Flight to safety

A lot of investors’ cash has been moved to shares considered safe, boosting Unilever (LSE: ULVR) — since the eve of the vote, the price is up 11.5% to 3,609p. It puts the shares on a forward P/E of 24.5, and that’s pretty high compared to the long-term FTSE average of around 14. And with dividends set to yield only 2.8% this year I can’t help wondering if risk-averse investors are overpaying now, especially as the company warned just before the event that “Unilever in the UK […] would be negatively impacted if the UK were to leave the European Union“.

At least there’s a decent year forecast for 2016, and we should have H1 results on 21 July. For Q1 we saw a 4.7% rise in underlying sales growth, including an 8.3% increase in emerging markets, with chief executive Paul Polman predicting “another year of volume-driven growth ahead of our markets, steady improvement in core operating margin and strong cash flow“. That really is the kind of thing that safety-conscious investors want.

Analysts have upped their revenue and earnings predictions in the last week, but that’s largely down to the falling value of the Pound boosting overseas earnings in Sterling terms. While Unliever investors are likely to avoid volatility, I don’t see great returns at today’s price.

Top telly

Shares in ITV (LSE: ITV) took a tumble too, dropping 30% from referendum day to 27 June, but since then they’re back to 176p for an overall fall of 20%, amid fears that ad revenue will fall as UK companies face squeezes in the months ahead. In a little less than 12 months, the once-popular ITV shares have lost 36% of their value.

Earnings forecasts for this year and next have been scaled back, but the price fall still leaves the shares on a price-to-earnings multiple of 10.5 for this year, dropping to under 10 next. Those will be based on a consensus that’s now a little out of date, but even with a modest downgrade that could still look cheap.

ITV’s first half figures should be with us on 27 July, and investors will be looking for them to build on a 14% rise in revenue in Q1 when the company predicted “good group profit growth” for the half. The figures won’t include any Brexit impact yet, but any thoughts from ITV on the resulting outlook for the rest of the year will be crucial.

Banker bashing

The banks were among the hardest hit by the vote, with Lloyds (LSE: LLOY) shares down 27% to 53p since 23 June. Lloyds should be revealing halfway figures on 28 July and I can picture its bosses tearing up their prepared outlook section and rushing to put together a replacement now we’re heading for the EU exit door.

Now that Lloyds, and other UK’s banks, faces massive uncertainty over the future of its membership of the EU passport scheme for banking services, the falling shares are understandable, but is it fair?

The shares are on a forward P/E of only a little over seven, and this year’s forecast dividend yield is up to 7.2%. That looks a strong contrarian buy to me, unless the market’s worst fears do come to pass — and worst fears usually don’t.

The post 3 dates for your July investing diary (Unilever plc, ITV plc and Lloyds Banking Group plc) appeared first on The Twelfth Magpie.

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

Since the Brexit camp’s following has grown over the past few weeks, Lloyds shares have fallen by 12% to 64.8p,  taking them down 29% over the past year. And that’s a year in which the bank’s fundamentals have been improving with the shares now on a forward P/E as low as 8, and dividend yields of 6.5% and 7.6% forecast for this year and next.

The Bank of England has also weighed in, only this week saying that the EU referendum is the “largest immediate risk” faced by the world’s financial markets. The BoE has plans in place to support banks in the event of a leave vote, which highlights the reality of the risk.

On the other hand, should we get a remain vote, now could turn out to be the best time ever to buy Lloyds shares.

Single market

In another sector, consumer giant Unilever (LSE: ULVR) has warned that it would be harmed if Britain leaves the EU, saying that having access to “a single European market of 500 million consumers” has greatly helped its performance over the past 25 years.

In a letter to employees, Unilever’s chief executives and chairman wrote that “Unilever in the UK […] would be negatively impacted if the UK were to leave the European Union“.

And Unilever shares? After a strong start to the year, since 19 April we’ve seen a 7.4% price fall, to 3,084p. Unilever shares have traditionally commanded a relatively high P/E, but that’s largely dependent on its low risk and predictable markets. EU uncertainty is surely going to dent that confidence, and trusting the leave campaign’s claims that the UK’s European trade wouldn’t be affected if we quit the EU could be a very risky line to take for your investment security.

