Burberry Group plc Could Help You Retire Early

Retirement may not be so long away for shareholders in Burberry Group plc (LON: BRBY). Here’s why…

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Burberry

Despite its reliance on emerging markets for sales growth, Burberry (LSE: BRBY) (NASDAQOTH: BURBY.US) has held up pretty well in recent weeks.

Indeed, while many other companies with significant exposure to emerging markets have been hit hard, Burberry has performed almost exactly in-line with the FTSE 100. Shares are down 2.8% year to date, while the FTSE 100 is down 2.6% year to date.

The reason for this could be that Burberry is not particularly expensive — when compared to its sector, that is.

For instance, Burberry currently trades on a forward price-to-earnings (P/E) ratio of 17, while the sector to which it belongs, Personal Goods, trades on a P/E of 23.

This puts Burberry on a 26% discount to its sector, which seems unjustified when the quality of the company is taken into account. This discount could be a key reason why Burberry has not fallen heavily in 2014, as the sustainability of the emerging market growth story is brought into question. In other words, Burberry may have been very cheap before the start of 2014 and is now reasonably priced.

Indeed, Burberry continues to deliver strong earnings per share (EPS) growth and is forecast to post double-digit gains in EPS in the year to March 2015.

However, an aspect of Burberry that may be somewhat surprising to investors is the income that it offers, but more importantly, the rate of increase of dividend growth that is set to take place over the next two years.

Certainly, income remains a key criteria for Foolish investors to focus upon — especially when interest rates appear unlikely to move upwards before the general election in 2015. So, the fact that Burberry is forecast to increase the amount it pays in dividends per share by 22.5% over the next two years could make it an attractive stock for a new type of clientele: the income-seekers.

Of course, Burberry’s yield is not yet hugely attractive — it currently stands at 2.2%. However, if shares stay where they are then it could be as high as 2.7% in 2015, which is pretty impressive for a company that also offers above-average growth rates.

Therefore, as a result of a combination of a fair price, growing yield and above-average earnings forecasts, Burberry could help you retire early.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

> Peter does not own shares in Burberry. The Motley Fool has recommended shares in Burberry.

More on Investing Articles

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

3 dividend shares I’ve bought for the next decade!

I think these UK dividend shares can amplify my long-term passive income, and could even be on track to becoming…

Read more »

Investing Articles

If I’d put £5,000 in Scottish Mortgage shares at the start of 2024, here’s what I’d have now

Scottish Mortgage shares have staged a recovery lately, powered by the public and private growth stocks held in the portfolio.

Read more »

Happy couple showing relief at news
Investing Articles

9.9% dividend yield! Is this FTSE 100 stock a brilliant bargain?

This leading British enterprise looks like a delicious deal for passive income, trading at a low multiple while offering a…

Read more »

Investing Articles

If I’d put £5k in a FTSE 100 tracker fund 5 years ago, here’s what I’d have now

Investing in a FTSE 100 index fund is a terrific way to start building wealth passively with minimum effort. But…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

What’s going on with the Scottish Mortgage share price now?

The Scottish Mortgage share price is up 30% over the past 12 months, outperforming the index. Our writer explains why…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

Here’s how investing £10 a day could create passive income of £27,573 a year!

Charlie Carman explains how he'd build a sizeable passive income portfolio over time by investing a tenner a day in…

Read more »

Young Black woman looking concerned while in front of her laptop
Investing Articles

If I’d invested £10k in Greggs shares two years ago here’s what I’d have today

Harvey Jones wishes he'd bought Greggs shares two years ago and wonders whether the FTSE 250 stock still offers the…

Read more »

Young Caucasian woman with pink her studying from her laptop screen
Investing Articles

How I’d aim to turn an empty ISA into a £1m portfolio by targeting cheap shares

Harvey Jones is trawling the FTSE 100 for cheap shares to add to his Stocks and Shares ISA, in the…

Read more »