LONDON -- Next week we have one important set of full-year results from the high street, accompanied by interims from a few other big names in the dividend game -- mostly on a rather busy Thursday.
Debenhams
Thursday brings us full-year figures from Debenhams, the FTSE 250 department store that has been doing well. The shares fell below 60 pence in January, but since then they've more than doubled to 112 pence. So what should we expect from the results?
A trading update last month and current City forecasts suggest earnings-per-share growth of 3% to put the shares on a price-to-earnings ratio of 12, alongside a modest dividend yield of about 3%. Like-for-like sales look to be up 2.3% over the year, with online sales up 40%. Chief executive Michael Sharp has said he's been "delighted with [the] strong performance."
I think most of the share's undervaluation has probably disappeared now, but further earnings growth next year, with a rising dividend, could still make Debenhams a decent long-term investment.
AstraZeneca
FTSE 100 pharmaceutical firm AstraZeneca reports third-quarter figures on Thursday. At 29.51 pounds today, the share price is 13% down from its 2010 high point of 33.85 pounds. The fear is that Astra's product development pipeline is drying up, and the group has not been as successful as rival GlaxoSmithKline when it comes to expanding into newer biotechnology by way of acquisition. That was reinforced at the interim stage, when Astra said, "As expected, generic competition and challenging market conditions reflected in lower second-quarter revenues."
But has the sell-off been overdone? Despite indicating EPS falling for the next two years, current forecasts suggest a dividend yield of around the 6.5% mark, and the payment should be about twice covered.
Unilever
Consumer brand giant Unilever also reports on its third quarter on Thursday, and we are likely to hear of slow and steady growth. The firm is known for bringing home stable EPS and dividends, though the payout dipped in 2009. But for this year, the City is expecting a 10% rise in earnings and a dividend yield of around 3.5%.
The share price has had a strong few months and is now up around 12% over the past year, so is it looking a bit toppy now?
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Reckitt Benckiser
On to Wednesday, when we should have a Q3 update from Reckitt Benckiser, a key FTSE 100 competitor to Unilever. Reckitt's shares have risen only modestly during the past few years to stand at 36.53 pounds today, but they have been paying reasonable dividends. And current forecasts suggest we'll receive more of the same in the form of a 3.6% payout for the year to December 2012.
That's slightly more than is expected from Unilever, and with a P/E of under 15, Reckitt's shares are more lowly rated. Could they be the better bargain of the two?
ARM
Switching to a different day, ARM Holdings will release a Q3 update on Tuesday. ARM has gone through a classic growth phase, and its share price has powered up from 80 pence at the start of 2009 to a peak of 650 pence in early 2011, sporting a very high P/E along the way. Since then, the price has flattened and is even down a little from that peak to 593 pence today; the price appears to be taking a break while earnings catch up.
How's the valuation looking today? The company is still priced as a growth share, with forecasts putting it on a forward P/E of more than 40 with a tiny dividend of less than 1%. We're still some way from the transition between growth and dividends, and there is a fair bit of growth still in the price. But is there a new growth spurt to come? There could be.
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