Could Aviva plc, Barratt Developments Plc And SSE PLC Be The Best Value Shares On The FTSE 100?

You can hardly read a financial site these days without bumping into someone telling you that the stock market is overvalued and is heading for a fall. But selling up doesn’t make sense if there are individual bargains to be found amongst FTSE 100 shares.

Insurance on the up

Take insurance giant Aviva (LSE: AV)(NYSE: AV.US). While Aviva shares are up 55% in two years to 519p, over the past 12 months the price has been pretty flat. But earnings have been climbing since the whole insurance sector was hit by the financial crash and Aviva was forced to slash its overheating dividend — there’s a 3% dip in EPS forecast this year, but analysts are predicting a 12% rise in 2016.

All of that puts the shares on a forward P/E of only 11 for this year, dropping to under 10 a year later. On that alone, I really can’t see how anyone could think Aviva is overvalued — and when you throw in a recovering dividend expected to yield 4% this year and 4.7% next, come on, it has to be a steal, doesn’t it?

Is housing safe?

Now, you might think I’m mad suggesting that a share that’s put on 68% in 12 months and has more than five-bagged in five years is still cheap. But that actually is what I think about Barratt Developments (LSE: BDEV). At 601p today, the shares have rewarded investors well since the crunch, but it really does look like there’s more to come with a P/E that’s still below the FTSE long-term average.

In fact, the forecast 40% rise in EPS for the year ending this month would give us a P/E of around 13.5, and a further 18% earnings increase marked down for next year would drop it as low as 11.5. Barratt is also set for better-than-average dividends, with yields of 3.9% and 4.8% expected this year and next, and the cash would be well covered by earnings.

Energy always needed

My third choice for today is SSE (LSE: SSE)(NASDAQOTH:SSEZY.US), and it’s a pure dividend play. Reinvesting dividends is the surest way to maximise the long-term profit from an investment portfolio and, of course, they make for an easy cash-withdrawal mechanism for when you eventually want the cash.

Dividends from the utilities companies are about the most reliable there are, as they have good long-term visibility and don’t need to retain much cash. SSE’s forecast yields reach 5.5% and 5.6% this year and next, and the firm has a policy of lifting each year’s payout at least in line with inflation. And you don’t even have to pay a premium for these dividends — SSE shares are on forward P/E multiples of only 14 to 15.

Investing in top FTSE 100 shares like these can bring great long-term rewards.

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Alan Oscroft has no position in any shares mentioned. 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.