It’s been a difficult start to the year for investors. Share prices have been volatile, and some are warning there’s a superbubble in the US right now. It could only be a matter of time before we see another stock market crash.

But I’m not worrying too much. In fact, if there is a crash, I’d snap up shares of this company as it becomes cheaper. Let’s take a closer look.

An investment company

The stock I’ve got high on my watchlist is Segro (LSE: SGRO). It’s actually a real estate investment trust (REIT) that specialises in managing a portfolio of industrial properties. REITs have benefits that generally means a good stream of dividends for shareholders.

One of the reasons I’d buy shares of Segro is due to its diversified property portfolio. It has a good mix of urban buildings that are generally smaller and used for ‘last mile’ deliveries and data centres. Segro also owns big box warehouses that are used for bulk storage and act as large-scale distribution facilities. The portfolio is weighted more towards urban properties, which offer greater scope for increased rental growth. This is because of the increasing demand for local delivery hubs as e-commerce continues to grow. Not only this, but our growing digital economy requires more  data centres.

I also like how Segro is diversified across the UK and mainland Europe too. So there’s less concentration on any one economy.

Segro released its full-year results to 31 December last week. The company achieved record levels of rental growth, and said the demand for industrial and logistics properties remain “very favourable”. As mentioned, e-commerce and an expanding digital economy are excellent growth drivers for its property portfolio. I only see this demand increasing from here.

I’m buying if there’s a stock market crash

I’ve held back from buying the shares in recent months because of the valuation. On a forward price-to-net-asset-value ratio (taking into account the valuation of Segro’s properties), the shares are valued on a multiple of 1.2. This is higher than it has been historically.

Also, the shares are highly valued based on the rental income it earns too, in my view. Using the forward price-to-earnings ratio, Segro is valued on a multiple of 39 based on next year’s earnings from rental income.

As well as the price, there are other risks to consider. For one, occupancy rates can decline if there’s a recession. This would really impact Segro’s rental income. REITs also use debt to purchase properties. One way to track this is by looking at Segro’s loan-to-value ratio, which is currently 23%. It’s below the company’s target of 30% right now, but I should monitor this to watch how much debt it’s using.

Nevertheless, I’d buy shares of Segro if it became cheaper in any stock market crash.

Dan Appleby has no position in any of the shares mentioned. 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.

It’s going to be March next week, which means a new month to find investing opportunities. I always try to get a head start each month. I work out how much free cash I’ll have over the next four-and-a-bit-weeks to invest, along with what I think the topic theme could be. At the moment, I’m anticipating having £500, which I want to put to work in hot dividend stocks. Here are two options I’m considering.

Shopping around for deals

The first is Moneysupermarket.com Group (LSE:MONY). The main website offers a price comparison service to users on a broad range of financial products. The company also owns MoneySavingExpert.com, a famous site that include tips on how to manage expenses and find the best deals.

It currently has a dividend yield of 6.04%, making it one of the highest-yielding dividend stocks in the FTSE 250. The share price is down 32% over the last year. In the latest full-year results just released, the business kept the dividend per share unchanged at 11.71p. This is interesting as revenue and profitability actually fell last year. Yet the decision to keep the same payout amount shows that it values income investors and wants to keep them onboard.

Results were softer in 2021, with revenue down 8% on the prior year and adjusted EBITDA down 7%. This was mostly driven by the fall in travel and home services. This isn’t surprising, given the lockdowns over the past year. However, the Money arm (ie cards) did show growth. Looking forward, I think that Money can continue to grow, and travel and home services should rebound in 2022 as people get out more.

One risk to this dividend stock is in the Energy sector. Lower wholesale prices are needed to provide product availability. Current high prices will negatively impact revenue.

A growing dividend stock

The second stock I might buy is IG Group (LSE:IGG). The retail trading platform is also a member of the FTSE 250 index, with a dividend yield at the moment of 5.56%. Over the past year the share price has fallen by 2%. 

