3 Savvy Stocks For Your 2015 ISA: Banco Santander SA, Sky PLC And Topps Tiles Plc

Today I am running the rule over three of the FTSE’s most appealing stock selections.

Banco Santander

Investor appetite for global banking goliath Banco Santander (LSE: BNC) has experienced a sharp drop in recent months, and shares in the business have shed 7% since the turn of January. However, I view this current weakness as a decent buying opportunity as the firm’s growing presence across the lucrative regions of Latin America should deliver strong long-term growth.

City analysts expect Santander to follow last year’s 24% earnings advance with an additional 14% rise in 2015, a projection that leaves the bank changing hands on a P/E multiple of just 12.5 times — any reading below 15 times is widely considered terrific value. And an anticipated 13% bottom line boost in 2016 drives this figure to just 11.1 times.

January’s price decline was set off by new chairperson Ana Botín’s decision to rebase the dividend, smashing Santander’s appeal to dividend seekers as well as raising the alarm over the bank’s capital strength. Although Botín pledged a full-year dividend of 20 euro cents this year, the business still offers a solid-if-unspectacular 2.9% yield. And I fully expect this to march higher in coming years as earnings keep rattling higher and measures to bulk up the balance sheet deliver the goods.


Although its domestic telecoms rivals have all been upping the ante in recent months, I believe that Sky’s (LSE: SKY) weighty presence across the television, broadband and telephone sectors should deliver robust profits growth in coming years. Sky has also making acquisitions in Germany and Italy in these lucrative markets, as well as splashing the cash to improve its domestic services and TV coverage, in a bid to see off the charge of its competitors.

Even though economists expect revenues at Sky to leap higher from this year, the huge cost of its organic investment drive and acquisition programme are expected to push earnings 9% lower in the year concluding June 2015, resulting in a slightly-expensive P/E multiple of 19.3 times. Still, an estimated 18% rebound from fiscal 2016 drives the multiple to a much more appetising 15.9 times, and I expect earnings to keep moving higher as ‘quad play’ entertainment demand rises.

And although Sky’s vast capital expenditure has cast doubt over the scale of dividends going forwards, City analysts expect the firm’s progressive payout policy to remain on track. Indeed, a payout of 32p per share for last year is anticipated to edge to 32.6p in 2015, producing a yield of 3.2%. And a predicted 35.4p dividend for next year nudges the yield to 3.4%.

Topps Tiles

I firmly believe that a backcloth of booming construction activity in the UK, combined with the effect of improving spending power on Britons’ DIY appetite, should drive earnings at Topps Tiles (LSE: TPT) skywards looking ahead. Indeed, the Cheadle firm announced today that like-for-like sales advanced 5.2% during October-March, and the business is looking to extend the brand to cotton onto expectations of rising footfall — it currently operates 339 stores across the country.

The City expects Topps Tiles to record a 22% earnings improvement in the year concluding September 2015, resulting in a P/E ratio of 15.3 times. And this falls to just 13 times in fiscal 2016 owing to predictions of a further 14% bottom-line bounce.

In line with these expectations of robust profits growth, the number crunchers expect Topps Tiles to deliver a full-year dividend of 2.9p per share this year, up from 2.25p in 2014 and producing a yield of 2.4%. And the payment is estimated to increase to 3.5p next year, propelling the yield to 2.9%.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Sky. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.