If I were starting out on my investing journey today, I’d buy FTSE 100 stocks.
The stock market can be a daunting place. There are ample industries and companies to research. However, many businesses on the Footsie are household names.
They offer stable and solid growth. And unlike many growth stocks, they have proven business models.
I want to buy companies I understand and have heard of. I think these two look like good options. I’ve been tracking them for my own portfolio lately.
Unilever
First on my list is Unilever (LSE: ULVR). The business sells essential goods. It owns brands such as Dove and Hellmann’s. The stock has struggled recently. In the last 12 months, it has dropped by 5.4%. However, I think now could be the time to swoop in and buy.
What I like about Unilever is its defensive nature. It sells products that consumers need to use every day. That, to an extent, defends it against external pressures, such as the ‘technical recession’ the UK is currently in.
We saw this in play last year. In 2023, Unilever grew its total underlying sales by 7%. Its 30 ‘Power Brands’, which make up 75% of its revenues, grew sales by 8.6%.
It also offers investors a 3.9% dividend yield. This means for owning Unilever shares I receive passive income. I can either take that money and spend it on paying off bills or purchasing luxuries. Or, as I tend to do, I can reinvest it back into buying more shares. That said, I must note that dividends are never guaranteed.
Tesco
Next up is Tesco (LSE: TSCO). The business needs no introduction. It’s the largest player in the supermarket industry by some way with a 27.2% market share. Unlike Unilever, Tesco has posted a strong performance in the last year. During that time, its stock has jumped 11.9%.
Like Unilever, I can also make some extra money with Tesco shares. It yields 4%. In the last five years, its dividend payout has grown by 89% from 5.7p to 10.9p.
Tesco’s dominant share of the market gives it an advantage over its peers. For example, it can benefit from economies of scale. Recently, it disposed of its Tesco Bank to Barclays, which should provide its balance sheet with a boost.
There are always risks
I must be wary of the risks with investing. With both Unilever and Tesco, I think the largest threat stems from cheaper competition.
The rise of budget supermarkets such as Aldi and Lidl has hurt both companies. The cost-of-living crisis has forced consumers to search for cheaper alternatives. In recent times, Unilever and Tesco have seen their market shares threatened.
There are other risks, too. Rising costs because of inflation will harm margins. Unilever upped its prices to offset this, but that may not be sustainable. Tesco recently announced a 9.1% pay rise for staff, which will also eat into profits.
I’d still buy
But even so, both businesses have taken steps to nullify these growing threats. And the chance to make some extra cash in a nice touch. Both are top-quality businesses I’d look to add to my portfolio if I had the cash.
This post was originally published on Motley Fool
