I have to confess that as an investor I do not have much appetite for risk. An occasional volatile small cap is okay in my portfolio, but more often than not, I think the best UK shares to buy are FTSE 100 or FTSE 250 stocks.
Identifying the best UK shares
And for good reasons. Some of these companies are over a century old and still going strong. Since they have proven themselves over and over again, they are confidence bolstering.
Moreover, having been around this long, many of them are really huge companies with a presence across countries. This means that when trouble strikes, as it undoubtedly will, they will not fold up in a hurry. It can take years, if not decades for big companies to sink when the going gets tough. And that is if they do sink at all.
As the economy comes out of the serious setback caused by Covid-19, at least some of them are poised for growth. This can show up in their share prices too. But that is not all. Some of these FTSE 100 stocks offer more than safety and growth. They are also great dividend payers. The combination of these three characteristics makes them among the best shares I can buy today.
Betting on commodities
One such stock is the industrial metals’ miner Rio Tinto (LSE: RIO). Its share price was up around 30% in the past year until recently, when it went ex-dividend. It has fallen by around 15% since, which to my mind makes it a great time to buy the stock. It has a a huge 9.6% dividend yield.
Moreover, I think there is good reason to believe that it can continue to perform in the future. The global economy can pick up speed now, which should increase demand for industrial metals. Further, the Biden government’s infrastructure plan is a step closer to being underway. And with a slowdown in the Chinese economy possible, there is even a chance that the authorities there could try and give it a lift again by spending more.
Housing activity is still strong
Another stock I like is the FTSE 100 house builder Persimmon (LSE: PSN), which too has a big dividend yield of 8.3%. Its share price has not seen the kind of gains that Rio Tinto’s has over the past year, but if I consider the last two years, it has also given healthy capital gains to investors.
Also, I think there is a case for its share price to stay strong. Going by its recent statements and those of other UK-based house builders, it appears that their forward sales are strong. Low interest rates and a pick up in the economy also bode well for the housing market. There can be some setback from the rollback of the stamp duty holiday, but the extent still remains to be seen.
Both stocks are cyclical, though. This means that they are vulnerable to economic performance. If the recovery falters, these stocks may not perform as per expectations. But for now, for me, they do appear to be the best UK shares to buy.
Are you on the lookout for UK growth stocks?
While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.
And the performance of this company really is stunning.
In 2019, it returned £150million to shareholders through buybacks and dividends.
We believe its financial position is about as solid as anything we’ve seen.
- Since 2016, annual revenues increased 31%
- In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
- Operating cash flow is up 47%. (Even its operating margins are rising every year!)
Quite simply, we believe it’s a fantastic Foolish growth pick.
What’s more, it deserves your attention today.
So please don’t wait another moment.
- FTSE 100: 2 shares to buy in September
- I’d buy this cheap FTSE 100 stock with a dividend yield of 8%
- The Persimmon share price looks cheap to me, with its 8% dividend yield
- Are Persimmon shares a buy just for the 8% yield?
- Here’s my guide on dividend investing and 2 top picks!
Manika Premsingh owns shares of Persimmon and Rio Tinto. 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.