National Grid
Shares in energy infrastructure firm National Grid (LSE: NG) (NYSE: NGG.US) have lost 13% from their May high. This pushed the shares down to levels not seen since March.
Last year, National Grid paid 40.9p of dividends per share from 58.1p of earnings. Analysts forecast that the company will report earnings per share (EPS) of 53.9p this year. The dividend is expected to come in at 42.1p.
The average FTSE 100 stock trades on a forward price-to-earnings (P/E) ratio of 13.4, with an expected yield of 3.4%. National Grid is on a P/E of 13.8 — the expected dividend yield is a thumping 5.7%.
During the last five years, National Grid has grown earnings by an average of 6.9% a year. The dividend has increased at a similar rate.
Imperial Tobacco
Cigarette firm Imperial Tobacco (LSE: IMT) (NASDAQOTH: ITYBY.US) trades at a significant P/E and yield discount to the rest of the market. That seems harsh, given how successful the company has been.
In the last five years at Imperial, EPS has increased by an average of 10.7% per annum. In that time, dividends have grown by an average of 11.9% a year.
Imperial’s past is not the problem. It is the company’s future that is causing concern.
I am suspicious of the long-term viability of the tobacco industry. These concerns are reflected in Imperial’s recent interim results. In the first six months of Imperial’s financial year, cigarette sales fell 6%. This led to a 7% fall in operating profits and a 3% decline in EPS.
Legal & General
Since the financial crisis, Legal & General (LSE: LGEN) has been ramping up its dividend. After paying 3.84p per share for 2009, the payout reached 7.65p in 2012. Double-digit dividends rises are forecast this year and next.
Earnings are forecast to rise at a similar clip. This puts the shares on a 2013 P/E of 11.1 and a forecast yield of 4.9%. The forecasts for 2014 are even better — giving a projected P/E of 10.5, with an anticipated yield of 5.4%.
Legal & General shares are a hybrid of value and growth. At 171p, Legal & General is today one of the best opportunities in the FTSE 100.
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> David does not own shares in any of the above companies.
