With the UK’s political and economic outlook shifting, I’ve been thinking carefully about rebalancing my portfolio lately. While screening for ideas, two FTSE 100 shares caught my eye: Reckitt Benckiser (LSE: RKT) and BAE Systems (LSE: BA.).
Both shares have had a decent run in the past month, with Reckitt in particular achieving notable growth. But most importantly, the current macro environment indicates favourable growth prospects for both companies.
Together, they could inject fresh life into a stagnant portfolio — albeit in very different ways.
Let’s take a closer look.
The defensive income pick
In the past, I typically viewed Reckitt as a relatively stable growth stock. But that narrative took a turn in the past few years, with the price down 23.6% since July 2021.
I now see it more as a moderately defensive income stock with global exposure. The company’s strong portfolio of essential, everyday products includes Dettol, Nurofen, Strepsils, and Harpic. It now derives over 40% of sales from emerging markets, with China and India delivering double‑digit growth.
In today’s ‘slower growth, higher uncertainty’ environment, strong brands matter: they tend to keep selling even when consumers are feeling strapped for cash.
At the same time, it faces the risk of sales disruption in regions like Russia and the Middle East, along with soft consumer sentiment and tough competition in Europe.
Still, with such an attractive dividend policy, it’s worth a closer look. Since 2015, the yield has climbed steadily from below 2% to around 4.2%, putting it ahead of popular income gems like National Grid and Diageo.
The defence giant with growth potential
BAE has a more obvious growth-focused appeal right now: it sits at the centre of a structural, multi-year ‘defence supercycle’.
With several NATO countries boosting defence spending to 3.5% of GDP, the aerospace and defence giant enjoys clear, long-term earnings visibility. In the UK alone, over £15bn of extra funding has been directed to areas where BAE is the number one supplier.
But while defence spending is a necessary evil, the rise in global conflicts is regrettable. Notably, some of BAE’s global sales have drawn criticism from human rights watchdogs, which brings about reputational risk. This could impact the share price going forward, but more importantly, adds a moral consideration for investors.
The company currently has a record £84bn orderbook, multi-year government contracts and rapidly expanding exposure to next-generational technology. And while it doesn’t have the high yield of Reckitt, its 42-year-long dividend track record is undeniably impressive.
Long story, short: BAE looks set for decades of steady growth, making it an ideal consideration for a retirement-focused portfolio.
My final verdict?
Reckitt and BAE together offer a great mix of income and growth to a portfolio, so I’ll be looking at how I can shift funds into them this month.
But for investors considering them, bear in mind these are long-term considerations, with each facing short-term volatility risk.
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Mark Hartley owns shares in BAE Systems, Diageo, Reckitt Benckiser, and National Grid.
This story originally appeared on Motley Fool
