Boost Your Returns With Banco Santander SA, British American Tobacco plc, Royal Mail PLC, SABMiller plc And Taylor Wimpey plc


While the banking sector has not had the most positive of years, with there being continuing fines and uncertainties regarding the future of the Eurozone and global economies, now appears to be a great time to buy Santander (LSE: BNC). That’s because it offers excellent income prospects over the medium term, with the bank’s dividends set to rise as profitability improves.

In fact, Santander’s yield of 3.2% could move much higher even if the Eurozone economy does not respond positively to quantitative easing. That’s because Santander currently pays out just 40% of profit as a dividend which, for a bank with such excellent financial standing, seems rather modest. As such, dividends are likely to increase and, with a low interest rate environment set to stay for a number of years, investor sentiment in higher yielding stocks could pick up considerably.

British American Tobacco

The decline in the valuations of commodity stocks in the last year highlights just how important barriers to entry can be. That’s a major reason, of course, to buy a slice of British American Tobacco (LSE: BATS), since its future revenue and earnings are likely to remain relatively robust and consistent even though cigarette volumes are falling across the globe.

That’s because British American Tobacco still has considerable scope for price increases and this is a major reason why its bottom line is set to rise by 8% next year. And, with a price to earnings (P/E) ratio of 17.3, it seems to offer good value for money while the FTSE 100 has a P/E ratio of 16; owing to its greater resilience and defensive attributes during uncertain periods.

Royal Mail

Since listing in October 2013, Royal Mail (LSE: RMG) has been rather hit and miss. Initially, its share price rose to 600p but has gradually fallen back to its current 470p level since then, with investors seemingly concerned about the scope for increased competition in parcel delivery as well as the gradual decline in the popularity of sending letters, too.

And, while Royal Mail is expected to post a fall in earnings this year of 14%, much of this should be recovered in next year’s forecast gain of 13%. As such, while Royal Mail may not be set to deliver top notch growth, its yield of 4.5% should keep investor sentiment buoyant moving forward and could help to push its rating higher over the medium to long term.


With demand from China picking up last quarter, SABMiller (LSE: SAB) appears to be on the brink of improved bottom line performance. Certainly, the last year has been a disappointment, with earnings likely to have fallen when the alcoholic beverages company reports its full year results to the end of March. However, investor sentiment has remained upbeat, with shares in the company rising by three times more than the FTSE 100 in the last year, which shows that the market believes it was a one-off.

And, looking ahead, SABMiller seems to offer good value for money given its long term growth prospects. Certainly, a price to book (P/B) ratio of 3.1 is hardly dirt cheap, but for a company with such diversity, strong brands and the potential for improved financial performance, it appears to be a price worth paying.

Taylor Wimpey

While low interest rates are contributing to a boom for house builders such as Taylor Wimpey (LSE: TW), the UK’s chronic shortage of housing is likely to make it a lucrative industry for incumbents for many years to come. Despite this, Taylor Wimpey still trades on a P/E ratio of just 11.2, which is considerably lower than the FTSE 100’s P/E of 16 even though Taylor Wimpey is expected to grow its bottom line by almost 50% over the next two years.

So, while there is undoubtedly a political risk from a change in government in the short term, Taylor Wimpey remains a stock worth buying for the long haul, with a dividend yield of 5.7% making it an even more enticing opportunity.

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Peter Stephens owns shares of British American Tobacco and Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.