Is It The Right Time To Buy National Grid plc, Informa plc & Travis Perkins plc?

Bilaal Mohamed asks whether it’s the right time to invest in National Grid plc (LON: NG), Informa plc (LON: INF) & Travis Perkins plc (LON: TPK) for their dividends.

| 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.

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.

Today I’ll be discussing the outlook for utility company National Grid (LSE: NG), publishing group Informa (LSE: INF) and building materials supplier Travis Perkins (LSE:TPK). Is it the right time to buy any of these FTSE 100 giants?

Inflation-proof

Energy company National Grid has seen its share price reach all-time highs recently, and is now within touching distance of 1,000p. So are the shares over-extended and should we expect a correction anytime soon? I don’t think so. Earnings have been on a steady upward trend for many years, and the share price has naturally followed suit.

This slow-but-steady growth is set to continue with analysts predicting a 6% improvement in earnings for the year just ended, with a further 2% earmarked for each of the next two years. The shares trade on 15.8 times forecast earnings for the year to 31 March 2017, falling slightly to 15.6 for fiscal 2018. This is on a par with recent years and represents fair value.

Utility companies are primarily income plays, and National Grid is no different. The company pays out solid dividends, with 43.77p per share forecast for the last financial year, rising to 44.81p for FY 2017, and 45.79p in FY 2018. This means prospective yields of 4.5%, 4.6% and 4.7%, respectively. This is a solid defensive income play suitable for investors seeking inflation-proof dividends with relatively low risk.

Slow-but-steady

Also reaching all-time highs this year is media business Informa, with the shares punching the 700p mark in recent weeks. Growth has been steady and consistent in the recent past, with single-digit rises over the last five years, and this is expected to continue in the medium term. Consensus forecasts suggest 5% earnings growth for the current year, with a further 4% pencilled-in for next year.

The company is paying respectable dividends, with 20.81p per share forecast for this year, rising to 21.7p next year, meaning prospective yields of 3.0% and 3.2% for the next two years. In fact, you can still get your hands on the latest final dividend for fiscal 2016, before the 28 April ex-dividend date, with the 13.55p per share payout due on 26 May.

So what about the valuation? Informa trades on a forward P/E ratio of 15.6 for this year, falling slightly to 14.9 for the year ending 31 December 2017. The shares look fully-priced to me, given the slow growth, and I can’t see any reason for significant upward movement any time soon. What’s more, the dividends aren’t attractive enough to tempt income hunters.

Bargain builder?

Builders merchant Travis Perkins reported strong full-year results last month, with revenue rising 6.5% to £5.94bn, coupled with underlying earnings growth of 4%. The last three years has seen steady growth for the company that also owns DIY chain Wickes. Is this trend going to continue?

Well, according to the suits in the Square Mile, very much so. They’re talking about a 10% rise in earnings this year, followed by a further 12% improvement next year. Dividend payouts have also been increasing steadily each year, with 50.69p per share forecast for this year, rising to 58.35p next year, offering prospective yields of 2.9% and 3.3% for the next couple of years.

Travis Perkins trades on 13.2 times forecast earnings for the current year, falling to 11.8 for the period ending 31 December 2017. I think the shares are undervalued given the growth outlook, and value investors might want to take advantage of the recent weakness in the price.

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.

Bilaal Mohamed 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.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Here’s how I’d target £496k in FTSE 100 shares and £19k of passive income in a Stocks & Shares ISA

I invest as much surplus cash as I can at the end of the month in my Stocks and Shares…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Is Rolls-Royce’s share price an irresistible bargain?

Is Rolls-Royce's share price the FTSE 100's greatest bargain today? Royston Wild explains why he would -- and wouldn't --…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Is the Vodafone share price a wonderful bargain or a horrible value trap?

As the Vodafone share price continues to fall, is it now a stock to buy with a view to a…

Read more »

Hand of a mature man opening a safety deposit box.
Investing Articles

I’d buy 95,239 shares of this banking stock to generate £200 of monthly passive income

Muhammad Cheema takes a look at how Lloyds shares, with a dividend yield of 5.9%, can generate a healthy monthly…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Can FY results give the Antofagasta share price a long-term boost?

The Antofagasta share price has had a good five years. Now the company says it's set to enter a new…

Read more »

Person holding magnifying glass over important document, reading the small print
Dividend Shares

Can I make sustainable passive income from share buybacks?

Jon Smith notes the rise in share buybacks from FTSE 100 companies, but flags up why they aren't great for…

Read more »

Front view of a mixed-race couple walking past a shop window and looking in.
Investing Articles

After the Currys share price rockets, here are more potential UK takeover targets!

The Currys share price has surged 39% higher in response to news of a takeover bid. Which UK stocks could…

Read more »

Investing Articles

Down 25%, where will the British American Tobacco share price go next?

The British American Tobacco share price has taken a hit. But this Fool isn't deterred. He think's now could be…

Read more »