One investment theme that came to the fore in 2013 was a shift away from defensive stocks and towards cyclical companies.
This is understandable: as growth prospects for the world (and UK) economy picked up, investors adopted a more risk-on attitude in terms of seeking out riskier companies that have the potential to deliver higher rewards.
Such a shift makes sense after investors had sought higher yielding, more defensive companies in the wake of the credit crunch.
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However, there is one company that could offer the best of both worlds. A relatively high yield and above average growth prospects seem to be in prospect at Direct Line (LSE: DLG).
Indeed, earnings per share (EPS) is forecast to grow by 8% in 2014 and by 14% in 2015, which is well above the market average of 4-7%. Of course, such gains come after what looks set to have been a challenging 2013, where EPS is set to have fallen by around 3%.
However, the growth in EPS forecast for the next two years, coupled with a very reasonable forward price to earnings (P/E) ratio of 11.7, mean that Direct Line currently trades on a price to earnings growth (PEG) ratio of just 1.06.
This is ever-so-slightly above the PEG sweet-spot of 1.0, but is just about where investors in the stock would want it to be. In other words, it offers a potent mix of good value via a relatively low P/E and yet also has promising growth prospects, too.
In addition to offering an attractive valuation and above-average growth prospects, Direct Line also offers an above-average yield. While the FTSE 100 currently has a yield of 3.4%, Direct Line offers a yield of 5.4%.
This appears to be rather anomalous: a company with above-average growth prospects and an above-average yield. Indeed, were Direct Line to trade on a lower yield as a result of its impressive growth prospects, say a yield of 4.25% (still a 25% premium to the FTSE 100 yield of 3.4%), it would mean shares trading at around 335p.
Such a share price is 26% higher than current levels and, when a yield of 5.4% is added to the mix, it shows that Direct Line seems to have considerable potential, while offering the best of both worlds: growth and income.