Great first half

One of those is Persimmon (LSE: PSN), whose shares have fallen 35% to 1,370p, and that includes a 4% drop after Tuesday’s first-half trading update was released ahead of results expected on 23 August. The first half seems to have gone swimmingly well, with legal completions up 6% to 7,238 new homes and an average selling price up 6% to £205,000. Total revenues climbed by 12% to £1.49bn.

The company spoke of cheap borrowing, a healthy labour market and strong consumer confidence, and reported an 18% rise in mortgage approvals in the first quarter with April and May continuing the trend.

The big downer, of course, is that EU thing. As Persimmon said, it’s too soon to judge the effect the vote will have. But the company points to long-term unfulfilled demand and says it sees market fundamentals as remaining strong. It believes that its “focus on building traditional family housing in attractive locations … will continue to attract customers in good numbers.” Having spent £305m on new land purchases, Persimmon is being “selective” in its expenditure and any feared weakness in the market will surely lower land prices and provide opportunities for building up land banks for the future.

This is a company that’s conservatively managed, with a strong capital return policy (including £9 per share earmarked for return by 2021), which says it’s “confident in the group’s prospects based upon our long-term strategy.” I can’t see anything here other than an attractive contrarian recovery prospect.

Another one hammered

First-half results from brownfield site developer St. Modwen Properties (LSE: SMP) weren’t enough to protect its shares from another beating, and as I write they’re down 8% on the day to 238p, and down 29% since the referendum.

The results were confused (to this Fool’s mind at least) by the market valuation of the firm’s New Covent Garden Market development being included in profit, with a big rise in its value contributing to £206m in pre-tax profit last year. This year saw its valuation drop by £21m and there was a £13m hit from the increase in Stamp Duty Land Tax, lowering pre-tax profit to just £30m. Having said that, the company reported £34m in trading profit, which was close to last year’s record level of £35m.

None of this compensated for the EU effect, after chief executive Bill Oliver warned of a period of uncertainty following the referendum as we wait to see how the UK property market will respond. He told us that “until we have more clarity we believe it is appropriate to take a more cautious approach to the delivery of our development strategy“.

With St. Modwen shares now on a forward P/E of 11, I’m seeing a possible contrarian buy here too, although I don’t see it as clearly as Persimmon. Commercial property could be seriously hard hit should the UK lose a lot of business now we’re on our way out of the EU, but the housing shortage isn’t going away any time soon. Of these two, Persimmon is my pick.

The post Should you buy St. Modwen Properties plc and Persimmon plc on post-Brexit updates? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Cash from insurance

Standard Life (LSE: SL) shares had endured a rough 12 months before picking up a bit, but immediately fell back when the referendum result was known. At 299p, the shares are down 13% since the day of the vote — and the price is now only 11 times forecast earnings for this year, dropping to 10 times based on 2017 predictions.

Standard Life’s punishment is understandable, as the company has been reshaping itself into more of an investment manager, and downturns in the investment climate should be expected to knock it back a bit.

But we’re looking at forecasts for a near doubling of earnings this year, which leaves room for a modest downgrade while still looking good. And the jewel in the crown is its dividend, with a yield of 6.6% on the cards for this year, rising to 7.1% next. Cover by earnings could be better, but I see Standard Life as a tempting income target now.

Housing crash

The crunch that’s hit housebuilders is worse than I’d have expected in the circumstances, and we’re looking at a 29% fall in Taylor Wimpey (LSE: TW) shares, to 136p. Now, that fall isn’t entirely irrational, as anything that puts a dent in foreign investment in UK property (particularly in London) is going to hurt — and on top of that, there’s always been a cyclical nature to the sector, which has been on a bull run for a few years now.

It’s also arguable that today’s low P/E valuation, which values Taylor Wimpey shares at just 7.8 times forecast earnings, is justified on the grounds that the sector’s strong rise surely has to stop some time. I’m just not seeing it.

