Bunzl Is The Bundle 

Bunzl (LSE: BNZL) makes its money from supplying companies with a range of not-for-resale goods such as food packaging, catering equipment, stationery, cleaning supplies, face masks and swabs. If that sounds dull, this certainly doesn’t — its share price is up 168% over the past five years, against just 3% growth on the FTSE 100.

Some investors may turn up their noses at a company whose idea of an exciting takeover bid involves buying into the German incontinence market, as it did recently by investing in two Berlin-based “healthcare consumables” companies, but where’s there’s muck there’s brass. With Q1 results showing a 13% rise in group revenue at actual exchange rates, Bunzl is living up to expectations.

I tipped this stock is my favourite FTSE 100 unsung hero some years ago, and I’m still going a bundle on it today. Management can happily boast a “strong cash flow and balance sheet, together with a promising acquisition pipeline” and the only blot is the pricey valuation of 22.24 times earnings and lowly yield of 1.87%. So far, Bunzl has justified its premium valuation.

The Full Mondi

What is it about the packaging industry? International packaging and paper group Mondi (LSE: MNDI) is another paper heavyweight, growing 121% over the past five years. However, there has been slippage likely, with the stock down 12% in the past year.

Mondi, which operates in more than 30 countries, and across multiple industries, has diversification on its side. Its latest trading update showed a 9% rise in underlying operating profit compared to the final quarter of last year, to €246 million. Consumer packaging, and coated fine paper and its South Africa division all put in a strong performance, offsetting lower selling prices and margin pressure in other divisions.

Mondi is exposed to the huge growth area of global consumer packaging, thanks to the rise of online selling and emerging market consumerism. The company has been in the FTSE 100 since 2013 without grabbing the attention of investors, but trading at 12.93 times earnings and yielding 3.02%, and with forecast earnings per share growth of 6% this year and 3% next, it could be a company to take note of.

T-REXam

Global beverage can maker Rexam (LSE: REX) also packs a share price growth punch, rising 63% over five years. 2015 was a solid year, with sales up 2% to £3.93bn, although earnings were hit by currency fluctuations in currency and lower prices, with underlying operating profits down 3% to £404m. Chief executive Graham Chipcase has warned of a tough trading environment this year, but with continued volume growth.

Its ongoing tie-up with US can maker Ball Corporation should create a global packaging leader, boosting supply chain efficiency, cutting costs and driving efficiencies, although it has run into EU regulators who have forced £3 billion of asset disposals over competition concerns. However, it will mean you are holding a US company once the deal is in the can. This stock remains a tempting long-term hold, a company that does exactly what it says on the tin.

The post Bunzl plc, Mondi plc and Rexam plc have got it all wrapped up appeared first on The Twelfth Magpie.

More reading

• Up 27.1% in 6 months: a FTSE 100 share paying out 2.8% a year!
• How do the government’s latest changes affect your Stocks and Shares ISA?
• Why boring is often best when it comes to buying stocks
• This beaten-down UK growth share is also a dividend investor’s dream
• Here’s why my Stocks and Shares ISA climbed as the market fell on Friday

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

However, with AstraZeneca having a dividend coverage ratio of over 1.4, it appears to have sufficient headroom to at least maintain dividends over the medium term – just as it has done since 2011. And with AstraZeneca investing heavily in its pipeline of new drugs, its long-term profit outlook remains very bright. This is excellent news for its dividend potential and means that while dividends have flatlined in recent years, they could increase in the long run and boost AstraZeneca’s yield of 5%.

Furthermore, with AstraZeneca trading on a price-to-earnings (P/E) ratio of 14, it seems to offer excellent value for money and could be subject to an upward rerating in future.

Uncertain future?

One stock that also has a rather uncertain future is specialist lender Provident Financial (LSE: PFG). Its shares have fallen by 14% since the turn of the year as investors seem to be growing increasingly uncertain about the prospects for the UK economy. Specifically, there’s a concern that higher interest rates could lead to increasing default rates on loans, since low interest rates have become almost taken for granted by many borrowers and they may not have sufficient headroom for when rates rise.

Still, with Provident Financial trading on a price-to-earnings-growth (PEG) ratio of just 1.3, its shares seem to offer upside potential and a margin of safety. And with a yield of 4.6%, their dividend appeal remains relatively high. Yet due to the uncertainty surrounding the lending market, AstraZeneca seems to be a superior income play for the long term.