I like the business model for several reasons. First, it’s continuing to branch out into new areas, something that’ll help to diversify and grow revenues in the future. This has come from external acquisitions such as tastytrade, and from internal moves such as pushing into Japan. Second, it’s a fairly low-risk model. It makes a small commission when clients buy and sell. As long as it maintains a strong platform and can retain customers, revenue should follow.

One risk is that as retail investing has become more popular in recent years, so has the competition. Fellow FTSE 250 constituents CMC Markets and Plus500 are just two players vying for the same customers as IG, with little to differentiate them. However, for the moment it appears IG is doing well in this regard, with active client numbers jumping 42% in the half-year results compared to the previous six months. Some of this is due to the tastytrade acquisition, but some is natural growth.

I’m considering putting my £500 to work split between both dividend stocks.

Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended Moneysupermarket.com. 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.

One way to make passive income is from buying a dividend share. Over time, the dividends declared by the company will be paid into my account. This income can build up, making it useful money I don’t have to work hard for.

This is great, but there are a few things I can do to go from owning one dividend share to ramping up my passive income potential from the stock market.

Making use of the ISA wrapper

The first trick I’ve used is to house my dividend shares within a Stocks and Shares ISA. This is a provision that’s available to all, with a limit of £20,000 invested per year. My investments within this amount in the ISA are covered by a tax wrapper. This means that I don’t pay dividend tax on any income I receive in this regard. 

The benefit of this can be seen from a simple example. Let’s say I receive £3,000 in passive income a year from dividends. If it’s within my ISA, I get the full £3,000. Yet if not, then my dividend allowance of £2,000 is used up. Depending on how much other income I make, the excess £1,000 could be taxed up to a rate of 38.1%!

In order to reduce the potential of cutting my net passive income, housing my stocks in a Stocks and Shares ISA makes sense.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Checking the payment dates

The second tip I like to use is to see when the next dividend payment is due. For example, a company might pay an annual dividend with a current attractive yield of 8%. But if I see this a week after the annual dividend has been paid, it doesn’t make much sense to invest right then. To increase my passive income, I’d rather look for other companies that will be paying a dividend sooner, or one that pays out on a quarterly basis. 

The key point here is that as long as I own the share before the ex-dividend date, I’ll receive the dividend on the payment date. Admittedly, I don’t want to try and get too clever here. Attempting to perfectly time these things never ends up going well, in my experience.

But for dividends that are paid annually, it does make sense to consider when it will next be paid so that I can avoid holding a stock for many months before getting any sniff of income.

Increasing passive income consistency via diversification

The final point to help me increase my passive income is to build a larger portfolio of dividend stocks. In one way, this will obviously increase my income, as I’m investing more money. But the logic here is actually more to do with diversifying my risk and blending my dividend yields together.

By holding a dozen stocks versus just one, the ability for me to consistently generate income increases. If I hold one stock and the company cuts the dividend, my income is significantly hit. If one out of 12 stocks cuts the dividend, the impact is much less.

Further, I can even achieve a higher overall dividend yield by owning multiple stocks (with a lower overall risk) than by just owning one.

Jon Smith and The Motley Fool UK have 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.

It’s been a good start to the year for the BT (LSE: BT.A) share price. Already, the shares are up 16%. And over one year, the stock is up a huge 50%. It means the company is one of the best performers in the FTSE 100 so far this year.

So, what’s going right for BT? But most importantly, should I add the shares to my portfolio?

What’s going right?

One of the points that appeals to me as a potential investor in BT is its expanding next-generation networking. This includes things like full fibre internet directly to homes, and wireless 5G mobile networks. BT is directly involved in these crucial upgrades across the UK. And things have been progressing well of late. As part of the results for the nine months to 31 December, BT said it “had a good [third] quarter with encouraging market share performance“.

Expanding on this further, it was another record-breaking quarter for the full fibre rollout for BT’s Openreach subsidiary. BT also confirmed that its 5G network now covers 40% of the UK’s population. These continuing upgrades will be key for its prospects in the years ahead, in my view. Indeed, Openreach’s revenue and profit grew by 4% and 7%, respectively in the nine months compared to the equivalent period last year.

