If you have just £1,000 to invest, there’s one stock out there that I believe deserves your money more than most based on its history of producing outstanding returns for investors.
This company might not be a household name, but that hasn’t stopped it. Beazley (LSE: BEZ) is one of the largest specialist insurance businesses in the UK. And with operations around the world, the business is truly a play on not just UK, but international economic growth as well.
Over the past 10 years, shares in the company have produced a total annual return for investors of 21.7%, turning every £1,000 invested into £7,127.
And I believe that this outstanding record of performance is set to continue.
After a rough 2017, when some of the biggest hurricanes ever to hit the United States caused billions in damage, which insurers like Beazley had to pick up the bill for, analysts are expecting the firm to return to growth this year. Earnings per share (EPS) are projected to rise 42% to $0.34 (26p) giving a forward P/E of 22.
Growth is only expected to accelerate for 2019. Analysts have pencilled in EPS growth of 64% to $0.56 (43p). Based on this estimate, the stock is trading at a 2019 P/E of 13.4.
As well as breakneck earnings growth, Beazley has attractive dividend credentials. The dividend yield of 2.1% might not be the highest around, but the payout of $0.16 (12p) per share is covered twice by EPS. To me, this high level of cover suggests that the distribution is shielded from earnings volatility — one of the critical factors I like to consider when evaluating a firm’s dividend potential. Analysts are expecting the payout to hit $0.22 (17p) next year, providing a more lucrative yield of 2.9%.
Overall, looking at the company’s record of producing returns for investors, coupled with its growth outlook, I believe Beazley won’t let you down.
Low risk, high potential reward
If you’re looking for an investment with more growth potential for your portfolio, you might want to consider Rockhopper Exploration (LSE: RKH).
There’s lots to like about this oil minnow. For a start, the company is one of the few early-stage oil businesses with positive free cash flow.
According to half-year figures, published today, Rockhopper generated cash flow from operations of $4.9m during the first six months of 2018. With cash operating costs of $11 per barrel of oil produced, this looks set to continue.
Rockhopper’s funds are essential to support the development of its flagship Sea Lion development in the Falklands. Management is targeting year-end net cash of $30m (down from $46.4m at the end of the first half) and is planning to secure further financing for the prospect towards the end of 2018. Its partner on the $1.5bn project is Premier Oil which is pushing ahead with the development of Sea Lion. It could yield as much as 1.7bn barrels of oil in the best case.
What I like about Rockhopper is that the company is already self-sustaining but has huge upside potential if Sea Lion proves to be as good as expected. If everything goes to plan in the Falklands, Rockhopper could be a multi-bagger investment for shareholders.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.