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3 No-Brainer Buys? Diageo plc, Bellway plc And Admiral Group plc

Shares in house builder Bellway (LSE: BWY) are up by over 3% today after the company released a strong set of full-year results. It sold a record number of homes last year, with the sale of 7,752 houses representing a 13% rise on the previous year’s figure. Furthermore, a focus on improved discipline towards investment has meant that Bellway’s return on capital employed has risen by 4.3% to 23.9%, with operating margins also increasing by an impressive 3.2%.

The result of this is net profit growth of 47.5%, which has allowed Bellway to increase dividends per share by 48%. And, looking ahead, the company expects that its strong forward order book should allow it to achieve volume growth of 10% in the current financial year.

Despite Bellway’s shares having soared by 322% in the last five years, there is still strong capital gain potential. They trade on a very cheap price to earnings (P/E) ratio of 9.7, which indicates that there is considerable upward rerating potential. And, with them yielding 3.4%, they remain a viable option for income seeking investors, too.

Similarly, motor insurance specialist Admiral (LSE: ADM) also appears to be a strong buy. Unlike Bellway, its industry is not enjoying the most profitable of periods, with the hike in insurance premium tax likely to cause its margins to come under pressure in the near term. And, with Admiral’s bottom line falling by 2% last year and forecast to drop by a further 3% this year, investor sentiment may remain weak in the coming months.

However, for longer term investors Admiral offers excellent upside. With the Bank of England not expecting inflation to reach 1% until spring 2016, it seems unlikely that interest rates will rise at a rapid rate. As such, Admiral’s yield of 6.3% remains extremely appealing and, with the company’s bottom line set to return to growth next year, investor sentiment could pick up in 2016.

Also offering an excellent long term income story is beverages company Diageo (LSE: DGE). It may only yield 3.2% at the present time but, as a mature business operating within a mature industry, it has the scope to pay out a greater proportion of profit as a dividend than is currently the case.

For example, Diageo presently pays out 65% of profit as a dividend and, while it needs some cash to reinvest for future growth opportunities, the relative stability of its business means that a higher proportion of profit could be handed over to the company’s shareholders in future. This, coupled with the excellent long term growth prospects for spirits in China, India and the rest of the emerging world, indicates that Diageo is a strong buy. And, with sector consolidation on the rise, Diageo remains a highly appealing bid target due to its wealth of leading spirits brands.

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Peter Stephens owns shares of Admiral Group and Bellway. 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.