However, the update wasn’t all good. In fact, total revenue over the nine months actually declined by 3% compared to last year. BT put this down to reduced demand for its enterprise legacy products and challenging market conditions in its global businesses.

In terms of overall profit though, BT was able to control costs very well. This meant that adjusted earnings before interest, tax, depreciation and amortisation rose 2%, despite the revenue decline. To my mind, this shows that the management team has a good handle on the business.

Should I buy at this BT share price?

The results didn’t show spectacular growth, then. But the free cash flow generation remained excellent. Looking ahead into BT’s next fiscal year (the 12 months to 31 March 2023), the free cash flow yield is expected to be almost 8%. This will support a dividend yield of 4% according to current forecasts. Therefore, I can see the appeal of BT shares if I’m looking to generate income in my portfolio.

There might be value to unlock in the company too. Reports had suggested that BT was close to selling its lucrative BT Sport division to DAZN for an estimated $800m. However, just this month, we learnt that BT is now in negotiation with Discovery Communications over a joint venture to combine BT Sport with Eurosport UK. This may lead to DAZN increasing its bid for BT Sport, which could then propell the BT share price higher.

But having said this, I wouldn’t invest in a company based only on this type of situation. It’s a very risky strategy as negotiations could break down. If this happens, then the share price could fall below where I bought the shares.

Nonetheless, I like the prospects for BT going forward, regardless of the outcome for BT Sport. Its expanding networks could lead to impressive growth. Also, the dividend forecast makes the shares attractive for an income investor. So I’d consider buying the stock today.

Dan Appleby has no position in any of the shares mentioned. 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.

One FTSE 250 income stock stands out to me as an attractive investment in the current environment.

Shares in this company have recently declined to a 52-week low, despite the firm’s growing international presence and rising profitability. 

The corporation I am referring to is the financial services group IG (LSE: IGG). Over the past couple of years, this organisation has become an international financial powerhouse, leveraging its presence in the UK market to expand worldwide and grow its customer base. 

The group specialises in financial market trading and trading software. This business can be lucrative, especially in volatile markets when investors and traders place more deals. 

As the business has expanded, it has also hiked shareholder returns, making the company one of the most attractive income stocks in the FTSE 250. 

FTSE 250 income stock 

IG’s interim results, covering the period to the end of November 2021, showcase the company’s strengths. Overall net trading revenue for the period increased 16% year-on-year. Unfortunately, as costs increased 22%, overall profit before tax rose just 8%. 

I am not particularly bothered about this increase in overall costs. IG’s investment in technology and personnel helps the company differentiate itself from the competition. These investments will impact profitability, but they should translate into growth in the long run. 

Indeed, three years ago, the enterprise was a UK-centric, CFD-focused firm, which left it incredibly exposed to the UK economy and regulators. When regulators clamped down on highly leveraged CFD products, the business had to change direction. Since then, it has transformed itself into a global financial technology outfit with an international footprint. 

This expansion has come with its own set of challenges. The firm is having to fight larger peers for market share. It also has to pay more for talent. This is one of the reasons why costs have been rising faster than sales, as I explained above. These headwinds will not go away any time soon. They are likely to remain the company’s biggest challenges going forward. 

Nevertheless, the business’s expansion plans are paying off. Last year it acquired US-based broker Tastytrade. This is already contributing to growth. Revenues increased 29% in the three months to the end of November. 

Growing payout 

As the company’s bottom line has grown, it has been able to increase its dividend to investors. The annual payout has jumped from 31.4p in 2016 to 43.2p. This suggests the stock offers a prospective dividend yield of 5.7% at the time of writing. 

As well as this tasty looking dividend yield, the shares are also selling at a forward earnings multiple of just 9.6. I think this undervalues the company and its growth prospects over the next few years. 

Therefore, I would take advantage of the recent decline in the IG share price and acquire the FTSE 250 stock for my portfolio as an income investment. 

Rupert Hargreaves has no position in any of the shares mentioned. 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.

The BT (LSE: BT.A) share price looks cheap compared to its trading history. At around 200p, the stock is trading about 60% below its 10-year high of 460p printed in December 2015. 

