Reckitt Benckiser (LSE: RB) has been one of the fastest growing companies in the FTSE 100, having delivered a compound annual growth rate (CAGR) in adjusted EPS of 11.0% over the past 10 years. Through continued innovation, investment in marketing and a focus on “power brands”, the company now has a dominant market position in a significant number of pharmaceutical, home-care and food markets.
Growth has been slowing down recently, as weak global growth, particularly from emerging markets, has dampened demand of premium brands. On top of this, competition has been intensifying in the sector and the market is becoming increasingly saturated. This has led Reckitt’s adjusted EPS compound annual growth rate (CAGR) to slow to just 3.3%, over the past five years.
But, although growth is slowing, Reckitt is at least still growing modestly. Analysts reckon underlying EPS will grow by 3% this year, and 7% in 2016. In addition, Reckitt has a prospective dividend yield of 2.5%.
Investors should also look beyond the usual blue chip companies to find growth and income opportunities. Many mid-cap and small-cap shares offer great yields and strong growth prospects, but are also often better value than their large-cap peers.
Recent earnings growth from KCOM (LSE: KCOM) has been disappointing, with adjusted EPS growing just 5% last year, and 2% in the preceding year. A combination of declining revenues from its legacy services and slowing smartphone growth has put pressure on the telecoms group’s top- and bottom-line. But, as these revenue sources are declining, growth from new business users, especially for cloud and collaboration services, should more than offset the declining legacy revenues in the longer term.
The company is set to raise its dividends by 10% for the sixth consecutive year, and its shares have a very attractive prospective dividend yield of 6.5%. In addition, its forward P/E ratio is just 11.4.
Dairy Crest (LSE: DCG), which has long been suffering from top-line troubles with its fresh milk dairy business, appears to be turning a corner, with the recent sale of its loss-making dairies to Müller. The company has now been focussing on the fast growing market for global infant formula milk and more profitable markets in cheeses and spreads.
A global milk oversupply and Russian sanctions on European dairy products has led to falling milk prices in the UK. Conditions have only worsened since the turn of this year, and the continued pressure on milk prices is set to drag earnings lower this year. Analysts expect this will push underlying EPS 2% lower this year, to 37.2p, which implies a forward P/E of 15.7.
However, Dairy Crest is expected to bounce back with underlying EPS growth of 10% in the following year. Furthermore, its shares have a prospective dividend yield of 3.6%.
Manx Telecom (LSE: MANX), the Isle of Man telecoms group, operates as a monopoly in the fixed-line communications market. In addition to this, it has a 76% market share of the wireless market on the island, and has only one wireless competitor, Sure, which is owned by the Bahrain Telecommunications Company.
With such a dominant market position, Manx Telecom is highly profitable and generates very high levels of free cash flow. Its EBITDA margin has been in the mid-30s, and it can afford to pay shareholders a juicy dividend, which currently yields 5.3%.
With the roll-out of 4G services and increasing take-up of high speed broadband, earnings is set to climb steadily over the next two years. Analysts currently expect underlying EPS will grow 10% in 2015, and 9% in the following year. This implies its shares have very attractive forward P/Es of 14.0 and 12.8, respectively.
Buy and Hold forever?
These five large-cap shares have been selected for their combination of income and growth prospects. They generate stable cash flows from their dominant market positionsand broad global exposure.
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Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended KCOM Group. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.