Some investors prioritise capital growth through a rising share price; some prioritise income growth from a rising dividend. But some shares — growth-and-income shares — offer investors a bit of both.
Unilever (LSE: ULVR) (NYSE: UL.US), Reed Elsevier (LSE: REL) (NYSE: RUK.US) and Legal & General Group (LSE: LGEN) are three companies from the UK’s elite FTSE 100 index that have grown both their earnings and dividends faster than inflation and are forecast to continue doing so.
Unilever’s earnings and dividend growth beat inflation during 2012. Earnings per share (EPS) increased 10% and the dividend was upped 4.4%. The owner of popular brands across the consumer-goods segments of food, household cleaning and personal care recently released its first-half results for 2013. EPS rose 4% and the board lifted the second-quarter dividend 10.7%.
According to Unilever’s website, the EPS consensus for the full year is €1.61 (+5.3%), while the board’s practice of paying four equal quarterly dividends allows us to conclude that the annual income payout will be €1.076 (+10.7%). Translating the numbers into sterling gives a price-to-earnings (P/E) ratio of 18.4 and dividend yield of 3.6% at a share price of 2,556p.
Reed Elsevier increased both its EPS and dividend by 7% during 2012. The publisher of academic, scientific and business information reported stronger growth still within its recent first-half results for 2013. EPS was up 9.1% and the board raised the dividend 10.8%.
For the full year, analysts see EPS at 53.7p (+7.2%), with a dividend of 25p (+8.7%). The numbers look a little on the low side to me after the recent strong first-half results, so the consensus may still contain some pre-results estimates. As the forecasts currently stand, though, the P/E is 15.3 and the dividend yield 3% at a share price of 820p.
Legal & General
Legal & General delivered EPS growth of 12% for 2012 and the directors confidently hiked the dividend 20%. The insurance group released another strong set of results earlier this week. During the first half of 2013, EPS increased 12.8%, and the board gave shareholders another bumper income hike, with the interim dividend lifted 22.4%.
City analysts are forecasting EPS for the full year of 15.37p (+12.5%), with a dividend of 8.58p (+12.2%). It looks like the dividend forecast may need to be upgraded after this week’s announcement of the big rise of the interim payout. As the forecasts stand, though, the P/E is 13 and the dividend yield 4.3% at a share price of 200p.
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> G A Chester does not own any shares mentioned in this article. The Motley Fool has recommended shares in Unilever.