Stability star

Similarly, Rexam (LSE: REX) is also a relatively popular income stock. The packaging company may only yield 2.9% at the present time, but with dividends currently representing just 45% of profit, there seems to be considerable scope for shareholder payouts to rise at a rapid rate in future. And with Rexam forecast to increase its bottom line by 5% this year and 8% the year after, its dividend prospects are relatively bright.

In addition, Rexam is arguably a more stable business than AstraZeneca and offers greater peace of mind when it comes to profitability and dividend growth. And with its shares trading on a PEG ratio of 1.8, they appear to offer good value for money for such a stable and robust business.

However, with AstraZeneca having a significantly higher yield, offering better value for money and an exciting future due to a rapidly improving pipeline, it still seems to be the preferred option.

The post Are Provident Financial plc and Rexam plc better income stocks than AstraZeneca plc? appeared first on The Twelfth Magpie.

More reading

• Down 14% to below £135, here’s where AstraZeneca’s deeply undervalued share price ‘should’ be trading today
• The top 3 FTSE shares for beginner investors to consider buying in 2026
• 2 FTSE shares for beginners starting an ISA
• 3 UK shares to consider holding in a Stocks and Shares ISA for a decade

Peter Stephens owns shares of AstraZeneca. The Motley Fool UK has recommended AstraZeneca and Rexam. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

GlaxoSmithKline

At first glance pills play GlaxoSmithKline (LSE: GSK) may not be the most appetising stock selection for bargain hunters. Thanks to the never-ending problem of crippling patent losses, the Brentford business is expected to endure yet another earnings dip in 2015, this time by a chunky 20%. Consequently GlaxoSmithKline changes hands on a P/E rating of 18.2 times, sailing well outside the benchmark of 15 times that is widely considered decent value.

But scratch a little harder and I believe the company’s terrific value becomes apparent. GlaxoSmithKline has chucked the kitchen sink at transforming its product pipeline, and last week unveiled 40 new medicines spanning six growth areas. Of these, GlaxoSmithKline believes 80% have the potential to be “first-in-class,” and the firm plans to make 20 regulatory submissions by the close of the decade.

Helped by strong emerging market demand, GlaxoSmithKline is finally expected to turn the corner thanks to this sterling work, and an 11% bottom-line bounceback is currently predicted for 2016 alone, creating a P/E ratio of 16.5 times. When you throw in a planned dividend of 80p per share to 2017, yielding a very-decent 5.8%, I believe GlaxoSmithKline is extremely difficult to overlook.

BAE Systems

I am convinced BAE Systems (LSE: BA) is also a splendid stock selection for those seeking red-hot growth and income prospects at low prices. The West is facing a multitude of challenges not seen for decades, from dealing with territory disputes in the South China Sea, through to tackling Russia’s increasingly-expansionist foreign policy and battling ISIS militants in the Middle East.

This naturally plays into the hands of weapons builder BAE Systems, which has been a critical hardware supplier to the US and UK for decades now. This is far from a surprise given the vast sums the firm chucks at R&D, not to mention its insatiable appetite for acquisitions in galloping growth areas. And thanks to the rising spending power of emerging markets, BAE Systems’ cutting-edge technology is becoming more and more popular with new customers, particularly those of Asia.

With order activity back on the rise, BAE Systems is expected to recover from recent earnings weakness in 2016 to post a 5% earnings rise, reducing the P/E ratio from 11.7 times for the current period to a cut-price 11.3 times. On top of this, the arms specialist is anticipated to shell out dividends of 20.9p and 21.5p in 2015 and 2016 correspondingly, yielding a heady 4.7% and 4.8%.

Rexam

Drinks can manufacturer Rexam (LSE: REX) is an exceptionally-priced FTSE candidate in my opinion. The future of the company was hit with fresh uncertainty last month after the Ball Corporation’s (NYSE: BLL.US) attempted £4.4bn takeover was hit by a range of objections from the European Union’s Competition Commission. The deadline has now been extended to December 23.

The planned deal is now thought by many to be up in the air, with Ball now likely to face massive asset sales to force through any deal. Indeed, Brazil’s declaration that it also has huge competition concerns adds another layer of intrigue. The cash-and-shares deal is worth an estimated 610p per share, representing a chunky premium from Rexam’s current price of 545p.