The dividend predicted for this year would yield a massive 8%, and it would be reasonably well-covered by earnings. Even if property prices themselves should fall, housebuilders should still enjoy decent margins as their land-replenishment costs should fall too — and we’re still faced with a significant housing shortage, which leaving the EU isn’t going to stop.

Which bank?

Then we come to the bank that everyone loves to hate, HSBC Holdings (LSE: HSBA). HSBC has been a pariah among its peers in recent years, as its focus on China and the Asian region has left it exposed to the slowdown that’s happening there. In a little over three years, HSBC shares have fallen by 41% to today’s 470p.

But now, suddenly, it’s exposure to the UK and Europe that everyone is shunning, and HSBC is being seen through more appreciative eyes. Though the shares did fall in the days after the referendum, they’ve recovered and are actually 3.5% up since the fateful day.

Part of the attraction is HSBC’s dividends which, if they come in according to forecasts, would provide a yield of 7.1% this year. Granted, cover wouldn’t be great, but if HSBC is past its worst then we could be looking at a solid long-term income provider — after all, even through its shaky period of the last few years, HSBC has kept on handing over the cash.

The post Are dividends from Standard Life plc (6.6%), Taylor Wimpey plc (8%) and HSBC Holdings plc (7.1%) now simply unmissable? appeared first on The Twelfth Magpie.

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Cash cow still delivering

Shares in SSE (LSE: SSE) dipped quite sharply in the wake of the Brexit result, though they’ve pulled back most of the loss to reach 1,505p as I write. The drop seemed bizarre, as SSE only does a tiny fraction of its business in Ireland and mainland Europe — about 3% of turnover in the last full year. The firm promptly issued a statement saying the exit “presents no immediate risk” to its operations, though it did raise the risk of uncertainty over the regulatory framework within which it works.

SSE looks a safe Brexit bet to me, and at the shares’ post-vote low point you could have tied in a forecast dividend yield of 6.6%! As it stands, there’s still a 6% yield on the cards, with 6.1% pencilled in for 2017, as EPS looks set to remain pretty much level.

SSE’s current share price is only around 13 times forecast earnings for this year, and for a company with such high and transparent dividend payouts, that looks cheap to me.

Cheap housing

The crash in housebuilders looks overdone, in my opinion, and at 395p apiece I see Barratt Developments (LSE: BDEV) shares as too cheap. They have bounced back a little since the vote, but we’re still look at a 32% fall since close of play on referendum day. That’s dropped the shares to a price-to-earnings multiple of just 7.2, which is only around half the long-term FTSE 100 average.

What’s more, Barratt’s forecast dividend yield now stands at 7.3%, rising as high as 8.8% on 2017 forecasts. Sure, the UK’s GDP growth is likely to at least slow, and we could even fall back into recession. And yes, house prices could well fall back a little, as demand seems likely to cool. But falling land prices also provide an opportunity for housebuilders to top up their land banks at a lower cost.

I really do see the kind of emotional over-reaction that we usually get in times of crisis here, and Barratt Developments is looking like a good contrarian opportunity to me right now.

Battered insurance

The insurance sector has also received a pummelling, but why should an insurer that does its business 100% in the UK be damaged by the vote result? That’s what’s happened to Direct Line Insurance Group (LSE: DLG), whose shares have shed 8.3% since the big event to reach 343p.

Are we, as a nation, suddenly going to stop insuring our cars, our homes, and all the other things we hold dear simply because we’re not going to be in the European Union for much longer? Of course not. No, the cash is still going to keep pouring into Direct Line’s coffers for it to hand out to its shareholders in the form of dividends, and the forecast yield for this year now stands at 7.3%!

That’s from shares on a forward P/E of only 12, which looks like a screaming buy to me.

The post Are dividends from SSE plc (6%), Barratt Developments plc (7.3%) and Direct Line Insurance Group plc (7.3%) now simply unmissable? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Solid housing

Housebuilder Bellway (LSE: BWY) was looking very good on a forward P/E of nine with a PEG ratio for this year of 0.3 (where growth investors typically see 0.7 or less as a good sign) — that was when the shares were changing hands at around £27 apiece, and since then they’ve lost 37% to just 1,700p, as fears of a housing collapse grip the City’s traders.

