As a rule I look out for updates from the stocks I have bought. But in February, I am particularly looking forward to them. Some FTSE 100 stocks I either own now or have owned in the past have run up a lot in price recently. Their upcoming updates will show me whether these increases are justified or whether they are not.
Is this FTSE 100 stock’s high P/E justified?
The first of these is the Swiss commodity miner and marketer Glencore (LSE: GLEN). The stock has done exceptionally well in the past year. Even while other FTSE 100 miners fumbled as the commodity price rally slowed down, it has risen fast. In fact, now its market valuation is way ahead of that for all its peers. At a price-to-earnings (P/E) of 35 times, it is also significantly higher than that for the FTSE 100 index as a whole, which is 18 times.
I held the stock till very recently in my investment portfolio, but going by its small dividends (it has a dividend yield of only 1.4% right now) and its current overvaluation, I was not convinced if there is much more upside to it. So I sold it at a pretty decent profit. And so far, its stock price has not seen any sustainable gains since.
Glencore could increase dividends
But there are two reasons why I believe now that there could indeed be a lot more upside to the stock. One, its 2021 results release later this month, will reveal how it has performed. And if it has seen a significant rise in earnings, then its share price might just be justified.
And second, I want to see if it increases its dividends. As per recent AJ Bell research, the company is expected to grow its dividends the most in 2022 from among FTSE 100 stocks. This is in stark contrast with the fact that all the other FTSE 100 miners, which are Anglo American, Evraz, and Rio Tinto, are expected to decrease their dividend amounts this year. If both earnings and dividends grow now for Glencore, I would seriously think about buying the stock again.
Can the BT stock continue to gain?
The next FTSE 100 stock whose update I await is the telecom biggie BT. I have held the stock in my portfolio to limited gains. I do not blame the company of course, these two years have been the most atypical I have seen in my many years of investing. My reason for buying the stock was its dividends, and despite its share price weakness.
It stopped paying dividends in the pandemic, but has now resumed them and its share price has also started strengthening now, which is heartening to me as an investor. I am looking forward to its update due later this week to figure out whether the stock can get even more robust now. My decision to stay invested in it could depend on that.
Manika Premsingh owns BT GROUP PLC ORD 5P. 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.