Aerospace troubles

Rolls-Royce (LSE: RR) is another great British company that’s said it expects to suffer if we leave. While the CBI was opining that Brexit would “put British businesses out in the cold“, Rolls-Royce bosses were writing to their employees to tell them it would “limit any company’s ability to plan and budget for the future”.

Chief executive Warren East told the Today programme that leaving the EU would provide a boost to US aerospace engine manufacturers at the expense of Rolls-Royce’s international competitiveness, adding that “uncertainty created by Brexit puts a lot of [the company’s investment decisions] on hold“.

After having been hit by a series of profit warnings, Rolls-Royce shares had been staging a bit of a recovery, but since early March we’ve seen a 15% drop to 617.5p, with a significant chunk of that coming on the back of the apparent rise in leave support.

Whatever other issues there are behind the EU referendum, looking at these three major companies in three vital sectors clearly suggests an exit won’t be good for your share portfolio.

The post Brexit could seriously harm Lloyds Banking Group plc, Unilever plc and Rolls-Royce Holding plc appeared first on The Twelfth Magpie.

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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK owns shares of and has recommended Unilever. 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.

My view is that it should be mostly in safe and reliable blue-chip shares, and they don’t come much safer or more reliable than Unilever (LSE: ULVR). It owns a whole host of worldwide household brands, including Dove, Hellmann’s, Surf, Sunsilk, Ben & Jerry’s, Colman’s, Lipton… and who could forget Pfanni and Sariwangi? It’s almost impossible to run a modern household without using some of Unilever’s products.

Unilever isn’t a super high-flying growth stock, but since the start of 1990 the value of its shares has still multiplied sixfold to reach 3,091p, while the FTSE 100 has managed just 150%. And Unilever’s growth has been far safer than any blue-sky growth candidate. Unilever also doesn’t pay the highest dividends in the word, but its average annual yield of a little over 3% is around the FTSE average and is well covered by earnings.

So, dividend yields that beat cash savings, plus that very nice long-term share price growth —  I’d say that makes Unilever a very safe cornerstone for a multi-decade ISA.

Technology too?

Moving towards a bit more risk now, I think BT Group (LSE: BT.A) is a candidate worth considering too. BT was hammered by the technology boom and bust at the turn of the century, so it hasn’t matched Unilever in the super-long stakes. But over the past five years BT shares have gained 155% to 445p (against just 8% for the FTSE). And now that the world has a more rational approach to technology, I can’t see anything like the dotcom madness hitting BT again.

BT’s dividends should be a bit above average with forecasts suggesting 3.8% by March 2018, and they’re well enough covered. Since BT completed its acquisition of EE, the UK’s largest mobile network, it’s able to offer the full range of telecoms services — fixed and mobile phones, broadband internet, and television content.

BT’s inroads into the lucrative TV sports market suggest to me that it has a strong future, and with its shares being on a modest P/E of 14.7 for the year ending March 2016, dropping to under 13 based on forecasts for 2018, I see BT as a good long-term ISA bargain.

Cash from gas

My final choice is an out-and-out dividend stock in the shape of Centrica (LSE: CNA), the owner of the British Gas and Scottish Gas brands. Centrica has been paying dividend yields of around 5% and better for years, and we have 5.3% forecast for this year followed by 5.5% in 2017. With the forward visibility of the industry, both in terms of supplies and costs and of customer demand, not much cover is needed and so Centrica can pay out most of its earnings as dividend cash.

The share price has been erratic of late and has actually fallen by 43% since a peak in September 2013, to 227p, as Centrica will have suffered three years of falling earnings should this year’s forecasts prove accurate. But that should level off in 2017, and I can see this year turning out to be a good time to buy Centrica for the long term.

The post Should Unilever plc, BT Group plc And Centrica PLC Be In Your 2016 ISA? 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 Centrica. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.