Tag Archives: Dividend Cover

Business, Finance, Occupation & Industry

Is Now the Time to Buy Bunzl?

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By Rupert Hargreaves, The Motley Fool

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LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today I am looking at Bunzl  to determine whether you should consider buying the shares at 1,274 pence.

I am assessing each company on several ratios:

  • Price/Earnings (P/E): Does the share look like a good value when compared against its competitors?
  • Price Earnings Growth (PEG): Does the share look like a good value factoring in predicted growth?
  • Yield: Does the share provide a solid income for investors?
  • Dividend Cover: Is the dividend sustainable?

So let’s look at the numbers:

Stock

Price

3-Year EPS Growth

Projected P/E

PEG

Yield

3-Year Dividend Growth

Dividend Cover

Bunzl

1,274p

19%

16.8

2.8

2.2%

21%

2.5

The consensus analyst estimate for this year’s earnings per share is 76 pence (6% growth) and dividend per share is 30.7 pence (9% growth).

Trading on a projected P/E of 16.8, Bunzl appears cheaper than its peers in the support services sector, which are currently trading on an average P/E of around 19.6.

Unfortunately, Bunzl’s P/E and growth rate give a PEG ratio of around 2.8, which implies the share is expensive for the near-term earnings growth the firm is expected to produce.

Bunzl offers a 2.2% yield, which is just above the sector average of 2.1%. Nonetheless, Bunzl has a three-year compounded dividend growth rate of 21%, implying the yield will continue to stay above that of its peers.

Indeed, the dividend is around two-and-a-half times covered by earnings, giving Bunzl plenty room for further payout growth.

So, is now the time to buy Bunzl?
Bunzl is a global distributor to a variety of industries, supplying a wide range of products such as food labels, paper towels, surgical gloves and ear defenders.

Given the diverse range and everyday nature of the products distributed, the company’s progress can be sensitive to the status of the global economy. However, as my table above shows, Bunzl’s earnings have actually grown 19% over the past three years.

So it seems Bunzl’s operations are relatively resilient to the economic environment and I believe this is due to the company’s diversification. You see, Bunzl’s broad customer base includes what I’d describe as some highly defensive sectors. In particular, during 2012, almost one third of Bunzl’s group revenue came from the supply of products to the grocery sector, which included supermarket bags and food packaging.

Indeed, Bunzl’s diversification and the company’s growth over that past five years has really impressed investors and, since the beginning of the year, Bunzl’s share price has gained around 28%, almost 20% more than the FTSE 100 as a whole.

However, this rapid rise in Bunzl’s share price over such a sort period leads me to believe the company currently looks overvalued. So overall, despite Bunzl’s strong growth and current discount to peers, I believe now does not look to be a good time to buy …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Now the Time to Buy Croda International?

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By Rupert Hargreaves, The Motley Fool

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LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today I am looking at Croda International  to determine whether you should consider buying the shares at 2,710 pence.

I am assessing each company on several ratios:

  • Price/Earnings (P/E): Does the share look like a good value when compared against its competitors?
  • Price Earnings Growth (PEG): Does the share look like a good value factoring in predicted growth?
  • Yield: Does the share provide a solid income for investors?
  • Dividend Cover: Is the dividend sustainable?

So let’s look at the numbers:

Stock

Price

3-Year EPS Growth

Projected P/E

PEG

Yield

3-Year Dividend Growth

Dividend Cover

Croda

2,710p

36%

19.8

2.5

2.2%

70%

2.1

The consensus analyst estimate for next year’s earnings per share is 137 pence (8% growth) and dividend per share is 64 pence (8% growth).

Trading on a projected P/E of 19.8, Croda appears slightly cheaper than its peers in the chemicals sector, which are currently trading on an average P/E of around 21.

However, Croda’s P/E and high single-digit growth rate give a PEG ratio of around 2.5, which implies the share price is expensive for the near-term earnings growth the firm is expected to produce.

At 2.2%, Croda’s dividend income is about the same as the chemicals sector average. However, Croda has a three-year compounded dividend growth rate of 70%, implying the yield could soon overtake that of Croda’s peers.

Indeed, the dividend is just over twice covered by earnings, giving Croda plenty room for further payout growth.

