Is Now The Perfect Time To Buy National Grid plc, BAE Systems plc, Berkeley Group Holdings PLC And Amlin plc?

National Grid

For investors in companies with significant levels of debt, the medium to long term is likely to see margins squeezed by higher interest costs. That’s because, while an interest rate rise in the UK may be a year or more away, over the next five to ten years interest rates are likely to move to a level that is more in keeping with the historic norm of 4% to 5%.

As such, National Grid’s (LSE: NG) (NYSE: NGG.US) debt servicing costs are likely to rise and, looking ahead, this could peg back investor sentiment somewhat. However, working in the company’s favour is its relative stability, its robust business model and excellent dividend potential. For example, it remains a hugely non-cyclical business that, whether or not macroeconomic news flow is positive, is likely to deliver impressive capital gains over the long run. And, with a yield of 4.8% and a dividend coverage ratio of 1.3, its income prospects appear to be very bright, too. As such, it remains a hugely appealing long term investment.


Just over a year ago, it was difficult to find an investor who would believe that BAE’s (LSE: BAE) share price would rise by 25% by this time in 2015. After all, the defence company was reeling from a profit warning, with US sequestration and European austerity hurting demand for its products. However, that’s exactly what BAE’s share price has done and, looking ahead, a continuation of its superb performance is very much on the cards.

That’s because BAE continues to offer excellent income prospects. For example, it currently yields a very impressive 4% yield and, with profit growth expected to recommence this year, there is scope for a brisk pace of dividend growth moving forward. Furthermore, BAE has a payout ratio of just 54%, which allows it considerable scope to increase dividends even if austerity and sequestration continue to put a brake on demand for its products in future.


Shares in upmarket house builder, Berkeley (LSE: BKG), are up by 24% since the General Election. However, it is certainly not too late for new investors to profit from the purple patch that the prime south east property sector is enjoying and, while the uncertainty surrounding the UK’s membership of the EU may hold investor sentiment back somewhat, there is tremendous scope for capital gains via a stake in Berkeley.

That’s because it trades on a price to earnings (P/E) ratio of just 11.6, which is considerably lower than the FTSE 100’s P/E ratio of around 16. And, with Berkeley forecast to increase its bottom line at a double-digit rate in each of the next two years, its price to earnings growth (PEG) ratio of 1 appears to represent excellent value for money – especially since investor sentiment in the company is so strong at the present time.


Unlike Berkeley, insurance company, Amlin (LSE: AML), is enduring a challenging period right now. For example, its bottom line is set to fall in each of the next two years, with its share price slump of 7% in the last three months indicating that investor sentiment is somewhat weak.

However, Amlin remains one of the most appealing income plays in the FTSE 350. And, that’s not just because it has a top notch headline yield of 5.8%. The key reason is that Amlin has vast scope to increase dividends per share in future, since its dividends are covered 1.42 times by profit. As such, it is expected to increase dividends per share by 4.2% next year and this puts it on a forward yield of 6.1%, which could act as a catalyst to push its share price to higher highs.

Of course, there are a number of other stocks that could boost your portfolio returns. That's why the analysts at The Motley Fool have written a free and without obligation guide called 5 Shares You Can Retire On.

The 5 companies in question offer stunning dividend yields, have fantastic long term potential, and trade at very appealing valuations. As such, they could deliver excellent returns and provide your portfolio with a major boost over the next few years.

Click here to find out all about them – it's completely free and without obligation to do so.

Peter Stephens owns shares of Amlin, BAE Systems, Berkeley Group Holdings, and National Grid. The Motley Fool UK has recommended Berkeley Group 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.