Now, there is a big risk to the UK’s housing market, for sure, at least partly from European investors who will be a lot less keen to risk their money here. But long-term profits for housebuilders do not depend on short-term property prices, and if demand falls, prices will fall and the houses will still be sold — to grateful occupants, I hope.

But that means land prices would fall too, and cash-rich builders like Bellway should be able to top up their land banks at low prices — just as they did during the last financial crisis. Long term, I reckon housebuilders, including Bellway still show great growth potential.

Support woes

Support services group Interserve (LSE: IRV) has had a horrible time, with its shares losing 56% over the past five years — they had been rallying slightly, but have fallen back 15% since Thursday, to 266p. But the firm’s earnings per share have actually been picking up over the past few years, and an expected standstill over the next few years puts the shares on a P/E of only a little over four — and that’s with a forecast dividend yield of 8.6%!

So, why so cheap? Well, after Interserve’s acquisition of Initial last year, its net debt rose to £309m, and that’s a lot for a company with a market cap of £385m and pre-tax profit of just £79.5m. Coupled with some big one-off costs this year, I think there’s a good chance the dividend will be cut,  even though it’s currently reasonably well covered by forecast earnings.

But the current super-low valuation means Interserve could still offer a decent yield, and with the City’s brokers putting out a strong buy rating on the shares, I see good long-term growth potential — even if we could still see another volatile year in the short term.

Banking carnage

You don’t need me to tell you that banking sector shares have collapsed since the referendum, and the short-term uncertainty means there’s no surprise there at all. Lloyds Banking Group shares are down 28% and Barclays are down 31%,  which I think is seriously excessive, but the one really takes the biscuit is Virgin Money (LSE: VM), whose shares are down a massive 42% since the referendum, plummeting to 212p.

Sir Richard Branson had said he expected Virgin shares to “take a pounding” in the event of a ‘leave’ result and that there could be job losses, and the challenger bank does face danger from its focus on mortgage lending should we really see a housing slump. But if the bank can pull through the short-term pressure (and I see no reason why it shouldn’t) then it could have some serious longer-term growth prospects.

The post Bellway plc, Interserve plc & Virgin Money Holdings (UK) plc still show huge growth potential despite dips appeared first on The Twelfth Magpie.

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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Joseph Dickerson of Jefferies has suggested that Barclays’ “exposure to investment banking and corporate banking” present it with the greatest risk of the sector, while Bernstein Research believes that banking fees could fall by more than 30%, going so far as to suggest that if we leave the EU Barclays might even need to raise more capital. Bearish predictions suggest we could see as much as a 40% fall in Barclays shares, with Lloyds Banking Group and Royal Bank of Scotland shares dropping by 35% and 25% respectively.

It’s easy to see what the markets think too, as Barclays shares have pretty much followed the Brexit polls — When the ‘leave’ campaign looked like it was gaining the upper hand, the shares dropped to 158p, but now the momentum has turned the other way in recent days, they’re back up to 181p.

Insurance down the pan too?

Something almost identical has happened to Aviva (LSE: AV) too, with Aviva shares falling to 396p last Thursday, a week before the referendum, after the polls reported a surge in favour of leaving. And again, they’re back up again since the ‘remain’ camp has been staging a comeback — Aviva shares are at 440p as I write.

Although the banks are often held up as the companies most likely to suffer if London’s financial firms lose their unfettered access to the EU single market, insurance companies would almost certainly face the same difficulties — especially ones like Aviva, which does around half of its business in the EU.

Writing in the Evening Standard back in April, Aviva boss Mark Wilson came out in favour of staying in the EU, addressing possibly the most important issue in the process, negotiating new trade agreements:

“How long would that take? Seven years? That would be typical. A decade? Do we really want a decade of uncertainty? Because uncertainty is kryptonite to business“.