So, is now the time to buy Croda?
Croda is one of the world’s largest producers of specialist chemicals for products such as cosmetics, herbicides and cleaning fluids.

Croda operates three main divisions, the largest of which accounts for 40% of the company’s revenue and produces chemicals used in cosmetics. Indeed, I feel this exposure to the cosmetics industry gives Croda a very defensive nature, as global demand for cosmetics has actually increased over the past few years despite the economic environment.

In particular, demand has increased for anti-aging products, which use chemicals that enjoy above-average margins within the cosmetics industry, and it appears this demand has been the driving force behind Croda’s recent growth.

In fact, rising demand for cosmetic products has helped push Croda’s earnings an astounding 171% higher during the past five years.

Alongside this good performance, Croda’s management remains proactive and, during 2012, Croda acquired two additional businesses in order to complement organic growth.

Furthermore, Croda’s growth over the past five years has really impressed investors, so much so that, since the middle of January, Croda’s share price has gained around 20% — almost 16% more than the FTSE 100 as a whole.

That said, the rapid share-price rise over such a short period leads me to believe the company currently looks overvalued. So overall, I feel now does not look to be …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Now the Time to Buy Barclays?

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By Rupert Hargreaves, The Motley Fool

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LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today I am looking at Barclays  to determine whether you should consider buying the shares at 290 pence.

I am assessing each company on several ratios:

Price/Earnings (P/E): Does the share look good value when compared against its competitors?

Price Earnings Growth (PEG): Does the share look like a good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend Cover: Is the dividend sustainable?

So let’s look at the numbers:

Stock Price 3-Yr. EPS Growth Projected P/E PEG Yield 3-Yr. Dividend Growth Dividend Cover
Barclays 290p 40% 7.8 0.7 3.3% 18% 5

The consensus analyst estimate for this year’s earnings per share is 37 pence (11% growth) and dividend per share is 7.2 pence (11% growth).

Trading on a projected P/E of 7.8, Barclays appears cheaper than its peers in the bank sector, which are currently trading on an average P/E of around 18.4.

Barclays’ P/E and double digit growth rate give a PEG ratio of around 0.7, which implies the share is under-priced for the near-term earnings growth the firm is expected to produce.

At 3.3%, Barclays’ dividend income is about the same as the bank sector average. Additionally, Barclays has a three-year compounded dividend growth rate of 18%, implying the yield will grow in line with that of the company’s peers.

Indeed, the dividend is slightly more than five times covered by earnings, giving Barclays plenty room for further payout growth.

Finally, Barclays’ share price is currently 34% below the bank’s net asset value of 438 pence per share at the end of 2012.

Barclays appears cheaper than its peers; is now the time to buy?
I believe Barclays is one of the most financially stable and profitable banks in the FTSE 100. During 2012, Barclays’ underlying profit before tax jumped 26% from the previous year to just over 7 billion pounds.

Having said that, like the majority of its peers in the banking sector, Barclays was forced to take an accounting charge relating to the value of its own debt, as well as increase its provision for Payment Protection Insurance claims. As a result, the company’s overall 2012 profit before tax was reduced to only 250 million pounds.

Nonetheless, Barclays appears to have a solid capital base. For example, at the end of 2012, the bank had a Tier 1 capital ratio of just under 11% and a loan-to-deposit ratio of 110%, which indicates that almost all of the bank’s loans are covered by customer deposits.

However, Barclays has something that the majority of its UK peers do not and that is a large presence in Africa. In particular, Barclays is focused on becoming the leading bank on the African continent with its ‘One Bank in Africa‘ strategy.

Indeed, Barclays currently has more than 14 million African customers across ten countries …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Now the Time to Buy Aviva?

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By Rupert Hargreaves, The Motley Fool

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LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today, I am looking at Aviva  to determine whether you should consider buying the shares at 300 pence.

I am assessing each company on several ratios:

Price/Earnings (P/E) Ratio: Does the share look like a good value when compared to its competitors?

Price/Earnings-to-Growth (PEG) Ratio: Does the share look good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend Cover: Is the dividend sustainable?

So let’s look at the numbers:

Stock Price 3-Yr. EPS Growth Projected P/E PEG Yield 3-Yr. Dividend Growth Dividend Cover
Aviva 300 pence N/A 6.8 N/A 4.8% -26% N/A

The consensus analyst estimate for next year’s earnings per share is 44.4 pence and dividend per share is 15 pence (44% fall).