Unfortunately, just because a stock looks cheap compared to its trading history does not necessarily mean it is a good investment. The BT share price might look cheap but over the past seven years the company’s profits have fallen. This suggests the corporation is worth less today than it was in 2015. 

However, I think the stock still has tremendous potential over the next couple of years. And according to my figures, there is even a chance the BT share price could double my money. 

The comeback kid

According to the company’s projections and analysts’ expectations, the group is expected to grow in 2023 for the first time since 2016. 

This will be a landmark for the business, which has been struggling against multiple headwinds over the past couple of years. The most significant headwind has been competition. And this has not gone away. BT is still having to fight for market share against smaller, more nimble competitors. 

However, customers are returning to the company, albeit relatively slowly. That is why analysts expect the group to return to growth in 2023. 

While there is no guarantee the enterprise will be able to return to growth, if it can, I think the market will reevaluate the firm’s potential. This could lead to a re-rating of the BT share price. To put it another way, the market may be willing to pay a higher multiple for the enterprise due to its growth potential. 

Indeed, at the time of writing, the stock is trading at a forward price-to-earnings (P/E) multiple of 9.5. By comparison, FTSE 100 peer Vodafone is selling at a multiple of 16 times forward earnings. If BT can trade up to the same multiple, the stock could be worth as much as 333p. 

These figures imply that the stock is undervalued. And the P/E ratio is not the only metric that leads to this conclusion. Analysing the company’s free cash flow provides more evidence that the BT share price is cheap. 

BT share price valuation

In 2017, the corporation reported a free cash flow per share figure of 31p. With the group set to return to 2017 levels of profitability in the next two years, it may be able to achieve the same figure.

With the company’s peers trading at an average ratio of 15 times cash flow, I believe there is enough evidence to justify the claim that the stock could be worth as much as 465p, an increase of 130% from current levels. These numbers suggest I could double my money if I buy the BT share price at current levels. 

Unfortunately, there is no guarantee it will double my money over the next couple of years. The above projections rely on a couple of assumptions. Firstly, that the market will re-rate the stock to a higher valuation. And that the firm can return to growth. 

Still, I think they illustrate the potential of the investment. That is why I would be happy to buy the stock for my portfolio today at current levels. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone. 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.

The great thing about a Stocks and Shares ISA is that any income or capital gains earned on assets held within one of these tax-efficient wrappers is not liable for tax.

In my opinion, this makes the account the perfect place to start building a passive income portfolio without having to worry about the taxman taking a big slice of any potential gains.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

And I think it is possible to start building a passive income portfolio with an investment of just £1,000.

Stocks and Shares ISA assets  

With a lump sum of £1k, I could buy a relatively diverse portfolio of income investments. Thanks to low-cost trading apps, acquiring multiple investments at a relatively low cost is now possible. 

By acquiring stocks such as Persimmon and Direct Line, which currently offer dividend yields of 9% and 8% respectively, I could earn a passive income of around £90 per annum on my initial investment. 

This is a start. However, I would be looking to increase my annual income by adding more money to the pot over time. 

According to my calculations, if I could put away £1,000 a year for the next decade and reinvest all of my income back into the market, I could potentially build a £15.5k nest egg within a decade. This could be enough to generate an annual passive income of around £1.5k. 

Unfortunately, there is no guarantee I will be able to achieve a 9% return indefinitely, of course. There is also no guarantee that the groups outlined above will maintain their distributions to investors.

Several challenges could hold back growth. These include rising costs and higher interest rates. If these costs hit company profit margins, they may have to reduce shareholder returns. And, of course, the value of my investments could even fall.

Investing for passive income

But I do still believe this approach has a lot of promise. I see a Stocks and Shares ISA as the perfect vehicle to build a passive income stream. That is especially true when combined with the power of compound interest. 

Another strategy I could use is to invest my £1,000 in a portfolio of growth stocks. If I can invest this money and achieve a 12% annual return while adding an additional £1,000 a year, I believe I could build a nest egg worth around £20k after a decade. By then investing this cash in income stocks yielding 9%, I could earn annual passive income of nearly £2,000. Again though, I have to accept that my returns may be less than I hope for.

