Director dealings are essentially insider transactions for shares between directors and the companies they work for. These dealings are always made public, and are often considered a good indicator of a company’s future prospects. However, they don’t get nearly as much attention as other company news due to their complex nature. Nonetheless, here I’m breaking down this week’s biggest director dealings from three FTSE firms.

Vodafone

Vodafone (LSE:VOD) is a British multinational telecommunications company. It predominantly operates services in Asia, Africa, Europe, and Oceania. The company runs at least some form of operations in over 150 countries.

Following lacklustre numbers from its Q1 trading update, the share price dropped by 5%. It has stayed there since. Despite that though, it’s a sign of confidence when a high-ranking director purchases shares. And this week, Vodafone’s Chairman decided to reinvest his dividends into buying more Vodafone shares.

• Name: Jean-François van Boxmeer
• Position of director: Chairman
• Nature of transaction: Dividend shares
• Date of transaction: 10 August 2022
• Amount bought: 9,975 @ £1.21
• Total value: £12,069.75

Deliveroo

Deliveroo (LSE: ROO) is a British online food delivery company. It operates in over 200 locations across the UK, and is the second-biggest food delivery platform in the country. It also operates internationally with operations in France, Singapore, Australia, and many more.

In this week’s transaction, a director exercised his option to redeem stock compensation. Following this, he opted to sell approximately half of the shares received to cover tax liabilities. That being said, it’s worth noting that this is a monthly occurrence from the company’s CFO. As such, these actions shouldn’t impact investor sentiment surrounding the stock. It’s worth pointing out, however, that the sale of these shares dilute shareholders’ value. This is because there are now more Deliveroo shares floating on the market.

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Award shares
• Date of transaction: 15 August 2022
• Amount vested: 83,400 @ £0.96
• Total value: £80,247.48

• Name: Adam Miller
• Position of director: Chief Financial Officer
• Nature of transaction: Sales of shares to cover tax liabilities
• Date of transaction: 15 August 2022
• Amount sold: 40,402 @ £0.95
• Total value: £38,381.90

FirstGroup

FirstGroup (LSE: FGP) is a British multi-national transport group. The FTSE 250 firm is the leading transport operator in the UK and North America. It is widely known for being a provider of public transport, especially buses in the UK.

Rather surprisingly, its shares have managed to outperform the wider UK market index this year. But after the share price took an 11% hit last week, a couple of large director dealings were carried out. The first involves a non-executive director purchasing a substantial number of shares. But what really caught my eye were the conditional share awards that could be awarded to FirstGroup’s CEO and CFO. This should shore up investors’ confidence in the stock, as the group’s management will have to perform and meet investors’ expectations in order for these award shares to vest.

• Name: Sally Cabrini
• Position of director: Non-Executive Director
• Nature of transaction: Purchase of shares
• Date of transaction: 17 August 2022
• Amount vested: 10,000 @ £1.15
• Total value: £11,482

• Name: Graham Sutherland
• Position of director: Chief Executive Officer
• Nature of transaction: Award shares
• Date of transaction: 18 August 2022
• Amount vested: 972,590 @ Nil
• Total value: N/A

• Name: Ryan Mangold
• Position of director: Chief Financial Officer
• Nature of transaction: Award shares
• Date of transaction: 18 August 2022
• Amount vested: 1,003,226 @ Nil
• Total value: N/A

Types of Shares

To provide context, there are a few types of shares that can be purchased by directors. Some directors opt to purchase shares via the open market. Having said that, directors also have the option to purchase and receive shares via a share incentive plan (SIP).

A SIP is an employee plan for companies within the UK to flexibly award shares to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this week’s set of director dealings, a few types of SIPs were exercised. For starters, Vodafone’s Chairman opted to purchase more Vodafone shares from the dividends he received from his current shares.

On the other hand, Deliveroo’s CFO decided to exercise the option of redeeming his restricted stock units. These are a form of award shares which allow for directors to redeem shares at a later date, as either as part of their salary or based on meeting performance obligations.

FirstGroup’s CEO and CFO were awarded shares as well, but these will only be vested once performance targets are met. In this case, more than 1.5m shares are up for grabs between the two directors under the operator’s long-term incentive plan (LTIP). The LTIP award will normally vest on the third anniversary of the date of award, subject to satisfaction of performance conditions and continued employment. The award is also subject to an additional holding period of two years from the date on which the award vests.

