With there being a considerable amount of uncertainty present among investors during the last year, shares in National Grid (LSE: NG) (NYSE: NGG.US) have risen by almost 20%. That’s at least partly because they are viewed as a superb defensive play, but also because the company offers excellent income prospects.
For example, National Grid still yields a highly appealing 4.7% despite its aforementioned share price rise. Even more enticing, though, is the company’s aim to increase dividends per share at a faster rate than inflation. This should ensure that investors in the company can enjoy a real terms increase in their income which, in the long run, could prove to be a fillip if inflation rises to more normal levels than at present. As a result, National Grid appears to be an excellent long-term buy.
Despite its share price rising by 12% in the last six months, BAE (LSE: BA) still offers excellent value for money. For example, it trades on a price to earnings (P/E) ratio of just 12.1 and, with the FTSE 100 having a P/E ratio of around 14.7, this indicates that an upward rerating could be on the cards.
Certainly, the defence sector is relatively cyclical and, as seen with its profit warning just under a year ago, BAE’s profitability may fluctuate more than that of most companies – especially while austerity dominates much of the developed world.
However, with its bottom line due to rise by 6% in the current year and by a further 5% next year, BAE seems to be more than holding its own during a tough period. And, with trading conditions likely to pick up in the long run, now could be a great time to buy a slice of BAE.
While the Chinese economy is growing at a slower rate than anticipated, it still holds vast potential for banks such as HSBC (LSE: HSBA) (NYSE: HSBC.US). Certainly, HSBC needs to address its cost base, which has reached an all-time high. However, with efficiency plans in place, HSBC is forecast to increase its bottom line at an impressive pace of 6% this year, and 8% in the following year.
However, it’s with regard to its dividend yield and valuation that HSBC really impresses. For example, it currently has a yield of 5.7%, with dividend per share growth of 6.2% next year meaning that HSBC could yield as much as 6.1% in 2016. And, with a P/E ratio of just 10.2, it seems to be a bargain buy at the present time – especially with its considerable long term potential in emerging markets.
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Peter Stephens owns shares of BAE Systems, HSBC Holdings, and National Grid. The Motley Fool UK has recommended HSBC Holdings. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.