LONDON -- Don't be fooled: When investing in shares, you don't have to choose between growth and dividends. There are shares available today that offer both.
I trawled the market looking for companies that are forecast to increase earnings per share by at least 10% this year, following an increase of at least 10% in the prior year. I then removed any shares yielding less than 4%.
This returns an exclusive list of just 36 shares. I've picked a selection across sectors and markets.
|
Company |
Market Cap (millions of pounds) |
EPS Growth Last Year |
EPS Growth Forecast |
Yield |
|---|---|---|---|---|
|
Imperial Tobacco |
23,675 |
16.9% |
11.9% |
4.2% |
|
Admiral |
2,919 |
13.1% |
10.9% |
5.3% |
|
ICAP |
2,151 |
24.4% |
29.7% |
6.6% |
|
Balfour Beatty |
1,932 |
14.8% |
22.6% |
4.9% |
|
UBM |
1,349 |
11.4% |
26.9% |
4.8% |
|
De La Rue |
1,014 |
69.1% |
30.8% |
4.2% |
|
National Express |
925.5 |
36.9% |
45% |
5.3% |
|
John Menzies |
359.4 |
23.2% |
11.8% |
4% |
|
4imprint |
75.5 |
23.6% |
20.4% |
5.1% |
|
Renew Holdings |
42.5 |
90.3% |
36.6% |
4.3% |
I've picked out five shares that might be worth researching further.
1. Admiral Group
FTSE 100 insurance specialist Admiral is one of the U.K.'s best growth stories. Founded in 1993, the company today has a market capitalization of nearly 3 billion pounds. Admiral employs more than 4,500 people and is Wales' most valuable listed company.
Admiral owns the eponymous insurance brand, along with others such as elephant.co.uk and confused.com. At the current price, Admiral looks to be a triple play of blue-chip strength, growth, and value.
In the last six years, Admiral has increased net profits from 100 million pounds to 220 million pounds. In that time, EPS has increased an average of 16.7% per annum. Dividend growth has outstripped this. The 2011 payout of 56.5 pence is far ahead of the 18 pence shareholders received for 2006. In that time, the dividend has increased an average of 27% every year.
Growth in both profits and dividends are expected to continue. The 2012 consensus forecast is for EPS of 90.6 pence and a dividend of 83.3 pence. This puts the shares on a forward price-to-earnings ratio of 11.9 and a yield of 7.8%.
2. Renew Holdings
Renew Holdings has transformed itself in the last five years as it has moved away from homebuilding. Much of the company's revenue today comes from engineering services to the energy and infrastructure sectors. This change means the company is now less reliant on the U.K. housing market. Today, Renew targets long-term nondiscretionary work, such as railway tunnel maintenance and nuclear decommissioning.
Renew managed to hold its shareholder dividend throughout the financial crisis. That payout is now increasing again and is expected to hit 3.15 pence per share for 2012. The impressive profit growth the company demonstrated for 2011 is expected to continue into 2012. As a result, Renew trades on just 6.25 times the 2012 consensus EPS forecast.
3. ICAP
ICAP occupies an unusual niche in the financial-services industry: It is an interdealer broker. This means the company is a middleman for financial institutions that wish to deal with each other while preserving anonymity.
ICAP's history can be traced back to 1986 and its formation by Michael Spencer. Since then, the company has enjoyed massive growth and now has a market cap of 2.2 billion.
With consensus forecasts pointing to a 30% rise in EPS this year, the company remains a growth play. The dividend record at ICAP is also impressive: In the last six years, the payout to shareholders has been increased year on year. Current consensus suggests the dividend will edge ahead again this year to 22.1 pence per share. That puts ICAP on a forward yield of 6.5%.
ICAP currently trades on forward P/E of 8.6. Given the company's growth record and strong market position, that looks cheap.
4. National Express
National Express runs buses and trains in the U.K., U.S., Spain, and Morocco.
The company has disappointed shareholders in recent years. Prior to the financial crisis, the shares traded at around 500 pence. The company announced a loss and cut its dividend sharply in 2008 and didn't pay out at all for 2009.
Since then, profits and dividends have been recovering. The company managed to report a 36.9% rise in EPS for 2011, and a massive 45% rise is expected for the current year. For 2013, National Express is forecast to pay a 10.3 pence dividend, putting the shares on a forward yield of 5.7%.
5. Balfour Beatty
Balfour Beatty is an infrastructure company operating around the world. In 2011, the company made 9.4 billion pounds in sales. Today Balfour Beatty has a market capitalization of 1.9 billion pounds.
The company describes itself as having the expertise and resources to operate at every stage of the infrastructure life cycle, from financing and design to maintenance and support.
Despite worldwide economic conditions, Balfour Beatty has managed to increase sales, profits and dividends in recent years. The company grew EPS by nearly 15% in 2011, and a sizable 22.6% increase is expected for 2012. The shareholder dividend has been rising year on year for six years and is expected to reach 14.4 pence for 2012. At today's price, the 2012 yield for Balfour Beatty would be 5.1%.
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