Today I am looking at three of the hottest blue-chip bargains that London has to offer.
GlaxoSmithKline
I am convinced that medicines monster GlaxoSmithKline (LSE: GSK) provides brilliant growth and income prospects at an attractive price. The company has pulled out all the stops to kick-start its product pipeline and replace its ailing line of patent-related casualties like Advair, and GlaxoSmithKline currently has 40 new molecular entities (or NMEs) in late-stage testing.
The fruits of this hard work promise to deliver jumbo revenue growth in the years ahead, in my opinion, as a combination of rising populations and massive healthcare investment in emerging regions blasts global sales higher. As a result GlaxoSmithKline is anticipated to recover from a 21% earnings slippage this year to post a 12% rise in 2016, driving a P/E multiple of 17.2 times for 2015 to a very decent 15.5 times.
On top of this, GlaxoSmithKline’s vow to shell out a dividend of 80p per share through to the close of 2017 yields an impressive 6%, making mincemeat of the FTSE 100 average of 3.5%. With the business’ earnings outlook steadily improving, and the firm juggling its asset portfolio with the likes of Novartis to further boost the cash pile, I fully expect GlaxoSmithKline to meet these targets.
BT Group
The ‘quad-play’ entertainment sector has been one of the hottest plays in town in recent years — from Sky buying out its Italian and German arms, to Vodafone making its foray into the segment through the purchase of Kabel Deutschland and Spain’s Ono, companies the world over are betting big on this hot growth sector. With this in mind I believe BT Group (LSE: BT-A) is a great selection for clever investors.
BT has taken a shrewd approach to battling Sky by dismantling its stranglehold on British sports broadcasting, while the imminent launch of drama channel AMC Networks provides a credible alternative to its rival’s Sky Atlantic offering. With its fibre-laying drive also boosting broadband interest, the City expects BT to recover from a 3% earnings dip in the 12 months to March 2016 with a 7% recovery the following year.
Such figures result in ultra-low P/E ratios of 13.6 times and 12.8 times correspondingly, and the telecoms play’s bright profits outlook is predicted to keep dividends rising at breakneck speed, too. Last year’s reward of 12.4p per share is anticipated to rise to 14p in 2016 and 15.6p the following year, creating chunky yields of 3.3% and 3.7%.
Travis Perkins
Thanks to the buoyant construction market, I believe Travis Perkins (LSE: TPK) is a solid selection for those seeking great growth prospects. Indeed, a supportive industry backcloth has prompted the business to add a further 400 stores to its already-sprawling network in the next few years, thanks in no small part to resplendent activity across the housing sector.
And with the UK economy clicking steadily through the gears, I expect the top-line at Travis Perkins to keep on rocking. This view is shared by the City, and the retailer is expected to enjoy earnings growth of 9% in 2015 and 14% next year. As a result the stock sports terrific P/E multiples of 15.3 times and 13.4 times for 2015 and 2016 correspondingly.
In the medium term Travis Perkins is expected to lag the wider market in the dividend stakes, however — predicted payouts of 45.8p per share for 2015 and 54.4p for 2016 create handy, if unspectacular, yields of 2.3% and 2.7% respectively. But like BT, I believe investors should pay attention to the excellent growth rate in Travis Perkins’ annual dividend, a phenomenon that I expect to continue as earnings rocket higher.