Yet while these are only hypothetical outcomes, I believe the figures illustrate how straightforward it is to build a passive income in a Stocks and Shares ISA. I am so confident this is the best way to go about building wealth, it is the approach I am following. 

Rupert Hargreaves owns Direct Line Insurance. 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.

If I had a lump sum of £100,000 to start investing in the stock market today, I would look to take advantage of some of the attractive opportunities beginning to emerge. 

As the outlook for the economy has become more uncertain over the past couple of months, shares in some of the market’s fastest-growing stocks have faced significant selling pressure. 

While I think some of these companies were overvalued in the first place, I believe others have excellent growth potential. As such, I think the market is throwing the baby out with the bathwater. I would try to take advantage of this trend. 

What’s more, as well as a portfolio of individual stocks, I would also acquire a range of undervalued growth funds. But I would not risk everything on growth investments. I would acquire some defensive plays as well. 

Picking stocks for a portfolio

The great thing about being able to start investing with a large lump sum like £100,000 is that it allows for significant diversification. 

For example, I can invest 10% of the portfolio in some speculative growth stocks that I believe have excellent growth potential. With this risk capital, the three companies I would acquire are Ocado, Just Eat and Darktrace.

I believe each one of these growth stocks has a unique selling point. Ocado is revolutionising the grocery sector with robots. Just Eat has a leading position in the food delivery market, and Darktrace provides a unique artificial intelligence solution for the cyber security industry.

While these stocks have faced selling pressure recently, I think their competitive advantages should help them outperform the competition as we advance. 

Having said that, picking individual stocks can be a risky process. Even the professionals get it wrong on a regular basis. 

Start investing with growth funds

I would also invest around 30% of my money in growth funds. Two I would pick are the Scottish Mortgage Investment Trust and the Blue Whale Growth Fund. Both are looking for international growth stocks that exhibit unique qualities.

Scottish Mortgage also has the ability to invest in private companies. By adding these funds to my portfolio, I think I can increase my exposure to international growth stocks without doing any extra work. 

The relatively high cost of this approach is its major downside. Each of these funds charges a management fee, which will eat into my returns in the long run. 

I would acquire the Personal Assets Trust for my portfolio when it comes to defensive investments. This trust has around 50% of its assets invested in inflation-linked assets, which should provide some protection in the current environment.

I would invest approximately 20% of my portfolio in defensive equities like Personal Assets. A risk of using this approach is that if the economy outperforms, defensive investments could underwhelm. 

With around 60% of my £100k portfolio invested in the above opportunities, I would spread the remaining 40% across index funds. These funds are only designed to track the market. Therefore, they will not outperform the market.

Still, they are a great asset to use to start investing. They allow investors to take part in market growth without picking individual stocks. 

Rupert Hargreaves owns Personal Assets Trust. The Motley Fool UK has recommended Just Eat Takeaway.com N.V. and Ocado Group. 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.

Trying to estimate what sort of returns an asset like the Lloyds (LSE: LLOY) share price will return over the next 12 or 24 months is a tough challenge.

It is impossible to predict the future. Therefore, it is also impossible to predict where the stock will be trading a couple of weeks, months, or even years from this point. 

However, in theory, an asset like the Lloyds share price should track the company’s underlying fundamental performance. As such, if the bank’s profits double over the next year, then its stock price could double as well. 

The company’s value could also increase significantly if the market decides to re-rate the stock to a higher multiple. At the time of writing, shares in the lender are selling at a price-to-book (P/B) value of just 0.7 and a forward price-to-earnings (P/E) multiple of 6.7. 

To put these numbers into perspective, many of the bank’s international, profitable peers are selling at an average P/B ratio of 1.2 and a P/E multiple in the mid-teens. 

These numbers alone suggest the Lloyds share price could rise by between 70% to 100% from current levels. On this basis, I am considering adding the stock to my portfolio. 

Improving outlook 

Of course, there is no guarantee the market will re-rate the stock to either one of these values. The bank has consistently traded at a discount to its international peers over the past decade. Although past performance should never be used to guide future potential. 