Let me start by saying that, according to various websites, the current dividend forecast figure for Aviva is 20.3 pence per share. However, I believe this consensus figure could be misleading following Aviva’s recent dividend cut and that the actual dividend payment for 2013 will be closer to 15 pence.

In addition, as Aviva reported a loss of 15.2 pence per share for 2012, it is not possible for me to calculate a three-year earnings growth rate. In addition, due to Aviva’s loss, I am not able to calculate the company’s PEG ratio or dividend cover.

That said, I am able to calculate Aviva’s projected P/E. Indeed, Aviva is trading on a projected P/E of 6.8, below its peers in the life insurance sector, which are currently trading on an average P/E of around 17.7.

Supporting a dividend yield of 4.8%, Aviva’s dividend income is significantly higher than the sector average of 3.6%. However, Aviva’s dividend payout has fallen a compounded 26% over the last three years.

Finally, Aviva has a net asset value of 278 pence a share, which indicates that the company is currently trading at just a 7% premium to the value of its assets.

So is now the time to buy Aviva?
At the beginning of March, Aviva spooked investors when it announced it was going to slash its dividend in order to preserve cash after the company lost 3 billion pounds in 2012. However, I believe the market has overreacted to Aviva’s woes and that the shares currently look undervalued.

You see, even though Aviva reported a loss of 3 billion pounds for 2012, this figure included a one-off writedown of 3.3 billion pounds, which was related to the disposal of the Aviva’s U.S. business. Indeed, ignoring the writedown, it appears Aviva made an underlying profit of 1.7 billion pounds for 2012.

Furthermore, after the exclusion of currency movements, Aviva made an underlying profit of 1.8 billion pounds for 2012 — the same as 2011.

In addition, it appears that management is working hard to restructure the company and improve shareholder returns. In …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Now the Time to Buy Polymetal International?

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By Rupert Hargreaves, The Motley Fool

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LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market. So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today I am looking at Polymetal International to determine whether you should consider buying the shares at 870 pence. I assess each company on several ratios:

  • Price to Earnings: Does the share look like a good value when compared against its competitors?
  • P/E to Growth: Does the share look like a good value when factoring in predicted growth?
  • Yield: Does the share provide a solid income for investors?
  • Dividend Cover: Is the dividend sustainable?

So let’s look at the numbers:

Stock

Price

3-Year EPS Growth

Projected P/E

PEG

Yield

3-Year Dividend Growth

Dividend Cover

Polymetal International

870 pence

N/A

7.3

0.2

5.3%

N/A

1.1

The consensus analyst estimate for this year’s earnings per share is $1.80 (34% growth), and the estimated dividend per share is $0.54 (80% growth).

Firstly, I should mention that Polymetal has only been listed on the London Stock Exchange in its current form since November 2011. Therefore, the company’s historic earnings figures are difficult to establish, and it is not possible for me to calculate a reliable three-year growth rate. In addition, Polymetal has only paid a regular dividend since 2011. Furthermore, I have calculated an estimate for this year’s dividend based on the company’s target to pay out at least 30% of earnings as a regular dividend to shareholders each year.

Anyway, trading on a projected P/E of 7.3, Polymetal appears to be cheaper than its peers in the mining sector, which are currently trading on an average P/E of around 10.3. Polymetal’s P/E and double-digit growth rate give a PEG ratio of around 0.2, which implies that the share price is cheap compared to the near-term earnings growth the firm is expected to produce.

Currently, Polymetal supports a 5.3% dividend yield, which is above the mining-sector average of 2.8%. However, the company’s yield figure includes a special dividend of $0.50 a share. With the special dividend excluded, I believe the yield could be closer to 1.5% — below the sector average. That said, Polymetal is committed to returning cash to shareholders, and management has stated that it will declare a special dividend every year, assuming the company has sufficient free cash flow.

So is now the time to pile into Polymetal?
Polymetal is a precious-metals producer based in Russia and is one of the world’s largest silver-producers. In addition, I believe the group is one of the world’s most efficient gold-producers. Indeed, during 2012, Polymetal was able to produce an ounce of gold for $691, a full 5% less than the industry’s average production cost of $727 per ounce.