The post Director dealings: Vodafone, Deliveroo, FirstGroup appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Which will reach £2 first, Lloyds or Vodafone shares?
• 3 value stocks under £3 to consider in June

John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Deliveroo Holdings Plc and Vodafone. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

BT (LSE: BT.A) recently published its Q1 earnings. Since then, its stock has dropped by 8%. As such, the current BT share price could present a buying opportunity. However, a deeper look at the business could indicate that it’s a value trap.

Average numbers

Although both revenue and adjusted EBITDA saw slight increases, investors were disappointed to see the rest of BT’s financials worse off. With the group’s net debt seeing a £325m increase, this soured investor sentiment, as BT already has a high debt-to-equity ratio of 105.8%. The justification for this according to management, however, was higher pension contributions and slower free cash flow.

Bad numbers aside, the telecommunications company had some bright spots that are worth pointing out. For one, it managed to achieve a record number of customer connections for its full fibre broadband, with over 8m homes and businesses now connected. Additionally, BT now anticipates increasing its Openreach network to reach a further 3.5m premises this year.

The company’s Consumer and Openreach lines of business saw decent growth. Nonetheless, revenue growth from those two divisions was offset by legacy product declines and the current tough economic environment for businesses.

Aside from that, the firm also managed to finalise its partnership with Sky, which should further increase broadband coverage in the future. But most importantly, its long-awaited join venture with Warner Bros. Discovery has finally been cleared by the CMA. And despite the lacklustre numbers, management still reiterated its outlook for the year, which remained unchanged.

Possible hang ups

Nevertheless, BT still faces a number of bumps on the road. With the FTSE 100 firm no where near to resolving pay disputes with its workers, I’m anticipating further strikes to go ahead. This would definitely disrupt the business’ operations and affect its cost structure. In fact, management mentioned that it’s had to invest in contingency plans to minimise disruptions.

Moreover, CEO Philip Jansen stated that the company will be setting in price hikes for its broadband services. While this should help to mediate rising costs across the board, BT has intense competition to worry about, and risks losing customers to its competitors. This is because a join venture (JV) between Virgin Media O2, Liberty, and Telefonica are hot on its heels. The JV plans to invest £4.5bn to connect a further 7m homes. This would bring Virgin’s reach to 23m by 2027.

Close call?

That being said, the firm still faces strong headwinds that makes its outlook less convincing. BT seems to be reliant on its Consumer and Openreach divisions to maintain profitability for the time being. If inflation continues to run rampant, achieving its FY23 outlook is going to be a very close call.

So, do I think the current BT share price is a bargain? Not in my opinion, as I think it’s more of a value trap. Its 4% dividend yield could be a valid reason for me to invest, but I’m afraid that BT’s increasingly high levels of debt are going to hinder its earnings potential.

The post Is the BT share price a bargain or value trap? appeared first on The Twelfth Magpie.

More reading

• Why has the BT share price almost doubled – yet gone nowhere?
• Down 16% in 5 weeks, are BT shares just too good to miss?
• Down 16% to around £2.03! Here’s where BT’s bargain-basement shares ‘should’ be trading right now
• The BT share price is already up 91.5% in 2 years! Can it hit £3?
• Want to get rich on passive income? Here are some mistakes to avoid

John Choong has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Director dealings are essentially insider transactions for shares between directors and the companies they work for. These dealings are always made public, and are often considered a good indicator of a company’s future prospects. However, they don’t get nearly as much attention as other company news due to their complex nature. Nonetheless, here I’m breaking down this week’s biggest director dealings from three FTSE firms.

Rolls-Royce

Rolls-Royce (LSE: RR) a British multinational aerospace and defence holdings company. It is one of the world’s largest maker of aircraft engines, and operates in four different segments. These include civil aerospace, power systems, defence, and new markets. This week, four director dealings were carried out, albeit in small volumes.