Those are words to heed.

Consumer products need free markets

Then we come to consumer goods giant Reckitt Benckiser (LSE: RB), which garnered only about 8% of its 2015 turnover here in the UK. EU trading is massive business for Reckitt, and its major US segment is also brokered via EU trade agreements. Should we leave the EU, Reckitt Benckiser would be in the same boat as Unilever, whose bosses have written to employees to tell them that “Unilever in the UK […] would be negatively impacted if the UK were to leave the European Union“.

What do we see if we look at Reckitt Benckiser shares? The same pattern again — with the shares sliding to 6,595p when the Brexiteers looked like they had the upper hand, recovering to 6,791p as the ‘remainers’ have come back.

Whichever shares you look at, it seems clear that the institutional investors don’t want to have to face that Brexit kryptonite, and it seems obvious to me that shares will fall sharply  were we to vote ‘leave’. In fact, only today, UBS has warned that we could see a 20% fall in the FTSE 100 within days of a ‘leave’ vote, which would knock a staggering £350bn off the value of shares.

The post Brexit could seriously harm Barclays plc, Aviva plc & Reckitt Benckiser Group plc appeared first on The Twelfth Magpie.

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Alan Oscroft owns shares of Aviva and Lloyds Banking Group. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Barclays and Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Electronics revival

The story of the old Dixons was a remarkable one of turnaround from the brink of disaster, and since its rebirth as Dixons Carphone (LSE: DC) we’ve seen a decent performance. Dixons shares have gained 39% over the past two years to 443p, and the company’s dividend has been creeping up slowly.

For the year ended April 2016, the forecast dividend would only yield a modest 2.2% on today’s share price, but it would represent an inflation-smashing rise of 26% on the previous year and there are big boosts on the cards for the next two years. The firm’s fourth-quarter trading update told us to expect headline pre-tax profit of between £445m and £450m, after revenues grew by 5% in the final quarter and over the 12 months. Net debt should below £300, which is really nothing at all to be worried about.

What about the value of the shares? The latest P/E of 15.6 might seem a little high, but that would drop to 12.6 by April 2018 if forecasts prove accurate, and I see that as fair value for a company with decent growth expectations even if it’s perhaps not a screaming bargain. Full-year results are due on 29 June.

Cash in on housing

Before that, on 15 June, we’re due full-year results from housebuilder Berkeley Group Holdings (LSE: BKG). The City’s analysts are expecting a standstill in earnings for this year to put the 3,302p shares on a P/E of around 12.7, which might not sound too thrilling. But a 50% EPS forecast for the year to April 2017 would drop that to just 8.4, and there are dividend yields of 6% on the cards.

In its last update in March, Berkeley told us that the London market was stable and that it had “cash due on forward sales remaining in excess of £3 billion“, although reservations were down 4% on the previous year at that point. But the company did predict “£2 billion of pre-tax profit in aggregate over the three years culminating in 2017/18” and said that results should be at the top end of expectations.

Fears for a slowdown or even a reversal in London house prices have helped show share price growth, and we’re looking at a rise of just 6% in the past 12 months. But with expectations so strong, I’d say rumours of a demise in the housebuilding sector are very much exaggerated.

Oil & gas bargain?

On 30 June we should see a trading and operational update from Tullow Oil (LSE: TLW), ahead of first-half results due on 27 July. Tullow oil shares have picked up 84% since their low on 20 January, trading now at 232p, and that is in no small part due to the recovery in the oil price to above $50 per barrel.

Tullow is one of those mid-sized oil companies that carry a lot of debt, but which at least do have profits on the cards to service it. And while that makes the firm riskier than the likes of BP and Shell, it’s way ahead of the unprofitable tiddlers in the safety stakes. Despite that, Tullow shares are still down 85% since their peak in early 2012, and you’d have had very little in the way of dividends since then.

But the tide looks like turning, and now could be a great time to buy Tullow Oil shares.

