Barclays PLC, ARM Holdings plc And Mitie Group PLC: 3 Of The Hottest Growth & Income Stocks

Today I am looking at three terrific earnings and dividend selections.


The instalment of Jes Staley as chief executive at Barclays (LSE: BARC) has led to huge question marks concerning the long-term strategy of the firm. The new boss has already hinted at cranking the firm’s investment banking division back into action, a stance likely to have huge ramifications on the bank’s risk profile. But with Staley underlining the importance of Barclaycard, not to mention Barclays’ huge African presence, to future growth, I believe there is plenty for investors to remain optimistic about.

Barclays is expected to follow earnings growth of 29% in 2015 with an extra 20% advance in 2016, figures that produce ultra-low P/E ratings of 10.5 times and 8.6 times correspondingly. Any reading below 10 times is widely considered a snip, while a PEG ratio of 0.4 through to the close of next year underlines Barclays’ terrific value.

And Barclays’ splendid growth potential — combined with a steadily-improving capital pile — is expected to feed through to dividends in the coming years. The bank is anticipated to match last year’s 6.5p per share payout in 2015 before hiking it to 8.3p in 2016, driving the yield from 2.8% in the current period to a very handsome 3.6% next year.

ARM Holdings

I am convinced that microchip builder ARM Holdings (LSE: ARM) is a splendid pick for those seeking solid returns in the years ahead. Shares in the business have smashed back through the £10 marker despite ongoing fears over slowing smartphone and tablet computer sales, and with good reason in my opinion — the tech play’s products are a band apart from those of rivals such as Intel and AMD, making ARM Holdings the go-to supplier for industry heavyweights like Apple.

This quality has kept licence and royalty revenues ticking reliably higher, and ARM Holdings saw total sales advance a further 24% in July-September, to £243.1m. With the Cambridge firm also diversifying into other fast-growing tech areas like servers and networking, the City has pencilled in whopping earnings growth of 66% for 2015 and 14% in 2016.

Consequent P/E multiples of 35.3 times and 31.1 times may be high on paper, but few other stocks can match ARM Holdings’ hot growth profile in my opinion. And the chip play’s terrific earnings prospects are expected to blast the dividend from last year’s 7.02p per share to 8.3p this year, and 10.1p in 2016. It is true that these figures generate modest yields of 0.8% for this year and 1% for the following period, but I reckon rewards should continue shooting higher as profits grow.

Mitie Group

Like ARM Holdings, support services play Mitie Group (LSE: MTO) has seen its share price explode in recent weeks. Still, I believe the business remains significantly undervalued at present prices. The company is expected to deliver earnings expansion of 2% and 8% for the years ending March 2016 and 2017 respectively, resulting in very attractive P/E ratios of 13.3 times and 12.5 times.

Mitie announced at the end of September that it had enjoyed “a good start to the year with good organic revenue growth driven by new and recently expanded contracts,” and that more than nine-tenths of budgeted revenues for the year had already been secured. And the company — which offers a range of services from catering and cleaning through to document management — has a terrific order book that provides terrific earnings visibility for the longer-term.

With the bottom line expected to keep on climbing, Mitie is expected to lift fiscal 2015’s dividend of 11.7p per share to 12.1p in the current year, and again to 13p in 2017. Consequently the business boasts market-beating yields of 3.6% and 3.9% for these periods.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended ARM Holdings and 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.