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3 FTSE 100 Growth-And-Income Shares: Unilever plc, Reed Elsevier plc And Legal & General Group Plc

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.

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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

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.

Growth and income

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> G A Chester does not own any shares mentioned in this article. The Motley Fool has recommended shares in Unilever.

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