Furthermore, it appears that while the majority of Polymetal’s peers are struggling with rising production costs, Polymetal has managed to keep costs under control. In particular, during 2012 the company’s …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Now the Time to Buy Royal Bank of Scotland?

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By Rupert Hargreaves, The Motley Fool

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LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today, I am looking at Royal Bank of Scotland  to determine whether you should consider buying the shares at 302 pence.

I am assessing each company on several ratios:

Price/Earnings (P/E) Ratio: Does the share look good value when compared against its competitors?

Price/Earnings-to-Growth (PEG) Ratio: Does the share look good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend Cover: Is the dividend sustainable?

So let’s look at the numbers:

Stock Price 3-Yr. EPS Growth Projected P/E PEG Yield 3-Yr. Dividend Growth Dividend Cover
Royal Bank of Scotland 302p 0% 10.5 0.2 0% 0% N/A

The consensus analyst estimate for this year’s earnings per share is 28.7 pence (57% growth) and dividend per share is 0.17 pence (reinstated).

First, I must mention that the consensus analyst estimate for this year’s earnings per share is based on underlying earnings, which excludes items such as mis-selling provisions and restructuring costs and which could significantly affect the estimate. In addition, the three-year earnings-per-share growth rate is based on the same underlying figures.

Anyway, using underlying earnings, RBS is currently trading on a projected P/E of 10.5, cheaper than its peers in the banking sector, which are currently trading on an average P/E of around 19.5.

RBS‘s P/E and high growth rate give a PEG ratio of around 0.2, implying the share is cheap for the near-term earnings growth the firm is expected to produce.

Unfortunately, RBS has not paid a dividend since 2008. However, the consensus analyst view is that RBS will offer a small dividend for 2013.

Is RBS a suitable investment yet?
As I have written before, I do not like financial stocks. In particular, I do not like the risks contained within bank balance sheets and the minefields they can become.

That said, similar to its peer Lloyds Banking, RBS has undergone a significant restructuring program during the past few years and the changes are starting to show through.

Indeed, RBS‘s underlying profit reached 3 billion pounds during 2012, almost double that of 2011. However, RBS was forced to take an accounting charge relating to the value of its own debt, which pushed the company into a loss for the year.

Nonetheless, RBS has made progress in other areas, especially the restructuring of its balance sheet. Indeed, the company’s Tier 1 capital ratio is now at 10.3%, while loans as a percentage of capital have come down to a sustainable level of 100% to indicate all of RBS‘s loans are now covered by customer deposits.

Furthermore, RBS continues to sell off non-core assets in order to pay down debt and strengthen its balance sheet. Indeed, RBS recently spun off insurer Direct Line and is planning to sell part of its stake in U.S. retail bank Citizens Financial.

In addition, management believes that 2013 will be the bank’s …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Now the Time to Buy Admiral Group?

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By Rupert Hargreaves, The Motley Fool

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LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today I am looking at Admiral  to determine whether you should consider buying the shares at 1,357 pence.

I am assessing each company on several ratios:

Price/Earnings (P/E): Does the share look good value when compared against its competitors?

Price Earnings Growth (PEG): Does the share look good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend Cover: Is the dividend sustainable?

So, let’s look at the numbers:

Stock Price 3-Yr. EPS Growth Projected P/E PEG Yield 3-Yr. Dividend Growth Dividend Cover
Admiral 1,357p 32% 14.2 14.2 5% 32% 2.2

The consensus analyst estimate for this year’s earnings per share is 95.5 pence (no growth) and dividend per share is 90.3 pence (no growth).

Firstly, I should mention the consensus analyst estimate for this year’s 90.3 pence per share dividend includes potential special dividends the company may declare. (Since its flotation, Admiral has consistently paid special dividends alongside ordinary dividends). Based on the company’s ordinary dividend history, however, and evaluating City forecasts further, I believe the regular payout for this year may well be left unchanged at 43 pence per share.

Anyway, trading on a projected P/E of 14.2, Admiral appears to be slightly more expensive than its peers in the non-life insurance sector, which are currently trading on an average P/E of around 13. In addition, Admiral’s P/E and low near-term projected growth rate give a PEG ratio of 14.2, which cannot help with my analysis.