• Name: Lee Hsien Yang
• Position of director: Non-Executive Director
• Nature of transaction: Purchase of shares (Share purchase plan)
• Date of transaction: 7 July 2022
• Amount bought: 1,184 @ £0.83
• Total value: £950.59

• Name: Wendy Mars
• Position of director: Non-Executive Director
• Nature of transaction: Purchase of shares (Share purchase plan)
• Date of transaction: 7 July 2022
• Amount bought: 2,198 @ £0.83
• Total value: £1,820.38

• Name: Sarah Armstrong
• Position of director: Chief People Officer
• Nature of transaction: Purchase of shares (Share purchase plan)
• Date of transaction: 7 July 2022
• Amount bought: 147 @ £1.02
• Total value: £149.91

• Name: Rob Watson
• Position of director: President (Rolls-Royce Electrical)
• Nature of transaction: Purchase of shares (Share purchase plan)
• Date of transaction: 7 July 2022
• Amount bought: 147 @ £1.02
• Total value: £149.91

Lloyds

Lloyds (LSE: LLOY) is one of Britain’s biggest financial institutions. Its brands include Lloyds itself, Halifax, and Bank of Scotland. It earns the bulk of its revenue from mortgage loans. A large number of director dealings occurred with Lloyds shares this week.

• Name: Joanna Harris
• Position of director: Interim Group Director
• Nature of transaction: Partnership shares and matching shares
• Date of transaction: 11 July 2022
• Amount bought: 296 @ £0.42
• Amount received: 106 @ nil
• Total value: £124.91

• Name: Antonio Lorenzo
• Position of director: Chief Executive Officer (Scottish Widows)
• Nature of transaction: Partnership shares and matching shares
• Date of transaction: 11 July 2022
• Amount bought: 355 @ £0.42
• Amount received: 106 @ nil
• Total value: £149.81

• Name: Janet Pope
• Position of director: Chief of Staff and Group Director of Sustainable Business
• Nature of transaction: Partnership shares and matching shares
• Date of transaction: 11 July 2022
• Amount bought: 296 @ £0.42
• Amount received: 106 @ nil
• Total value: £124.91

• Name: Stephen Shelley
• Position of director: Chief Risk Officer
• Nature of transaction: Partnership shares and matching shares
• Date of transaction: 11 July 2022
• Amount bought: 355 @ £0.42
• Amount received: 106 @ nil
• Total value: £149.81

• Name: Andrew Walton
• Position of director: Group Corporate Affairs Director
• Nature of transaction: Partnership shares and matching shares
• Date of transaction: 11 July 2022
• Amount bought: 71 @ £0.42
• Amount received: 105 @ nil
• Total value: £29.96

Vodafone

Vodafone (LSE: VOD) is is a British multinational telecommunications company. It predominantly operates services in Asia, Africa, Europe, and Oceania. A significant director exercised their options to purchase Vodafone shares this week.

• Name: Nick Read
• Position of director: Chief Executive Officer
• Nature of transaction: Purchase of shares (Vodafone Sharesave Plan)
• Date of transaction: 11 July 2022
• Amount bought: 22,352 @ £1.01
• Total value: £22,499.52

Types of shares in a SIP

To provide context, there are a few types of shares within a company’s share incentive plan (SIP). A SIP is an employee plan for companies within the UK to flexibly award equity to employees. Publicly listed companies normally exercise this option because it’s tax-efficient for both the employer and its employees.

In this week’s dealings, directors at Rolls-Royce opted to purchase shares under a share purchase plan. This is a form of capital raising by Rolls-Royce which offers shareholders the opportunity to apply for new, additional shares.

As for Lloyds, the director dealings occurred with partnership shares and matching shares. Partnership shares give employees the opportunity to buy shares via deductions from their salary, before tax deductions. But where partnership shares are offered, the company can also offer matching shares, as was the case. This can range up to a maximum ratio of two free matching shares per partnership share purchased. Nonetheless, it’s important to note that matching shares must normally be held in a trust for at least three years, and held for five years in order to receive a full tax relief. However, these shares may be forfeited if an employee withdraws their partnership shares from the trust.

Finally, in the case of Nick Read, the CEO exercised his options to purchase shares under the Vodafone Share Save Plan. These options are exercisable five years from the savings contract start date, provided that the required monthly savings were made.

The post Director dealings: Rolls-Royce, Lloyds, Vodafone appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Here’s how much I think Rolls-Royce shares will be worth by the end of 2027
• Could small modular reactors take Rolls-Royce shares to the next level?