The post 3 hot dates for June: Tullow Oil plc, Dixons Carphone plc, Berkeley Group Holdings plc appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Berkeley Group Holdings, BP, and Royal Dutch Shell. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Doing the right thing

Barclays (LSE: BARC) surprised many by slashing its dividend by more than 50%, and it’s set to yield only around 2% this year and next with the shares priced at 174p. But after a bit more thought, it seems like just the right thing to do — with new boss Jes Staley having just taken over, he can sweep much cleaner with his new broom than an incumbent could.

Barclays has now reduced its liquidity risk to pretty much zero, I’d say, and with its aim of getting cash rewards back on track as soon as possible, I can see a glowing future for income investors with Barclays.

In the meantime, while the 9% EPS drop expected this year would put Barclays shares on a P/E of only a little over 11, the 49% recovery pencilled in for 2017 would drop that to just 7.5 — only around half the long-term FTSE 100 average. To me that says the shares are undervalued by around 50% right now, so what might it take for a doubling? I reckon any results that suggest those 2017 forecasts might be on the money could trigger an upwards re-rating.

Dirt cheap insurance

Old Mutual (LSE: OML) has been plodding along nicely, paying out almost half of its earnings per share in dividends, and provided shareholders with a 5% yield in 2015. Forecasts suggest the dividend will drop a little to 4.5% this year before perking back up to 5% next as EPS looks set to yo-yo slightly.

But despite the company’s decent performance, Old Mutual shares have gained only 13% over the past five years (albeit with a further 25% from dividends). That leaves the shares on a forward P/E for this year of only 9.5, dropping to 8.7 based on 2017 forecasts. Old Mutual’s home in South Africa and its exposure to emerging markets have no doubt exacerbated the share price fall, but I see the fear as greatly overdone.

I don’t think Old Mutual shares are on quite a 50% undervaluation right now, but we might only need a modest improvement in the world’s economic outlook for a price hike — and I can see a doubling within the next few years as a realistic hope.

More from housing?

Am I really suggesting a share that has gained 380% in the past four years is set for another doubling? The recovery in housebuilder shares boosted the sector magnificently, but since September last year it’s gone off the boil, and Barratt Developments (LSE: BDEV) is down 16% to 561p. That puts Barratt shares on a P/E of only around 9 based on forecasts for the year to June 2017 — and that’s with the company’s cash-return plans predicted to provide a total yield of 6.7% that year.

Fear of a slowdown, or even a downturn, in house prices has tempered investors’ appetite for Barratt, but it looks seriously overdone to me. Barratt spent a lot of its cash during the slump buying up land at knock-down prices and is set very nicely for profitable trading for a good few years no matter what happens to property prices.

If Barratt shares doubled again in another five years, I wouldn’t be at all surprised.

The post Which will double the quickest, Barclays plc, Old Mutual plc or Barratt Developments plc? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

The Beginners’ Portfolio is a virtual portfolio, run as if based on real money with all costs, spreads and dividends accounted for. Transactions made for the portfolio are for educational purposes only and don’t constitute advice to buy or sell.

The past year has been tough for the Beginners’ Portfolio, with a few key shares losing out — BP shares are down 23% over 12 months thanks to falling oil prices, while Rio Tinto has dropped 22% as the commodities crunch has continued, and a surprise dividend cut has led to a 34% slump for Barclays (LSE: BARC) shares. But with oil and minerals starting to pick up, and the future for Barclays looking strong to me, I think we could be past the worst for all three.

In fact, a 17% recovery for Barclays, to 171p, has helped keep the portfolio to a 35.5% gain since our first purchase in May 2012, which really isn’t too bad. Here’s the current state of affairs, with prices at market close on 22 April:

Persimmon (LSE: PSN) has cemented its position not just as our biggest growth share so far, but also as a solid dividend provider. We added £53.90 in cash to the pot in May, which gives us an effective yield of 15% on our original purchase price in July 2012. And that, for me, illustrates one of the real lessons of investing for income — that today’s yields don’t count anywhere near as much as a progressive cash-handout policy, as the latter is what brings in the big money over the long term.