Currently, Admiral supports a 5% dividend yield, which is slightly above the sector average of 4.7%. However, this yield figure includes a one-off special dividend of 24 pence a share. With the special dividend excluded, I believe the yield could be closer to 3.2% — below the sector average.

That said, Admiral’s regular payout has grown a compounded 32% during the past three years, indicating that the regular payout could soon catch up to that of the group’s peers. Indeed, the regular dividend payout is more than two times covered by earnings, giving plenty of room for further growth.

So is now the time to buy Admiral?
2012 was Admiral’s 20th anniversary and the company’s most successful year to date. Indeed, within the company’s full-year results released only last week, Admiral announced group profits were up 15% to 345 million pounds. However, the company did report a full-year loss of 24 million poundsfor its international operations.

Nonetheless, the majority of Admiral’s divisions performed strongly and profits from the company’s comparison website, confused.com, expanded by 13% during 2012.

Furthermore, Admiral is seeking to expand its international operations and diversify into new markets. For example, the company recently started offering home insurance to its U.K. customers as well as launch a new online comparison website focused on customers within the United States.

Unfortunately, despite Admiral’s special divided …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Now the Time to Buy Aberdeen Asset Management?

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By Rupert Hargreaves, The Motley Fool

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LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today I am looking at Aberdeen Asset Management  to determine whether you should consider buying the shares at 432 pence.

I am assessing each company on several ratios:

Price/Earnings (P/E): Does the share look good value when compared against its competitors?

Price Earnings Growth (PEG): Does the share look good value factoring in predicted growth?

Yield: Does the share provide a solid income for investors?

Dividend Cover: Is the dividend sustainable?

So, let’s look at the numbers:

Stock Price 3-Yr. EPS Growth Projected P/E PEG Yield 3-Yr. Dividend Growth Dividend Cover
Aberdeen Asset Management 432p 74% 16 0.8 2.7% 64% 2

The consensus analyst estimate for next year’s earnings per share is 27 pence (19% growth) and dividend per share is 13.7 pence (19% growth).

Trading on a projected P/E of 16, Aberdeen appears to be much cheaper than its peers in the financial services sector, which are currently trading on an average P/E of around 20.2.

Furthermore, Aberdeen’s P/E and high double-digit growth rate give a PEG ratio of around 0.8, which implies that the share is cheap for the near-term earnings growth the firm is expected to produce.

At 2.7%, Aberdeen’s dividend income is below the sector average of 3.5%. However, Aberdeen has a three-year compounded dividend growth rate of 64%, implying that the yield could soon overtake that of its peers.

Indeed, the dividend is approximately two times covered by earnings, giving Aberdeen plenty of room for further payout growth.

Aberdeen’s earnings are forecast to grow rapidly this year; is now the time to buy?
Aberdeen is a global asset management company and fund manager. Indeed, Aberdeen is one of the largest asset management companies in the world with just over 193 billion pounds in assets under management.

As one of the world’s largest asset management companies, Aberdeen seems in prime position to benefit from the record amount of money currently flowing into stock markets around the globe. Indeed, during the last quarter of 2012, the company reported record quarterly inflows of 1.1 billion pounds into its products.

Nonetheless, Aberdeen’s management continues to remain cautious about the global economic environment and equity markets. In particular, Aberdeen’s management is seeking to reduce interest in the company’s very popular emerging-market funds, as management believes that if the current level of demand continues, fund performance could be affected.

Furthermore, due to Aberdeen’s exposure to global stock markets, any significant fall in market values could affect the company’s near-term earnings outlook. In addition, the company is highly reliant on its fund-management performance to draw in clients and any departure could lead to an outflow of assets.

That said, Aberdeen is currently experiencing record demand for its products and the firm currently looks cheap compared to its peers and near-term earnings growth. So overall, I believe now looks to be a good time …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Now the Time to Buy Pearson?

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By Rupert Hargreaves, The Motley Fool

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LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

So, right now, I am trawling through the FTSE 100, and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today, I am looking at Pearson  to determine whether you should consider buying the shares at 1,166p.

I am assessing each company on several ratios:

  • Price/Earnings (P/E): Does the share look good value when compared against its competitors?
  • Price Earnings Growth (PEG): Does the share look good value factoring in predicted growth?
  • Yield: Does the share provide a solid income for investors?
  • Dividend Cover: Is the dividend sustainable?