John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group and Vodafone. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The BT (LSE: BT.A) share price has managed to buck the trend of the FTSE 100 this year. While its overall index has declined 5%, BT is up 10%. Given its defensive status as a stock, it makes me wonder whether the UK’s market leader in telecoms can sustain its rally.

Forming connections

Aside from its defensive nature, BT has more things going for it. For one, its mobile network, EE has been named the best mobile network in the UK by RootMetrics. Additionally, its 5G network now covers 50% of the UK population, with the firm planning to continue investing in its expansion.

Secondly, the group’s Openreach network now covers 7.2m premises, providing 1.8m connections, with a strong and growing early take-up rate of 25%. This momentum has therefore allowed BT to revise its target of installing fast broadband fibre in 20m to 25m homes by 2026.

Discovering a brother

The blockbuster, however, is its joint venture with Warner Bros Discovery. The two giants agreed to form a premium sports JV for the UK and Ireland earlier this year. This combines the offerings of BT Sport with Eurosport UK. Therefore, customers can now enjoy the most extensive portfolios of premium sports. These include the UEFA competitions, Premier League, UFC, Olympic Games, the tennis Grand Slams, and many more!

Moreover, BT Sport announced yesterday that it had been chosen to remain the home of European football for the next five years. The FTSE 100 firm said that it will pay £305m per season to keep showing UEFA Champions League matches on UK television and online streaming from 2024 to 2027. Under the competition’s new format, there will be 27% more games for customers to watch each season. As such, I imagine this would bring in more revenue for its consumer segment.

Buy signal?

All of the above excites me very much. However, BT could run into a couple of roadblocks. The first would be the investigation of its joint venture. The Competitions and Markets Authority (CMA) fear that the partnership will reduce competition. So, an unfavourable outcome could end up denting the BT share price. The second is the recent news that its call centre workers and Openreach engineers have voted to strike. As a result, BT will most likely have to fork out bigger paycheques for its workers as a long-term solution, eating into its already declining bottom line.

This brings me to the state of the company’s financials. Aside from its sky-high debt of £16.2bn, it has been facing declining top and bottom lines. In fact, its earnings have dropped 9.9% on average per year for the last five years. When paired with its low levels of cash (£3.4bn), its fundamentals certainly look grim.

So, should I buy BT shares? Well, the stock has an average price target of £2.10, which would mean 10% growth from its current levels. This isn’t much, but it does suggest BT shares have the potential to continue their rally. However, given the uncertainty surrounding the JV and its poor financials, I won’t be investing in BT shares until there’s more clarity surrounding the inquiry and its balance sheet improves. Instead, I’ll be investing in companies with better fundamentals.

The post Can the BT share price continue its rally? appeared first on The Twelfth Magpie.

More reading

• Why has the BT share price almost doubled – yet gone nowhere?
• Down 16% in 5 weeks, are BT shares just too good to miss?
• Down 16% to around £2.03! Here’s where BT’s bargain-basement shares ‘should’ be trading right now
• The BT share price is already up 91.5% in 2 years! Can it hit £3?
• Want to get rich on passive income? Here are some mistakes to avoid

John Choong has no position in any of the shares mentioned. The Motley Fool UK has recommended Vodafone. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Tough year

It’s been a tough year for BT (LSE: BT.A) shareholders. Despite a strong performance from the FTSE 100, shares in the telecoms company have fallen more than 20% over the past 52 weeks. BT shares have been in stuck in a downtrend for more than a year, as investors have been spooked by the company’s widening pension deficit and the possible legal separation of its Openreach network operations.

However, I feel that these fears may be overdone and I wouldn’t be surprised to see BT shares make up lost ground this year. That’s because underlying fundamentals remain strong as its investment in fibre broadband services begins to pay off in terms of profitability and free cash flow generation.

Management is also making good on the promise to deliver revenue and cost synergies from the acquisition of mobile operator EE, which could greatly enhance BT’s competitive position and customer profitability. And in spite of despite regulatory uncertainty, the possibility of a positive outcome from Ofcom’s ruling on BT’s Openreach division could greatly renew investor confidence in the company’s near-term outlook and give its shares a much needed boost.

