mainstream.
Still, a strong balance sheet suggests to me that Games Workshop should be able to withstand any short-term volatility in trading.
Paul Summers is a shareholder in Games Workshop.
Greggs
What it does: Greggs is the UK’s leading food retailer.
Written by Ben McPoland. One stock I hold for both growth and equity is Greggs (LSE:GRG). The growth in revenue and receivables is fueled by an increase in store inventory, which stood at 2,559 at the end of September. That is expected to increase to 3,000 stores in the next few years.
Sales fell in the third quarter compared to the first quarter, with cash-strapped buyers showing less caution. I will be keeping an eye on this in case the trade weakens further.
However Gregs still reported a 10.6% increase in total sales for the quarter, with like-for-like sales up 6.5% year to date. This was driven by extended opening hours, the introduction of a new menu, and an increase in digital sales Uber Eat again Just eat it.
The last term share and the annual yield for 2025 is 2.4 %. Although that is unlikely to win the hearts of leading investors in the races, the annual payout has been growing by 11% in recent years. So I think this stock makes more sense if I own it for the long term from a dividend growth perspective.
The fall menu is now available and includes an all-day breakfast baguette. I may behave one way when the baker pays me the October dividend.
Ben McPoland is a shareholder in Greggs and Uber Technologies.
Reckitt
What it does: A leading manufacturer of health, hygiene, and nutritional products in locations around the world.
Written by Mark David Hartley. British health and food retailer Reckitt (LSE: RKT) has had a tough year. In February, a US court ordered her to pay $60m in damages in the alleged death of the baby. Enfamil baby formula. The stock price fell 15% on the news and 13% as fears of litigation erupted. Reckitt denies any wrongdoing and is contesting the decision – but the damage is done.
Now in recovery mode, Reckitt is trying to get back to business as usual.
Funds are strong and analysts who watch the stock are in good agreement that the price will increase by 26% in the next 12 months. Hopefully, that will help reduce its worryingly high £8.2bn debt. Shares are undervalued by 43% and the forward price-to-earnings ratio (P/E) is 13.7 – well below the industry average. In addition, it has a yield of 4.3% and an excellent track record of increasing payouts.
Mark David Hartley is a Reckitt shareholder.
Sage
What it does: Sage is a technology company specializing in accounting and payroll software for small and medium-sized businesses.
Written by Edward Sheldon, CFA. One of my favorite stocks for both growth and equities is FTSE 100 software company Sage (LSE: SGE).
As a software company, Sage is well positioned to benefit from the digital revolution. Looking ahead, I expect its share price to rise as more businesses acquire its products, and revenue and earnings rise.
I also expect to receive regular dividends from the company going forward. Sage is a very reliable dividend payer and has raised its payout every year for over a decade now (the yield is around 2% currently).
I will point out that Sage is not a cheap stock. As I write this, it sports a price-to-earnings (P/E) ratio of about 25.
I see that as a reasonable valuation for this company, however, as it has an excellent track record when it comes to generating wealth for investors (the share price has nearly tripled in the last 10 years). Assuming revenue and earnings growth don’t slow, I think the stock can continue to generate attractive returns for long-term investors like me.
Edward Sheldon is a Sage shareholder
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