Why Shrewd Investors Are Buying Blue-Chip Bargains Prudential plc, Royal Mail PLC, Barratt Developments Plc And Vodafone Group plc!

Today I am looking at four FTSE beauties trading at unmissable prices.


The summer stock market washout has left many quality stocks going for a song and I believe life insurer Prudential (LSE: PRU) is one of those. The departure of the much-respected Tidjane Thiam in June left many investors concerned over the future of the firm. But new chief executive Mike Wells looks set to build on the groundwork laid by his predecessor and keep on ploughing into the growth markets of Asia, a promising omen for future growth.

With Prudential also pulling up trees in North America, the City expects the business to chalk up earnings increases of 14% and 10% in 2015 and 2016 respectively, creating ultra-attractive P/E multiples of 12.3 times and 11.1 times — any reading below 15 times is widely considered great value. And predicted dividends of 39.8p per share for 2015 and 43.6p for 2016, supported by Prudential’s brilliant cash flows, create handy yields of 2.9% and 3.2%.

Royal Mail

Helped by the steady decline of its domestic competition, I believe Royal Mail (LSE: RMG) is in great shape to deliver spectacular shareholder returns in the years ahead. With the breakneck progress of e-commerce set to keep driving parcels traffic, and the company’s GLS unit — which spans 37 countries the length and breadth of Europe — also picking up momentum, I reckon the courier’s revenues outlook is a compelling one.

Royal Mail is expected to swallow a 22% earnings decline in the period to March 2016 due to massive restructuring, although a 3% bounceback is forecast for the following year as costs fall. And these projections create delicious P/E ratios of 12.2 times and 11.8 times respectively. On top of this, estimated dividends of 21.7p per share for this year and 22.7p for 2017 produce super yields of 4.7% and 4.9%.

Barratt Developments

There has been no shortage of media coverage in recent days lamenting the lack of adequate housing stock in the UK. This is a very real problem as improving wage and employment levels amongst homebuyers, combined with kinder lending conditions, propel demand through the roof. Given this backcloth, I am convinced house prices should keep on chugging significantly higher in the years ahead, which is great news for the likes Barratt Developments (LSE: BDEV).

The construction play is expected to punch earnings expansion of 16% in the year ending June 2016 alone, producing a terrific P/E multiple of just 12.3 times. And thanks to Barratt Developments’ brilliant capital strength and solid growth outlook, a dividend of 30.3p per share is currently forecast, yielding an impressive 4.6%. With expectations of a Bank of England rate rise steadily receding, and the homes market’s supply/demand balance still worsening, I reckon Britain’s housebuilders should continue to shine.

Vodafone Group

At first glance Vodafone (LSE: VOD) may not appear to be an obvious candidate for those seeking quality stocks at knock-down prices. The telecoms leviathan is expected to suffer a 5% earnings decline for the 12 months to March 2016, producing an eye-watering P/E multiple of 43.8 times. And despite an expected 19% bottom-line recovery the year after, Vodafone still deals on a chunky ratio of 35.5 times.

Still, I believe the company’s terrific growth prospects fully justify this premium. Conditions in its core European markets are improving significantly, thanks in no small part to its multi-billion-pound organic investment programme and clever acquisitions like that of Kabel Deutschland, while revenues are also taking off in Asia and other emerging regions. But if Vodafone’s high earnings multiples remain a bone of contention for some, huge projected dividends of 11.5p per share for 2016 and 11.8p for 2017 — yielding 5.3% and 5.5% — should help to cushion the blow.

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Royston Wild owns shares of Barratt Developments. 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.