Attractively priced

At a forward price-to-earnings ratio of 12.8, BT shares are attractively priced in today’s market, and especially so when compared to sector peers Vodafone and Sky, which have forward P/Es of 37.1 and 17.3, respectively.

What’s more, BT’s dividend prospects appear to be in good shape even as its pension deficit approaches £10bn. That’s because free cash flow is set to exceed £3.1bn this year, and £3.6bn next, which would give the company ample room to increase its pension contributions and deliver further dividend growth.

The shares may currently yield just 3.6%, but for 2017 and 2018, city analysts expect BT’s yield would rise to 4.0% and 4.4%, respectively.

Muted reaction

Marks and Spencer‘s (LSE: MKS) general merchandise sales have been struggling for a number of years, but a turnaround seems to be in sight. Like-for-like sales for its clothing and homeware products smashed market expectations by rising 2.3% during the Christmas shopping period — the first piece of good news from its general merchandise business in seven years.

However, investors remain unnerved on its outlook and the muted share price reaction on this latest piece of good news reflects this mood. Concerns that consumer spending may be about to wane as higher inflation is set to hurt real household incomes this year remains high on the agenda, but investors are also concerned that M&S still has a long way to go before sales return to steady year-on-year growth.

Upside potential

With M&S now trading at 12.8 times expected 2015/6 earnings, there’s plenty of upside potential.

Its sector peers trade on an average of 15.1 times earnings, while the FTSE 100’s average forward P/E is 13.6. What’s more, shares in M&S currently yield 5.6%, which is significantly above the sector’s peer average of 4.4% and the FTSE 100’s average yield of 3.2%.

The post 2 beaten-down shares with turnaround potential appeared first on The Twelfth Magpie.

More reading

• Why has the BT share price almost doubled – yet gone nowhere?
• Down 16% in 5 weeks, are BT shares just too good to miss?
• FTSE 100 to surge to 11,668! 2 cheap stocks to buy before the rally
• Down 16% to around £2.03! Here’s where BT’s bargain-basement shares ‘should’ be trading right now
• The BT share price is already up 91.5% in 2 years! Can it hit £3?

Jack Tang has a position in Marks and Spencer Group plc. 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.

Maybe we’ll see a dash for cash? That seems unlikely given the pitifully low interest available with many savings accounts. In any case, I reckon many investors cashed up before the UK referendum and will likely be looking to allocate their capital again now the result is in. So, a dash for cash has probably been and gone.

A sustained flight to quality

What seems more likely is a sustained flight to quality. We can find quality in internationally-trading, dividend-paying multinationals. That’s why the shares of such firms have been going up in recent days and, despite the full-looking valuations of many such companies, I reckon the move could continue for some time.

One-time hedge fund manager Richard Farleigh says in his book Taming The Lion that markets often move much further than we think possible, so which upward trends might we hop on among these quality movers? I’d like to throw in for your consideration Diageo (LSE: DGE), Vodafone Group (LSE: VOD) and Reckitt Benckiser Group (LSE: RB).

Improving performance

City analysts following premium drinks supplier Diageo expect earnings to rise 13% for the year to June 2017. The firm’s chief executive told us in January that the company is a stronger, more competitive business than it used to be. He reckons trading conditions are challenging in some markets, but Diageo’s brands and operational tactics are resilient.

I reckon such qualities will help Diageo navigate any Brexit fallout and continue to deliver what the chief describes as “improved, sustained performance.” The firm’s business is global, which dilutes the economic ripples spreading from Britain. On top of that, the company’s top-branded alcoholic drinks carry all the attributes of cash-generating consumer goods with the added ‘lock-in’ of habit — no matter how tough things become, people rarely forego their daily tipple.

On-going growth potential

Back in May, communications specialist Vodafone revealed it has completed its infrastructure investment programme Project Spring. The firm’s chief executive reckons the investment programme transformed the quality of Vodafone’s technology, which enhances the customer experience. The company hopes to expand its enterprise services on the back of that.

City analysts predict a 29% hike in earnings for year to March 2017 and 17% the year after that, which demonstrates Vodafone’s on-going growth potential.

Steady progress

There was no sign of any stress back in April when Reckitt Benckiser delivered its first quarter results. The chief executive made the usual reference to “challenging markets” as many firms seem to do, but went on to say that the company was seeing growth across both developed and developing markets.

