Why Lloyds Banking Group PLC, PZ Cussons plc And DS Smith plc Are Genuine Blue-Chip Bargains

Today I am looking at three FTSE giants that offer spectacular bang for one’s buck.

Lloyds Banking Group

I believe that Lloyds (LSE: LLOY) is in great shape to deliver delicious shareholder returns as the British economy steadily gathers momentum. While it’s true the PPI mis-selling scandal will remain problematic for some time yet — the business has already set aside a colossal £13bn to cover claims — I believe the effect of asset sales, cost-cutting, and a re-energised focus on the High Street leaves the bank a much more efficient earnings-generating machine for the years ahead.

It is certainly true that the bottom-line is not expected to take off any time soon. Indeed, earnings are expected to rise 5% in 2015 before slipping 6% in 2016. But Lloyds’ de-risking exercise of recent years at least makes it a better pick than many of its rivals for those seeking stable earnings performance further out. And rock-bottom P/E ratios of 8.7 times for this year and 9.7 times for 2016 are hard to ignore.

And with the balance sheet steadily improving — Lloyds’ CET1 capital ratio clocked in at a healthy 13.3% as of June — dividends are expected to explode in the coming years, too. The City expects a touted dividend of 2.5p per share for 2015, yielding a decent 3.4%, to leap to 3.9p in 2016, pushing the yield to a market-busting 5.2%.

PZ Cussons

Concerns over slowing demand from emerging markets has forced market appetite for PZ Cussons (LSE: PZC) through the floor more recently — indeed, the company’s share price has shed 20% in the past three months alone. But I believe this presents a fresh stocking-up opportunity, as I reckon the long-term potential of these territories should deliver brilliant long-term rewards for the company.

Indeed, PZ Cussons is a major player across Africa and Asia in particular, thanks in no small part to products like Carex soap and Yo cooking oil, labels that carry formidable pricing power to keep sales chugging higher. And with regular product roll-outs maintaining consumer interest, PZ Cussons is expected to enjoy earnings growth of 2% and 8% in the years ending May 2016 and 2017 respectively, resulting in decent P/E ratios of 16 times and 15.1 times.

This strong growth outlook is also expected to keep the dividend jogging comfortably higher, too. A payment of 8.4p per share is currently forecast for this year, yielding a very handy 2.9%. And this figure moves to 3% next year thanks to predictions of an 8.9p dividend.

DS Smith

Box building play DS Smith (LSE: SMDS) has forged itself a reputation as a dependable deliver of double-digit earnings rises in recent years, with retailers champing at the bit to snap up the firm’s innovative packaging solutions. And I reckon the company’s strong position across Europe should continue to underpin solid bottom-line growth — indeed, DS Smith has snapped up Duropack and Grupo Lantero in recent months to bulk up its presence in both established and developing continental markets.

Even though DS Smith is expected to see earnings expansion slow to 6% for the year concluding April 2016, the number crunchers expect growth to bounce higher again from next year — indeed, a 12% advance is currently pencilled in. These figures leave the packaging giant changing hands on very appealing P/E ratios of 15.5 times for 2016 and 13.8 times for the following year.

Naturally this bubbly earnings picture is expected to keep dividends trucking, as well. Last year’s reward of 11.4p per share is anticipated to leap to 12.3p for 2016, creating a yield of 3.1%. And predictions of a 13.4p dividend for 2017 nudges the yield to 3.3%.

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Royston Wild owns shares of DS Smith. The Motley Fool UK owns shares of PZ Cussons. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.