I think the outlook for the Lloyds share price is really starting to improve. Rising interest rates could provide a significant tailwind for the lender, which may help increase overall profitability. If profits increase dramatically, this could help improve market sentiment towards the business. 

Further, I think investors will return to the bank if it can begin to rebuild its reputation as an income champion. The bank paid a total dividend of 3.3p per share for its 2019 financial year.

Regulators put the brakes on bank dividends during the pandemic, but that changed towards the end of 2020.

City analysts believe Lloyds will pay out 2.5p per share for its 2022 financial year. Further growth seems likely in the following year. There is also a chance the firm could beat these projections. This could be another catalyst for the stock in the months and years ahead if it does. 

Lloyds share price tailwinds 

I think these tailwinds could support the stock over the next 24 months. However, I also need to consider the risks the bank faces. These include the cost of living crisis and the prospect of rising wage costs. These challenges could weigh on growth. Additional regulatory headwinds may also hit market sentiment towards the enterprise. 

Still, despite these potential challenges and based on all of the above, I think the right pieces are in place for the stock to double over the next 24 months.

There is no guarantee the shares will rise 100%, but it certainly looks to me as if the right tailwinds are blowing the business forwards. On that basis, I would be happy to buy the stock for my portfolio today. 

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. 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.

As fears over Covid-19 steadily ease, I think Rolls-Royce’s (LSE: RR) share price could be about to soar.

The FTSE 100 engine builder’s shares are 20% more expensive than they were this time last year. But Rolls-Royce’s share price slumped towards the back end of 2021 as concerns over Omicron jumped. It’s also failed to gain any serious momentum since then. In fact, Rolls-Royce is cheaper than it was on 1 January.

This is despite a sharp fall in global coronavirus cases and the lifting of travel restrictions in many regions. So is the Rolls-Royce share price due for a re-rating as travel bookings rebound strongly? And should I buy the FTSE 100 firm for my stocks portfolio?

Travel sector bounces back

As I say, major travel operators are reporting a strong rebound in flight bookings as pandemic rules steadily ease. It’s raised the prospect that flying hours for Rolls-Royce’s engines could be about to soar (they registered at just 50% of 2019 levels at the end of last year).

TUI, Ryanair and easyJet are a few major travel operators that have recorded strong ticket sales in recent weeks. The chief executive of easyJet, Johan Lundgren, even also said that “we see a strong summer ahead” and that strong pent-up demand will see the airline “returning to near 2019 levels of capacity.”

Encouragingly for Rolls-Royce this is already translating through to improved confidence in the aerospace sector. Last week, Airbus said it was in discussions with suppliers to lift production of its A320 model beyond 2023, from current levels of 65. It also confirmed plans to deliver 720 aircraft this year, up from the 611 delivered in 2021.

Is Rolls-Royce’s share price cheap enough?

As a long-term investor, there are other things about Rolls-Royce I find highly appealing too. The geopolitical landscape is becoming more uncertain and troubled as the unfolding crisis over Ukraine illustrates. So I expect sales at Rolls-Royce’s defence business to remain pretty robust too.

I’m also encouraged by the company’s plans to build small-scale nuclear plants across Britain. This could generate huge returns as the world transitions towards low-carbon energy sources.

All that being said, I’m not tempted to buy Rolls-Royce shares just yet. My chief concern is the huge amount of debt the engineer has on its books (£4.9bn as of June).

However, asset sales and cost-cutting have been coming along nicely to ease the pressure on its balance sheet. Earlier this month, it sold its share in AirTanker Holdings for a cool £189m.

But these huge debts still have the capacity to damage Rolls-Royce’s growth plans and delay the payment of decent dividends to shareholders.

I find Rolls-Royce’s debt particularly concerning as the pandemic rolls on and new travel restrictions can’t be ruled out. In this scenario the FTSE 100 firm could take on new debt or tap investors for more cash to survive.

The Rolls-Royce share price is cheap — at 119p it carries a forward price-to-earnings growth (PEG) ratio of just 0.2 — but I’d still rather buy other UK shares right now.

Royston Wild has no position in any of the shares mentioned. 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.