Cash-generating consumer brands such as Vanish, Dettol, Scholl and Nurofen will likely keep the company making steady progress despite the Brexit to come. City analysts expect progress too, predicting earnings will grow 9% this year and 10% during 2017.

The post 3 firms leading the flight to quality appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• Newsflash: the Diageo share price just climbed!
• Which British dividend shares could supercharge a passive income portfolio in 2026?
• Has the turnaround finally started for Diageo shares?
• How much longer can the Diageo share price stay this low?

Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has recommended Diageo 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.

Extra boost

Sometimes we can get an extra boost when we see share prices unfairly depressed, as has happened with BAE Systems (LSE: BA) in recent years. Back in 2011, with recession surrounding us and defence prospects looking a bit grim, BAE shares plunged as low as 253p and ended the year on a P/E of only a little over six — even for a depressed sector, that seemed ludicrously cheap.

Between that low point and today, BAE shares have soared by 90% to 480p, and dividends over the period would have made that up to around 125% — way better than a doubling, in just a bit over four and a half years.

How quickly might BAE shares double again? Let’s suppose the forecast return to EPS growth of 6% in 2017 is sustained and the dividend continues to yield around 4.5%, and also assume that the shares return to P/E in line with the FTSE 100 long-term average of around 14…

That’s perhaps a bit optimistic, but including dividends it suggests BAE shares could double again by the end of 2020 — that is, in just over another four years.

Oily double?

Speaking of depressed industries, we have the slump in BP (LSE: BP) shares. Well, I say slump, but BP shares have actually only fallen by 30% since mid-2014, to 364p, and two years of very high dividends would have reduced your loss to only around 15% — and if that’s the biggest share price disaster we ever face, we won’t be doing too badly at all.

But with Brent Crude now edging ever closer to $50 a barrel — it’s at $49.33 as I write — what does the future hold for BP shares? Forecasts suggest a a P/E of only around 13.5 for 2017, and they’ve been based largely on the low oil prices of the past couple of months. But analysts are already upping their forecasts in the light of the strengthening oil price, and are putting out a pretty strong Buy rating on BP shares.

The prospects for BP really depend on the future of the oil price and where it will stabilize. BP apparently believes that it will get back to $100 again in the future as demand rises, although in the short to medium term that would seem optimistic. But a number of pundits are suggesting around $75 in the medium term, and that could easily double BP’s earnings per share — and, assuming the P/E remains the same, that would double the share price.

Quad-play telecom

Now that BT Group (LSE: BT.A) is back in the mobile business through its acquisition of EE, and is doing nicely in the content-delivery stakes, it has to be the quad-play operator to beat. Over five years, BT shares have put in the best performance of the three here today, gaining 123% on share price alone with dividends taking that up to around 150%.

Even after that, and with dividends expected to yield 4%, BT shares are on a forward P/E for the year ending march 2018 of just 13.5. That’s likely due to a 7% fall in earnings on the cards for the current year, after 2015-16 saw EPS growth slow to 5%.

But I think using that as a valuation misses one key fact — BT has been in a high capital expenditure mode in recent years, and that’s set to drop as it goes about integrating its acquisitions and hopefully enjoying future cost savings as a result.

How long it will take for BT shares to double again is anybody’s guess, but I’d say there’s at least an evens chance it’ll happen in the next five years.

The post Which will double the quickest: BAE Systems plc, BP plc or BT Group plc? appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
• Just how bad could it get for the BP share price?
• 1 FTSE stock tipped to handily outdo Rolls-Royce shares by 2027
• BP shares are falling. But is the oil market actually tighter than investors think?

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

Results for the year just ended in March 2016 are due on 5 May, and after a 12% rise in EPS last year, forecasters are expecting a fall back of 2% this year, followed by just a 1% pick-up by March 2017. But with growth expected to accelerate again in 2017-18, does the recent price stagnation make BT shares a good buy now?

BT’s acquisition of EE has only just been completed, and we should be seeing a significant contribution to the bottom line in the coming years. And at Q3 time, chief executive Gavin Patterson enthused about BT’s 4.7% revenue growth as being “our best result for more than seven years“.

On current expectations, the P/E would drop to 13 by March 2018, when the dividend would be yielding 3.9%, and that should make BT shares good value if it comes off — eyes peeled on Thursday.

