If I had some money to invest now, I would buy three FTSE100 Shares. They are LondonMetric property (LSE: LMP), CRH (LSE: CRH) and Taylor Wimpey (LSE: TW.).
Even though dividends are never guaranteed, I like these tips because of the juicy returns for the following reasons.
What they do
LondonMetric is designed as a real estate investment trust (REIT), which means it makes money from real estate. The nice thing about REITs is that they have to pay out 90% of their profits to shareholders.
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CRH is a construction supplier that sells materials such as cement, asphalt and other aggregates.
Taylor Wimpey is the UK’s second largest residential property developer with a broad presence and a positive track record.
The good stuff!
I’m a fan of LondonMetric’s diverse operations. Like many other REITs, the company hasn’t put all its eggs in one basket. Diversification is a great way to mitigate risk. It also gives the company the flexibility to capitalize on trends. LondonMetric has plenty of logistics assets to capitalize on the current e-commerce boom and is pulling back from office space, which is seeing declining demand due to the work-from-home trend.
From a return perspective, a dividend yield of 5.2% is attractive. For comparison, the FTSE 100 average is 3.9%.
CRH’s broad footprint and potential for dividend growth are exciting. The need for more infrastructure is tied to a growing global population. Demand for its products could skyrocket, boosting profits and earnings. A prime example of this is that CRH may benefit from a huge infrastructure bill recently passed in the US, where the company makes most of its money.
From a return perspective, the yield on CRH shares is currently just under 2%, but I can imagine this figure increasing over time.
Taylor Wimpey is in a great position to benefit from the imbalance in the UK housing market. Demand currently exceeds supply. Thanks to its favourable market position and reputation, the company may find that better economic conditions could catapult the company to new heights. This, in turn, could lead to higher earnings and returns.
Currently, the shares offer a dividend yield of 6.2%. Additionally, with a price-to-earnings ratio of just 15, the shares appear to offer good value for money.
Risks to be considered
REITs use debt to finance their growth and buy new assets to make money. This may be more difficult for LondonMetric at the moment due to higher interest rates, as servicing and repaying debt is more expensive. This could impact future earnings.
Economic shocks are a concern for CRH. When these occur, construction projects may come to a halt, which could impact earnings and returns. This is a cyclical risk that I will keep an eye on.
It’s been a tough time for homebuilders, with higher costs due to inflation hurting completions and sales. Higher costs eat into the profits that support returns. Buyers have also been put off by higher interest rates, which lead to higher mortgages. Although inflation is falling and a new government has promised to solve the housing crisis, we’re not out of the woods yet. A continued gloomy economy could also have a detrimental impact on earnings and returns.
The post 3 FTSE 100 shares I would buy to build permanent passive income appeared first on The Motley Fool UK.
Further reading
Sumayya Mansoor does not own any of the stocks mentioned. The Motley Fool UK has recommended LondonMetric Property Plc. The views expressed on companies mentioned in this article are those of the author and 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.
Motley Fool UK 2024