Regardless of the fate of the deal, I believe the British manufacturer remains a great long-term growth pick, as rising wealth levels in developing regions boost beverage demand, and as a consequence sales of Rexam’s receptacles. The firm is expected to flip from a 2% earnings dip in 2015 to record an 8% rise in 2016, creating a very-decent P/E rating of 13.7 times for next year. And anticipated dividends of 17.3p per share for 2015 and 18p for 2016 create chunky yields of 3.1% and 3.3% correspondingly.

The post Are GlaxoSmithKline plc, BAE Systems plc And Rexam PLC Brilliant Bargains Or Value Traps? appeared first on The Twelfth Magpie.

More reading

• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• 1 FTSE stock tipped to handily outdo Rolls-Royce shares by 2027
• Forget SpaceX, here are 3 UK tech stocks to consider buying without the high price tag
• Should investors consider buying BAE Systems shares now they’re back below £20?
• BAE shares are falling: opportunity or warning?

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

Ocado Group

Shares in online grocery play Ocado (LSE: OCDO) have enjoyed a stunning upturn during the past few months, gaining more than 50% in a little over three months. The market has paused for breath today and the retailer is currently trading 5.1% lower, although I expect this to be a temporary hiatus before the stock treks higher again.

Investor sentiment was further boosted this week by news that Ocado delivered the first profit in its decade-and-a-half history for the year ending November 2014, ringing in at £7.2m as sales leapt 20% to £948.9m. Like Waitrose and Marks & Spencer, the business has benefitted from flocks of affluent shoppers ditching mid-tier operators like Tesco in favour of the more expensive products of premium outlets.

Analysts expect the company to continue delivering stunning bottom line growth as the e-commerce phenomenon clicks through the gears, and have pencilled in growth of 185% and 45% for fiscal 2015 and 2016 correspondingly.

These numbers leave Ocado changing hands on, at face value at least, ultra-expensive P/E multiples of 114.7 times and 78.6 times prospective earnings for these years. Still, I expect profits to continue surging higher as investment in distribution hubs, expanding its fleet of vans, and continued expansion into overseas markets bolsters the bottom line, in turn justifying this enormous premium.

Rexam

Beverage can manufacturer Rexam (LSE: REX) is lighting up the FTSE indices today and was recently stomping 23% higher. The business has been boosted by news that it was in talks with US rival Ball Corporation over a potential takeover, a deal which would value the London company at some $4.3bn.

Against a backcloth of rising metal costs and foreign exchange headwinds, City analysts do not expect earnings to take off in the near-term at the firm and an anticipated 1% improvement for 2014 is expected to be followed with a 3% dip in the current year. But the long-term investment case remains strong, and improving drinks demand is predicted to herald a solid 6% rise in 2016.

Accordingly Rexam deals on appetising P/E multiples of 12.2 times for 2015 and 11.6 times for 2016, comfortably below the widely-regarded yardstick of 15 times which represents attractive value for money.

And the business is a particularly appealing selection for those seeking chunky dividends, with Rexam anticipated to keep the payment on hold this year at 17.8p per share before hiking it to 18.6p in 2016. As a consequence the company boasts market-topping yields of 4.2% and 4.4% for these years.

Vedanta Resources

Giant copper miner Vedanta (LSE: VED) has enjoyed a perky uptick in recent days, and the company was last trading 2.7% higher in Thursday trade. But in my opinion a poor supply/demand picture for the red metal makes the stock a perilous stock pick — just today ANZ slashed its 2015 average copper price forecast by almost a fifth, to just $5,850 per tonne.

The effect of persistent commodity price weakness has seen Vedanta punch significant earnings dips during the past three years, a trend which is expected to repeat itself in the year ending March 2015 and a 53% decline is currently pencilled in.

Bafflingly, though, the City expects the digger to defy the effects of a worsening price outlook and punch earnings improvements to the tune of 98% and 203% in fiscal 2016 and 2017 respectively.

While it is true that some project scalebacks, and prospect of fresh Chinese stimulus on metal demand could give Vedanta’s revenues outlook a boost, I believe that the patchy state of the global economy is likely to stymie hopes of any meaningful bottom-line bounceback, and that P/E multiples of 32.3 times and 13.7 times for this year and next do not fully reflect the poor state of the copper market.

The post Why I Would Buy Ocado Group PLC And Rexam PLC But Sell Vedanta Resources plc appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Can anything save the Ocado share price?

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