Oil comeback?

With the price of oil still gradually creeping up and standing above $45 per barrel today, Premier Oil (LSE: PMO) could be set for a very nice comeback from what looked like a dire situation at one point. Premier Oil shares were suspended at 19p in January while the world awaited news of a significant event — it turned out to be the acquisition of E.ON’s North Sea assets for $120m (which I still reckon was a steal), and the shares have since climbed back up to 69p.

At the time, investors were worrying about Premier’s $2.2bn debt mountain. But the firm’s covenants look safe until well into 2017, the E.ON assets should be immediately cash generative, and a modestly-recovering oil price is all that Premier really needs for its future to be reasonably safe.

We should get some news on the E.ON integration, together with an updated snapshot of the whole company, when Premier releases its latest trading and operations update on 11 May — and as a holder of Premier shares, I’m hoping it will help blow the cloudy skies further away.

Buying opportunity?

ITV (LSE: ITV) shareholders have enjoyed a cracking five years, seeing their shares treble in price to 229p. That’s been on the back of five years of strong earnings growth, with revenue growing by 34% between 2011 and 2014, and EPS up 85% — oh, and the dividend has been lifted from 1.6p per share in 2011 to 6p in 2015.

But despite that great record, ITV shares have been falling back of late, giving up 20% since the end of July 2015. The reason is very likely down to a slowing of growth expectations — the 8% and 7% EPS growth forecasts for this year and next respectively look fine to me, but it can lead those who expect super growth to continue forever to jump ship.

And the fall has dropped the P/E of ITV shares to 12.6 for this year, and as low as 11.7 on 2017 forecasts — while the dividend is set to rise to 7.4p this year for a yield of 3.3%, then to 8.6p for 3.8% in 2017. I reckon that’s given us a nice buying opportunity, and I’ll be watching for first-quarter results due on 12 May.

The post 3 Hot Shares for May: BT Group plc, Premier Oil PLC & ITV plc? appeared first on The Twelfth Magpie.

More reading

• £500 gets 617 shares in one of the top FTSE income stocks to buy!
• Here’s how to invest £3,600 in UK shares to target a 7% dividend yield
• Why has the BT share price almost doubled – yet gone nowhere?
• Down 16% in 5 weeks, are BT shares just too good to miss?
• Down 16% to around £2.03! Here’s where BT’s bargain-basement shares ‘should’ be trading right now

Alan Oscroft owns shares of Premier Oil. 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.

But a good dividend provider shouldn’t be judged on a short-term hiccup. And in my view, Aviva has dealt with the blow in exemplary fashion by focusing hard on rebuilding its balance sheet. By 2015 results time, chief executive Mark Wilson could say:  “We have completed the fix phase of our transformation,” adding “…our balance sheet is one of the strongest and most resilient in the UK.“

Aviva’s dividend was back up to 20.8p in 2015 for a 4% yield, with rises to 24p and 27p forecast for the next two years — to yield 5.3% and 6% at today’s 447p share price. I see Aviva as a great long-term dividend stock, and with the shares on P/E multiples of only around nine, I see a share price recovery coming too. That combination is why I bought some.

Cash from cash

The payment of bills and services is big business, though highly competitive. But PayPoint (LSE: PAY) has carved a niche as the country’s leading payment collection network — you’ll see its signs at newsagents and stores all over the country, where you can pay bills, and pre-pay mobile and energy meters.

Strong earnings growth resulted in an impressive share price rise until late 2014, but a slowdown (a 7% drop in EPS is forecast for the year to March) has led to a share price fall of 10% over the past 12 months, to 761p. But that’s helped boost the expected dividend yield, with this year’s predicted 42p amounting to 5.6%, and it would rise to 6.4% by 2018 if current forecasts prove accurate. And as PayPoint is a cash-generative company, cover by earnings of around 1.3 to 1.4 times looks safe enough.

On top of that, EPS should start picking up again in the coming year, with the shares’ P/E multiple dropping to 11 by 2018. Is this a smaller cap company that could become a multi-year cash cow? It’s worth a closer look.

