3 Pukka-Priced Stocks For Your 2015 ISA: Standard Chartered PLC, British American Tobacco plc & Babcock International Group PLC

Royston Wild describes why Standard Chartered PLC (LON: STAN), British American Tobacco plc (LON: BATS) and Babcock International Group PLC (LON: BAB) could be considered bona-fide bargains.

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Today I am looking at three FTSE 100 giants which City forecasts suggest are a steal at current prices.

Standard Chartered

Investor sentiment for Standard Chartered (LSE: STAN) has received a shot in the arm in recent weeks after the appointment of Bill Winters as new chief executive from June. Indeed, City brokers have upgraded their outlook for the firm in the hope that the new man will institute a turnaround in the bank’s flagging Asian operations and do what it takes to mend its fragile balance sheet.

Macroeconomic pressures in key regions are expected to push earnings at Standard Chartered 2% lower in 2015, although this is a vast improvement from the 28% decline punched last year. And the heavy lifting currently underway at the bank is expected to deliver a 13% rebound in 2016. These projections leave the company dealing on mega-low P/E multiples of 9.7 times and 8.7 times prospective earnings for these years — any reading below 10 times is widely considered a steal.

Even though the firm kept the full-year dividend on hold at 86 US cents per share in 2014, this is expected to be cut to 74 cents in 2015. A slight increase, to 76 cents, is anticipated for 2016 in line with earnings. Still, investors should bear in mind that these projections still create a jumbo yield of 5.2% for this year and 5.4% for 2016.

Although Standard Chartered could quite possibly prove a lucrative turnaround play, investors should be aware that the bank’s weak capital position — a situation which could see Winters enact a rights issue in the near future — could result in even heavier dividend cuts that currently forecasted. And the bank still has plenty to do to turn around its flailing emerging market operations, not to mention weather the storm of regulators in the US, both of which could crimp earnings performance in my opinion.

British American Tobacco

Cigarette giant British American Tobacco (LSE: BATS) has long been a favourite for those seeking reliable year-on-year earnings and dividend growth. Although falling sales of traditional products caused the bottom line to slip last year for the first time in many moons, I believe that recovering emerging market demand for these goods — combined with aggressive moves in the white-hot e-cigarette sector — should get earnings stomping higher again in the near future.

This view is shared by the abacus bashers, who expect British American Tobacco to clock up marginal growth in 2015 before recording an 8% advance next year. It is true that these figures produce P/E multiples of 17.4 times and 16.3 times for 2015 and 2016 correspondingly, just above the watermark of 15 times which marks attractive value for money. But I reckon an invigorated focus on its growth labels like Dunhill and Lucky Strike, market-leading products which boast considerable pricing power and are spearheading the drive into developing regions, merits this premium price.

And these slightly-bloated earnings multiples are more than compensated for by dividends which leave the wider FTSE 100 trailing in its wake. British American Tobacco is predicted to lift the total payout from 148.1p per share last year to 155.2p this year and 160.1p in 2016, in turn creating chunky yields of 4.3% and 4.4%.

Babcock International Group

Despite fears of reduced spend from the oil sector, I believe that Babcock International (LSE: BAB) is in great shape to deliver strong growth in coming years owing to the quality of its products and services across a wide array of engineering sectors. Indeed, this diversification helped propel the company’s order book to £20bn as of mid-February, up from £18bn five months earlier.

Even though the City expects Babcock International to punch a rare 4% earnings decline in the year concluding March 2015, the engineering colossus is expected to bounce back from next year onwards — improvements of 14% and 11% are currently pencilled in for 2016 and 2017 correspondingly. These figures leave the business changing hands on delicious P/E ratios of 12 times for 2016 and 10.8 times for 2017.

And while Babcock International lags the wider market in the dividend stakes, I believe that payouts should charge higher in line with earnings. A payment of 25.1p per share is currently pencilled in for 2016, producing a yield of 2.7%, and this rises to 3% the following year in light of an estimated dividend of 28.2p.

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 considered so you should consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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