3 Blue-Chip Bargains Poised To Deliver Spectacular Returns: Lloyds Banking Group PLC, easyJet plc And Premier Farnell plc

Royston Wild explains why Lloyds Banking Group PLC (LON: LLOY), easyJet plc (LON: EZJ) and Premier Farnell plc (LON: PFL) should be on the radar of all savvy value seekers.

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Today I am looking at three London beauties offering smashing bang for one’s buck.

Bank on this High Street beauty

The near-term earnings outlook at Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US) remains under pressure due to the colossal impact of legal penalties. The part-nationalised business is by far the UK’s worst culprit when it comes to previous misconduct, and has stashed away more than £12bn to cover the cost of mis-selling of PPI alone. Although the bank made no further provisions in January-March, it warned that complaint volumes were higher than expected during the quarter, a hugely worrying omen.

Still, I believe that the “Black Horse” remains a terrific growth bet for the coming years. Lloyds’ retail operations continues to benefit from the resurgent UK economy, and buoyant mortgage and business lending helped to nudge revenues 3% higher in the last quarter to £4.64bn. And I expect these figures to tick resoundingly higher beyond next year in line with earnings growth.

So although the bottom line is expected to rise 1% this year before dipping 1% in 2016, I reckon that Lloyds’ cheap P/E mutliples of 10.5 times and 10.8 times for these years are good levels at which to get in on the ground floor — any reading around or below 10 times is broadly considered exceptional value.

And following the resurrection of Lloyds’ dividend policy earlier this year, I reckon that strong earnings growth in the coming years should drive payouts comfortably higher, too. Indeed, the City expects the bank to shell out a full-year payment of 2.9p per share for 2015, producing a decent 3.5% yield. And this readout leaps to a mighty 4.8% for 2016 amid expectations of a 4.2p reward.

Get set for soaring returns

In my opinion easyJet (LSE: EZJ) is a great way to gain access to the surging budget airline sector at an attractive price. Although the Luton firm has warned that French air traffic control strikes would hamper revenues in the current quarter, easyJet’s recent half-year report confirmed that demand for inexpensive flights remains solid — total revenues during October-March jumped 3.8% to £1.77bn, a record performance.

And easyJet is extending the number of routes it operates as well as bases from which it flies to boost the top line further. The business added airports in Amsterdam and Porto during the first half of fiscal 2015, driving the total number of hubs to 26.

Given all of these supportive factors the number crunchers expect the airline to record earnings growth of 20% and 12% in the years concluding September 2015 and 2016 correspondingly, creating juicy P/E multiples below the benchmark of 15 which represents decent value — easyJet currently deals on numbers of 13.5 times for this year and 12.1 times for 2016.

Against this bubbly backdrop dividends at the flyer are anticipated to head for the skies in the coming years. Indeed, easyJet is predicted to raise last year’s payout of 45.4p per share to 55.4p in 2015, creating a handy yield of 3%. And an extra rise, to 62.1p, is chalked in by the City for 2016, pushing the yield to an even-better 3.3%. I fully expect dividends to continue increasing at a rate of knots.

Tech titan provides terrific rewards

I believe that electronic components supplier Premier Farnell (LSE: PFL) is a brilliant pick for those seeking great growth and income prospects at decent value. The business has seen macroeconomic turbulence in Europe smack the bottom line in recent years, while adverse exchange rates have also damaged earnings.

But with conditions on the continent finally on the mend, and economic growth in the US and UK also gathering pace, I believe that Premier Farnell is ready to get back on the growth trail sooner rather than later. On top of this, the company’s growth outlook is also receiving a welcome boost from customer demand in Asia-Pacific — sales in this territory jumped 16.1% during 2014. These factors are expected to drive earnings 7% and 11% higher in 2015 and 2016 respectively, creating attractive P/E ratios of 13.3 times and 12 times.

With growth firmly back on the agenda, Premier Farnell is finally anticipated to get dividends moving higher again from this year, the payment having been frozen at 10.4p per share for what seems like an eternity. Indeed, a payout of 10.5p is currently slated for 2015, producing a meaty yield of 5.3%. And expectations of a further increase next year, to 10.7p, drives the yield to 5.4%.

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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