Telecoms riches

Looking for even smaller companies, I’m intrigued by Alternative Networks (LSE: AN). It’s a firm with a market cap of around £170m that provides comprehensive communications and IT services to businesses — telephony, network provision, mobile and so on. The share price has been a bit erratic. It dropped sharply in February on a warning over pressures on its mobile business, with profit likely to be impacted for the year to September. At 347p, the shares are down 23% over 12 months, but have managed a 40% rise in five years — not the best in the market, but comfortably ahead of the FTSE 100.

Even with reduced forecasts suggesting a 7% drop in EPS this year, the shares are still on a relatively undemanding P/E of 13, dropping to under 12 on 2017 forecasts. More importantly in my view, with last year’s results the firm reiterated its “intention to progress dividend payments towards 15% annual growth in the medium term, anticipating growth of no less than 10% per annum.” That progressive dividend policy has seen payments rise from 10p in 2011 to 16.4p last year to yield 3.1%, with analysts expecting a boost to 5.4% this year followed by 6.2% in 2017.

The post Are Dividends From Aviva plc, PayPoint plc And Alternative Networks Plc Unbeatable? appeared first on The Twelfth Magpie.

More reading

• A £10,000 ISA buys 1,931 shares in these 6.5%+ yielding dividend stocks!
• 3 top passive income shares to consider with dividend yields above 5%
• How much do you need in a SIPP to target a stunning £750.75 weekly passive income?
• How to turn a £20k ISA into a £12,000 yearly second income
• Starmer resigns as PM — what could this mean for UK stocks and the FTSE 100?

Alan Oscroft owns shares in Aviva. The Motley Fool UK owns shares of PayPoint. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Buffett only invests in the best companies, which have wide moats, a reliable income stream, intelligent management and a history of success. A strong brand is also important to Buffett, as without that, the company in question will struggle to rise above the competition. 

Finding Buffett-esque companies is difficult and requires plenty of research. There are a few businesses that meet all of his criteria. Vodafone (LSE: VOD) is one such company.

Reliable income 

Vodafone has a huge moat in its European, South African and Indian telecoms network. It would cost tens or possibly even hundreds of billions of pounds to replicate the company’s existing infrastructure. Additionally, it’s a strong brand that’s internationally recognised. That being said, Vodafone’s market share is under attack in some regions, and while the company is now fighting back, the outlook is no longer as bright as it once was.

Still, Vodafone’s wide moat means that the company is a perfect income investment, the sort of investment that Warren Buffett might buy. The company’s shares currently support a dividend yield of 5.3%, and the payout is expected to rise in line with inflation for the next few years.

Prized assets 

ITV (LSE: ITV) is a company that could fit quite comfortably into Warren Buffett’s equity portfolio. ITV has a leading market share in the UK’s television market. What’s more, the company is branching out into online content and has built a vast content library, which can be sold to various other networks around the world. This library is one of ITV’s most prized assets and should continue to generate a steady income stream for the company going forward.

ITV’s growth since 2011 has been nothing short of outstanding. If the company meets City forecasts for growth for the next two years, by the end of 2017 ITV’s pre-tax profit will have tripled in seven years. Off the back of this growth, the company’s shares have gained around 200% since the beginning of 2011 and ITV continues to return excess cash to shareholders via special dividends. The company’s shares currently trade at a forward P/E of 13.3 and support a regular dividend yield of 3.1%.

Growth in a competitive market 

Sky (LSE: SKY) is one of the most recognisable brands in the UK and Europe. The company has shown its resilience and strong relationship with customers over the past few years as competitors such as Netflix, Amazon, BT and other content streaming providers have all started to nibble away at the company’s market share.

However, despite this competition, Sky’s pre-tax profits are up around 50% since 2011 and City analysts are forecasting a further 11% growth in EPS this year. Sky’s shares currently trade at a forward P/E of 16.2 and support a dividend yield of 3.4%.

The post SKY PLC, Vodafone Group plc & ITV plc Have The Traits Of A Warren Buffett Investment appeared first on The Twelfth Magpie.

More reading

• Here are 2 FTSE shares I’m excited about this July — and 1 I’m avoiding
• £500 gets 617 shares in one of the top FTSE income stocks to buy!
• Here’s how to invest £3,600 in UK shares to target a 7% dividend yield
• Which will reach £2 first, Lloyds or Vodafone shares?
• Should I buy ITV shares for my ISA ahead of the World Cup?

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