Whatever happened to the heroes? In today’s nervy stock markets, all-action stocks are hard to find. The following four stocks have all performed heroics for investors at some point. Are they yesterday’s men or can they make a fighting comeback?
Do Or Diageo
I will always have fond memories of Diageo (LSE: DGE), which blew me away during its glory growth years under former chief executive Paul Walsh. His growth charge and acquisitions splurge doubled the company’s share price after the financial crisis, and served me a spirited return. Successor Ivan Menezes switched targets to building the spirit giant’s premium core brands rather than simply blazing away for market share.
The result is that Diageo is no longer to die for, with the share price down 12% over the last two years. Wary emerging markets consumers have lost their thirst for pricier brands, while the crackdown on luxury gifting in China won’t have helped. Sometimes I wonder about the long-term outlook, too, given today’s less-boozy young Westerners. Yet Diageo trades at nearly 20 times earnings and yields a sober 3.24%. I’ll save my ammunition.
Reckitt Ralph
Household goods giant Reckitt Benckiser Group (LSE: RB) has heroic potential despite being overshadowed by rival Unilever. It has showed its defensive powers this year, rising almost 12% against a 10% drop on the FTSE 100 as a whole. First-half results showed its continuing firepower, with rising sales, margins and earnings per share, as well as double-digit growth in its health division. Power brands like Nurofen and Cillitt Bang are still hanging tough.
The dividend is reasonably well covered at 1.7 times but its 2.42% yield disappoints. Reckitt Benckiser makes a reliable comrade: you know it has your portfolio’s back. But at nearly 25 times earnings, I wouldn’t go over the top for it.
Standard And Deliver!
Standard Life (LSE: SL) is another stock that gets overlooked as investors charge into insurance rivals such as Aviva, L&G and Prudential, yet it will still have doubled your money over the last five years. The last six months have disappointed, but it was bound to suffer the odd reverse after such a lengthy period of stellar growth. Despite falling 12% in the last three months, it still trades at a pricey 26 times earnings.
I usually run for cover at that kind of valuation, but its meaty 4.24% yield offers some protection. Strong net investor inflows, rising income from fees and charges, and a successful advisory distribution model suggest that Standard Life could go great guns, once the current market rout is over. But it is expensive.
Electric Shocker
SSE (LSE: SSE) is a true dividend hero, having raised its payments every year since 1992, and at a muscular compound annual rate of 10%. Unfortunately, I suspect its glory days are over for now. In July it admitted losing a small army of customers, 90,000 in the second quarter, a horrific rate of attrition.
SEE still has 8.49 million left but those kind of losses aren’t good for morale, especially since it delivered a profit warning at the same time. It 6% dividend yield no longer looks bullet-proof, as earnings per share fall and smaller rivals continue to snipe off disillusioned utility customers. Old soldiers never die, the danger is that SSE will only fade away.