So let’s look at the numbers:

Stock Price 3-yr EPS growth Projected P/E PEG Yield 3-yr dividend growth Dividend cover
Pearson 1,166p 9% 14.3 N/A 3.8% 15% 1.9

The consensus analyst estimate for next year’s earnings per share is 81.5p (3% fall), and dividend per share is 48p (7% growth).

Trading on a projected P/E of 14.3, Pearson appears significantly cheaper than its peers in the media sector, which are currently trading on an average P/E of around 18.5.

Unfortunately, Pearson’s P/E. and falling near-term earnings. give a negative PEG ratio, which cannot help with my analysis.

At 3.8%, Pearson’s dividend income is above the media sector average of 2.7%. Furthermore, Pearson has a three-year compounded dividend growth rate of 15%, implying that the yield will continue to stay above that of its peers.

Indeed, the dividend is nearly twice covered by earnings, giving Pearson plenty of room for further payout growth.

Pearson currently looks cheaper than its peers, but is now the time to buy?
Pearson is the owner of the Financial Times newspaper and the Penguin publishing brand. In addition, the company is the world leader in educational materials such as textbooks, digital education software, and examination papers.

Indeed, due to Pearson’s world-leading position in education, the company was able to raise North American education revenues by 2% during 2012, while aggregate revenues for the North American education market as a whole fell by 10%.

That said, like the rest of the publishing sector, Pearson is at risk from falling sales in the traditional book market.

However, the company is taking steps to reduce its reliance on traditional publishing and, at the end of 2012, 50% of all Pearson’s sales were digital-based.

In particular, digital subscriptions for the Financial Times grew 18% during 2012, which meant that, for the first time in its history, there were more copies of the newspaper sold online than sold in print. Furthermore, at the end of 2012, 17% of Penguin sales were in digital e-book form.

Nonetheless, despite these strong figures, Pearson’s management remains cautious about the future, and recently announced a restructuring plan aimed at reducing costs by around £100 million a year from 2014.

So, all in all, taking into account Pearson’s market-leading positions, restructuring plan, and current discount to sector peers, I feel now looks to be a good time to buy Pearson at 1,166p.

More FTSE opportunities
As well as Pearson, I am also positive on the FTSE 100 share …read more
Source: FULL ARTICLE at DailyFinance

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Is ITV the Ultimate Retirement Share?

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By Roland Head, The Motley Fool

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LONDON — The last five years have been tough for those in retirement. Portfolio valuations have been hammered and annuity rates have plunged. There’s no sign of things improving anytime soon, either, as the eurozone and the U.K. economy look set to muddle through at best for some years to come.

A great way of protecting yourself from the downturn, however, is by building your retirement fund with shares of large, well-run companies that should grow their earnings steadily over the coming decades. Over time, such investments ought to result in rising dividends and inflation-beating capital growth.

In this series, I’m tracking down the U.K. large-caps that have the potential to beat the FTSE 100 over the long term and support a lower-risk income-generating retirement fund (you can see the companies I’ve covered so far on this page).

Today, I’m going to take a look at one of the U.K.’s biggest television broadcasters, ITV  . After a very successful run recently, does it have the making of a retirement share?

ITV vs. FTSE 100
Let’s start with a look at how ITV has performed against the FTSE 100 over the last 10 years:

Total Returns

2008

2009

2010

2011

2012

10-Year Trailing Avg.

ITV

(50.6%)

31.7%

33.8%

(2.1%)

57.3%

10.7%

FTSE 100

(28.3%)

27.3%

12.6%

(2.2%)

10%

10.2%

Source: Morningstar. Total return includes both changes to the share price and reinvested dividends. These two ingredients combined are what make it possible for equity portfolios to regularly outperform cash and bonds over the long term.

ITV‘s average annual total return over the last 10 years has been almost identical to that of the FTSE 100, despite its recent outperformance, which has been the result of its post-2008 turnaround plan.