Persimmon is forecast to pay out the same again for this year and next, so two more years of effective 15% yields make Persimmon a very strong hold to me, especially as the shares are on forward P/E multiples of only around 10.

Engineering comeback

Shares in BAE Systems (LSE: BA) have had a flat 12 months, but they’ve been clawing their way upwards since late September 2015, and we’re now sitting on a very nice 41.5% gain since purchase in October 2012. But that is just the share price, and once we include dividends too, we’re looking at an overall 65% gain including all spread and costs.

Our dividends are, of course, being reinvested whenever there’s sufficient cash to make a purchase, and so far that’s been at times when a share has been sold to boost the cash pot. But with £335 in cash built up since the last purchase, it really won’t be too long before we have enough for dividends alone to make a new investment. I think it will most likely be a top-up, and with BAE shares on a forward P/E of only around 12 for 2017 and with growth likely to return, it’s in with a shout.

Too cheap

Another big top-up possibility is Barclays, whose share price fall over the past year has disappointed me — and I really didn’t see the dividend cut coming. But I’m greatly encouraged by the recent modest recovery, and with the shares now on a P/E that’s expected to drop as low as 7.6 based on 2017 forecasts (while the FTSE 100 long-term average stands at close to twice that), they could be one of the best bargains around.

Sure, the dividend will probably only yield around 2% by then, but at full-year results time the bank told us that it expects to get back to paying “a significant proportion of earnings in dividends to shareholders over time“, once the balance sheet is a bit tighter and legacy issues recede further.

I think there’s a very good chance of Barclays’ shares doubling in the next few years, and it would be madness for me not to keep hold of them now.

The post Beginners’ Portfolio: Persimmon plc, Barclays plc & BAE Systems plc help us to 35% gains appeared first on The Twelfth Magpie.

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Alan Oscroft owns shares of Aviva. The Motley Fool UK owns shares of Apple and GlaxoSmithKline. The Motley Fool UK has recommended ARM Holdings, Barclays, BP, and Rio Tinto. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

First-quarter results released on Thursday helped, with underlying sales growth up 4.7%. That includes an 8.3% rise in emerging markets, which is an increasingly important contributor for Unilever, with many of its brands that are unknown in the UK being top sellers overseas. The company, whose UK brands include Lynx, Dove, Hellman’s and Knorr, was able to lift its dividend for the quarter by 6%, easily beating inflation.

That, of course, is ultimately what Unilever is about — super-reliable dividends. The shares’ forward P/E in the low 20s might seem a bit high compared to the FTSE’s long-term average, but that’s really not too important for investors seeking the safety and comfort of dividends that regularly yield around 3% or better.

And on top of that, a 67% share price rise over the past five years isn’t too shabby, especially as the index itself has only managed a paltry 6% in the same period. Unilever shares might not be at the best bargain price out there, but they’re serving investors very well.

Superior growth

Something similar has happened at Reckitt Benckiser (LSE: RB), whose shares are up 24% to 6,776p since their 52-week low in June last year. Reckitt, the company behind many household brands including Dettol, Stepsils and Cillit Bang, has actually seen its shares gain 111% over five years, soundly beating even Unilever (and making the FTSE 100 look flatlined by comparison).

Full-year results released in February revealed a 5% rise in revenue which translated to a 12% jump in adjusted operating profit, and the dividend was kept steady at 139p per share while the company continues with its share buyback programme.

Reckitt Benckiser’s dividend yield is not as impressive as Unilever’s and has been falling a bit due to the superior share price performance, but with the firm committed to paying out 50% of adjusted net income each year, forecast rises in earnings should lead to steady dividend increases. With a slightly higher forward P/E, Reckitt looks less likely than Unilever to repeat its recent price growth.

