Do Barclays plc, National Grid plc & Bellway plc Offer The Perfect Combination Of Value and Income?


Barclays (LSE: BARC) is set to appoint Jes Staley, a former J.P. Morgan executive, as its new CEO. His appointment comes at an important turning point in the bank’s strategy, with the bank looking to roll back former CEO Antony Jenkins’ plans to shrink its investment bank and refocus on retail banking.

Shares in Barclays have fallen 6.7% since Tuesday, reflecting the market’s fears that a renewed focus on investment banking would delay the bank’s existing cost cutting plans and slow the sale of under-performing assets. But, despite these fears, analysts continue to be optimistic about the outlook for the bank’s earnings.

Underlying Earnings per share (EPS) is expected to grow by 36% this year, to 23.5p, and by 19% in 2016, to 27.9p. This would give its shares a very attractive forward P/E ratio of 11.2 times, which would fall to just 9.2 times on its expected 2016 earnings.

With profitability steadily improving and its balance sheet strengthening, Barclays is expected to raise the proportion of earnings distributed in dividends. By 2016, Barclays is expected to fork out dividends worth 9.0p per share, which represents a 38% increase on this year. Although this would still be just under a third of its expected underlying earnings, it would still give its shares a prospective dividend yield of 3.5%.

National Grid

National Grid (LSE: NG) may not deliver the growth that is expected of Barclays, but shares in the utility giant offer value and income today. In 2015, the utility company is expected to pay shareholders a dividend of 43.8p per share, which currently represents a prospective yield of 4.8%. The company also has plans to grow its dividend by at least RPI inflation in the medium term.

Although dividend growth may seem modest, in the light of today’s low inflation environment, it is the stability of National Grid’s business model that makes its shares most attractive. Unlike many listed electricity and gas utility companies, National Grid’s focus on electricity transmission and gas distribution means its revenues are largely unaffected by changes in demand, wholesale energy prices and the recent rise in competition on the supply side.

The dividends are also well covered, with underlying earnings cover of 1.36 times and free cash flow cover of 1.34 times.


Earlier this week, housebuilder Bellway (LSE: BWY) reported a strong set of full year results. EPS increased 47.5% to 231.5p, following the combination of growth in the number of new homes sold and an increase in the average selling price.

The number of new homes sold grew 13.2%, but revenues increased 18.9%, as average selling prices rose 8.7%. The increase in average selling prices was not only the result of the gains in nationwide property prices, but also due to the shift in the mix of property completions in favour of higher value London apartments.

Despite rapid earnings growth, shares in the housebuilder trade at a low multiple on its earnings and offer an attractive dividend — Bellways’s price to earnings ratio is 10.5 times, and its shares currently yield 3.2%. Analysts expect underlying EPS will grow another 11% next year, with dividends expected to increase by 9%, which implies its forward P/E ratio would be just 9.4 times with a prospective dividend yield of 3.5%.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended Barclays. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.