What’s the score?
To help me pinpoint suitable investments, I like to score companies on key financial metrics that highlight the characteristics I look for in a retirement share. Let’s see how ITV shapes up:

Year Founded

2004

Market Cap

5 billion pounds

Net Debt (cash)

(206 million pounds)

Dividend Yield

2%

Five-year average financials

Operating Margin

(12%)*

Interest Cover

2.8 times

EPS Growth

14.3%

Dividend Growth

(3.8%)*

Dividend Cover

2.8 times

*Caused by a 2.7 billion pound goodwill impairment in 2008, when the dividend was also canceled for a year.

Here’s how I’ve scored ITV on each of these criteria:

Criteria

Comment

Score

Longevity

ITV was only formed in 2004, but its parts are much older.

3/5

Performance vs. FTSE

Evenly matched.

3/5

Financial strength

Rising profit margins and net cash.

4/5

EPS growth

Decent growth.

4/5

Dividend growth

Rising payout but checkered history and low yield.

3/5

Total: 17/25

ITV‘s score of 17/25 shows that a few years of strong performance isn’t enough to score highly as a retirement share — companies with high scores have generally delivered many years of above-average performance, and often have much longer pedigrees than ITV.

To be fair, ITV is the result of a 2004 merger between regional broadcasters Carlton and Granada, both of which had been in business since the 1930s. ITV is also much leaner and more profitable than it was before 2008. Its recent full-year results showed that operating profits rose by 20% to 453 million pounds during 2012, thanks in part to a …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Is Now the Time to Buy Antofagasta?

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By Rupert Hargreaves, The Motley Fool

Filed under:

LONDON — I’m always searching for shares that can help ordinary investors like you make money from the stock market.

So right now I am trawling through the FTSE 100 and giving my verdict on every member of the blue-chip index. Simply put, I’m hoping to pinpoint the very best buying opportunities in today’s uncertain market.

Today I am looking at Antofagasta  to determine whether you should consider buying the shares at 1,075 pence.

I am assessing each company on several ratios:

  • Price/Earnings (P/E): Does the share look good value when compared against its competitors?
  • Price Earnings Growth (PEG): Does the share look good value factoring in predicted growth?
  • Yield: Does the share provide a solid income for investors?
  • Dividend Cover: Is the dividend sustainable?

So let’s look at the numbers:

Stock

Price

3-Yr. EPS Growth

Projected P/E

PEG

Yield

3-Yr. Dividend Growth

Dividend Cover

Antofagasta

1,075p

87%

12.5

N/A

1.2%

100%

7

The consensus analyst estimate for this year’s earnings per share is $1.32 (no change) and dividend per share is $0.50 (up 150%).

Firstly, I should mention that although the consensus analyst estimate for this year’s dividend is $0.50 per share, Antofagasta has consistently missed such dividend forecasts for the past five years. Therefore, based on the company’s dividend history, I believe the payout for this year may well be left unchanged at $0.20 per share.

Anyway, trading on a projected P/E of 12.5, Antofagasta appears more expensive than its peers in the mining sector, which are currently trading on an average P/E of around 10.

Unfortunately, its P/E and lack of growth give an abnormally high PEG ratio of 12.5, which cannot help my analysis.

Antofagasta offers a 1.2% yield, which is about half of the sector average. However, the company has a three-year compounded dividend growth rate of 100%, implying the yield could soon catch up to that of its peers.

Indeed, the dividend is covered seven times by earnings, giving Antofagasta plenty of room for further payout growth.

Antofagasta’s growth is slowing and the company is trading at premium to its competitors
As I say, similar to its peers within the rest of the mining sector, Antofagasta’s growth is slowing as weaknesses in the global economy put pressure on commodity prices.

That said, Antofagasta has managed to increase production at its mines during the past year, which has to some extent offset falling commodity prices. Indeed, during 2012, Antofagasta increased its production of copper by 11% and gold by 53%.

In addition to mining operations, Antofagasta owns the largest non-state controlled railway in Chile as well as a water distribution company that supplies 144,000 households. However, income from these operations amounts to about only 5% of total group revenue.

Lastly, I should mention the group’s balance sheet. In particular, unlike the majority Antofagasta’s peers, which have net debt positions, as of Sept. 2012, Antofagasta had net cash of just under $4 billion, which is about 37% of the company’s total market capitalization.

After taking all of that into account, I believe Antofagasta deserves a premium over its peers. So overall, I feel now looks to be a good …read more
Source: FULL ARTICLE at DailyFinance