Does Change At BT Group plc, United Utilities Group PLC And Prudential plc Make Them Star Buys?

In business, the only constant is change. However, there are periods in every company’s lifetime when the pace of change is perhaps a little quicker than usual. Take, for example, BT (LSE: BT-A). It recently completed the purchase of the UK’s largest mobile network, EE, for around £12.5bn and will now attempt to integrate the company into its own.

This is a major undertaking since EE is a huge entity and in fact, it will become its own division within BT, with the company restructuring to include six main business lines. This could help to drive efficiencies and ultimately make BT more profitable, but it also comes with a significant amount of risk.

Certainly, becoming a major quad play operator is a sound move for BT, but the pace of change could lead to disappointment in the short term – especially since the market is very upbeat regarding its future prospects. For example, BT trades on a price-to-earnings (P/E) ratio of 15.6 and with the company having a large pension liability and significant leverage, it may be a stock to watch, rather than buy, over the medium term.

Dividend growth ahead?

Also undergoing a period of change is financial services company Prudential (LSE: PRU). It recently changed its CEO and other senior management positions, which is likely to bring a refreshed strategy as it seeks to capitalise on a strong position within the Asian economy.

Certainly, a high level of exposure to the region has hurt market sentiment in recent months as investors have turned against China-focused stocks. But in the long run, Prudential’s exposure to the world’s second-largest economy is likely to boost its profitability, rather than hold it back.

With Prudential trading on a price-to-earnings growth (PEG) ratio of just 1.3, it seems to offer excellent growth potential. And with its shares currently yielding 3.1%, they remain an enticing income option when the company’s dividend growth prospects are taken into account. For example, Prudential pays out only around a third of profit as a dividend, meaning that dividends could rise at a rapid rate and quickly turn the company into an exceptional income stock.

Long-term buy

Also undergoing a period of change is water services company United Utilities (LSE: UU). It recently announced a joint venture with Severn Trent and looking ahead to next year, the liberalisation of the UK water services market is likely to bring a degree of uncertainty for the sector incumbents. That said, United Utilities appears to be well-prepared to cope with the changes being made that will see greater choice for customers and with its dividends being very appealing, it remains a top-notch income play.

For example, United Utilities currently yields 4.1% and is expected to increase shareholder payouts by around 2.2% next year. Neither of these figures may sound earth-shattering, but with United Utilities having a robust business model, highly defensive characteristics and being prepared for change within its sector, it appears to be a worthy long-term purchase.

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Peter Stephens owns shares of Prudential, Severn Trent, and United Utilities. 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.