When you’re choosing your investment strategy, isn’t it hard to choose between dividend income and share price growth? I’m a great believer in looking for good dividends and reinvesting the cash each year, of course. But what if you can get both? Here are three that look set to provide exactly that:
Bricks and mortar
There might be a bit of a slowdown in housing recovery at the moment, but the sector is still looking very attractive to me. Take Persimmon (LSE: PSN), for example, which is sitting on earnings per share (EPS) growth forecasts of 21% and 14% for the years ending December 2015 and 2016 respectively. A price of 1,597p puts the shares on forward P/E multiples of only 11 and 9.7, giving us PEG ratios for the two years of 0.5 and 0.7.
There’s a growth-investing rule of thumb that says anything under 0.7 is a good sign, and that’s for people usually not looking for dividends. But you get those too with Persimmon — it pays back cash in non-standard instalments, but we’re looking at effective yields of 6.6% and 7.5% for the next two years.
Alternative telecoms?
Telecoms and multi-utility supplier Telecom plus (LSE: TEP) was a bit of a growth star, but its shares have fallen back by 43% over the past 12 months to 1,086p. But they’re still up 265% over five years, so is it time to take another look?
Well, we still have 27% EPS growth forecast for March 2015 followed by 18% a year later, giving us respective PEG ratios of 0.6 and 0.8. That would be fairly marginal as a growth rating alone, but analysts are predicting dividend yields of 3.9% this year and 4.6% next — with 6% pencilled in for March 2017. Could be time to buy on the dip.
Airline profits
And finally, what about easyJet (LSE: EZJ)? The budget airline can do no wrong, it seems, and has posted pretty amazing growth over the past few years as EPS quadrupled between 2010 and 2014. There’s more expected, too, with 12% on the cards for the year ending September 2015 followed by 13% in 2016.
Accompanied by mooted dividend yields of 3% and 3.3% these are perhaps not the most obviously attractive figures here, but it does come after five-year price climb of 328% to 1,867p! And we’re still only looking at P/Es of 14.6 and 13 — that’s better than the FTSE average for 2016, from a stock with more years of growth still expected.