Advertising on the up

My third big FTSE winner today is advertising and PR group WPP (LSE: WPP), whose shares have put on 27% since their low of August 2015, to 1,656p, with the best five-year gain of the three of 122%.

WPP has some pretty illustrious candidates in its portfolio, including American Express, AT&T and GlaxoSmithKline, and that’s helped it achieve growth in earnings per share averaging around 10% per year over the past five years — with two more years of the same predicted. And to celebrate its 30th birthday, the company reported “another record year” in 2015, with constant-currency revenue up 7.5% and pre-tax profit up 7.3%.

The dividend, at 44.69p per share, saw a 17% rise on 2014’s payment. And even with that impressive five-year share price appreciation, yields are keeping up, with 3.1% and 3.5% forecast for the next two years.

WPP shares are the most modestly priced of the three, on a forward P/E of 16 for this year, dropping to 14.6 for 2017. Of the three, I see WPP as the most likely to repeat its share price gain over the next 12 months — analysts are pretty bullish, and I can’t disagree with them.

The post Can Unilever plc (+30%), Reckitt Benckiser Group Plc (+24%) & WPP PLC (+27%) Keep On Climbing? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended GlaxoSmithKline and Reckitt Benckiser. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Pessimism priced in

The thing is, in these tough times when the final extent of banking penalties for past misbehaviour is still an unknown, I’m really not so much interested in this year’s dividend as in future ones — and I’m encouraged by Barclays’ longer-term expectations to “pay out a significant proportion of earnings in dividends to shareholders over time“.

The 3p per share that Barclays intends to pay this year and next would be covered 5.6 times by forecast 2016 earnings and 7.6 times on 2017 predictions, which is massively over-covered in comparison to long-term requirements — even if Barclays aimed for longer-term cover of two times, which would be above the likely sector average, we’d be looking at yields getting up towards 8% or so.

That’s largely because the share price has taken a pummelling, losing 40% over the past 12 months to 145p. That puts Barclays on a forward P/E of only nine for this year, dropping as low as six on 2017 forecasts — and to me that means the current share valuation has far more pessimism built in than is warranted. And I see Barclays shares now as one of the best dividend bargains for 2020 and beyond.

Building profits

The housebuilding and construction sector has been the big success of the past few years, with Galliford Try (LSE: GFRD) a shining light. We’ve seen year on year of double-digit rises in EPS with two more forecast, and that’s helped boost the share price by 235% in five years — though a 24% fall back since September last year has left us with a forward P/E of under 11, dropping to nine on 2017 expectations.

That alone sounds like bargain territory, but the big attraction is Galliford Try’s dividends. They’ve been galloping ahead, and it was only the soaring share price that kept last year’s yield down to 3.9%. The year saw a 28% rise in the annual payment, with the board stressing its “progressive and sustainable dividend policy” and telling us it now aims to maintain dividend cover at 1.5 times rather than its previous more cautious 1.7 times.

That bodes well for the yield of 5.6% forecast for this year, and the 7% on the cards for 2017, which would be covered sightly more than 1.5 times by forecast earnings.

Calling customers

Who’s Netcall (LSE: NET), you may well ask. Netcall produces telephone and data services for call centres and customer engagement, and it’s used by healthcare and public-sector organizations as well as the private sector. After a few years of very strong earning growth, we saw EPS fall back by 4% last year and there’s a further drop forecast for this year. That’s taken the shine of the share price a little, and despite a five-year rise of 184% to 49p, there’s been a 7% drop in the past 12 months.

But what I really like about Netcall is that it is generating oodles of cash. At the interim stage in December, net cash had risen to £15.2m, boosted by £1.82m in operating cashflow in the period. Oh, and there’s no debt.

With more cash than it needs to invest in its latest cloud computing developments, the firm is embarking on “an enhanced three-year dividend programme“, leading to a forecast dividend yield of 6.1% this year followed by 7.8% next.

The post Are Barclays PLC, Galliford Try plc And Netcall plc Among The Best Dividend Payers Out There? appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.