So, the Scottish referendum has been and gone. All of the uncertainty that has held the FTSE 100 and its constituents back over the recent weeks and months has now, to a certain degree, evaporated.
That leaves us with a number of high-quality companies that offer strong yields and that trade at very attractive valuations. Surely, then, it must be only a matter of time before the FTSE 100 moves past 7,000 points and into new and unchartered territory?
With that in mind, here are three companies that could help to push the index to record highs and bag their shareholders a tidy profit in the process.
HSBC
Although it hasn’t been plagued by the uncertainty that has held back many of its sector peers, HSBC (LSE: HSBA) (NYSE: HSBC.US) still trades at a very low valuation, given its future potential. Indeed, the Asia-focused bank currently has a price to earnings (P/E) ratio of just 12.2, which compares very favourably to the FTSE 100’s P/E ratio of 13.7.
Furthermore, HSBC offers strong growth potential. In the short term, it is expected to increase earnings by 6% in the current year and by 7% next year; both of which are in-line with the wider market’s growth rate. Looking further ahead, it would be of little surprise for the bank’s profitability to step-up due to increased demand for loans in emerging markets, as consumer-led economies begin to become more prominent. As such, HSBC could be a strong long-term play.
British American Tobacco
E-cigarettes seem to have caught a lot of people by surprise. Indeed, many of British American Tobacco’s (LSE: BATS) sector peers were slow to enter the lucrative new market, which is good news for the company as it has something of a head-start on its rivals having launched its own e-cigarette over a year ago.
Indeed, e-cigarettes seem to be a key reason for the volume declines in ‘normal’ cigarettes. However, what was once viewed as a problem has been turned into an opportunity by tobacco companies such as British American Tobacco, with higher prices offsetting volume declines. So, with continued pricing potential and e-cigarette growth to come, and with shares offering a rapidly growing yield of 4%, British American Tobacco could move upwards over the medium term.
Rio Tinto
It’s rare for major mining companies to be classed as strong income plays, so Rio Tinto’s (LSE: RIO) (NYSE: RIO.US) current yield of 4% indicates that shares in the iron ore-focused company are cheap. Indeed, they trade on a P/E ratio of just 10, which is well below the FTSE 100’s P/E ratio of 13.7.
In addition, Rio Tinto is set to overcome a challenging period that has seen the bottom line hit by a declining iron ore price. With management aiming to further reduce costs and focusing only on the most lucrative projects, it means that Rio Tinto could prevail as a leaner and more efficient entity. This should serve it well in the long run and, with earnings due to increase by 6% next year, it could see its share price move higher so as to help the FTSE 100 push past 7,000 points.
