With the State Pension likely to become increasingly unappealing due to the rising official retirement age, FTSE 100 shares such as Barclays (LSE: BARC) could become more important to investors in the coming years. As part of a diversified portfolio, they have the potential to deliver high returns over a long period, with the company’s low valuation being a key reason for this.
Of course, Barclays isn’t the only cheap share that could be worth buying today. One company reporting positive results on Monday could also help investors to boost their retirement savings and overcome a meagre State Pension.
The company in question is communications cloud and managed services specialist Maintel (LSE: MAI). It released interim results on Monday which showed a rise in revenue of 14%, with recurring revenue at 70%. This comes at a time when the company is seeking to transition towards and cloud and managed service business, with positive momentum being recorded during the period. Cloud revenues increased by 33% to £7.7m, while managed services revenue was up 22% to £23.2m.
Looking ahead, the company is expected to post a rise in earnings of 28% in the current year, followed by further growth of 17% next year. Despite an improving financial outlook, the stock trades on a price-to-earnings growth (PEG) ratio of 0.5. This suggests that it has a wide margin of safety and could deliver strong share price growth over the medium term.
Maintel will continue to invest in the higher growth areas of its business, as well as in automation. With new business orders up by 25% and a solid pipeline of opportunities, it seems to be in a strong position to generate growth. As such, now could be the right time to buy it for the long term.
The growth potential of Barclays also seems to be high, with the bank moving into a new phase under its current management team. After focusing on strengthening its balance sheet through a restructuring, it is now in a position where shareholders could reap the benefits of its improving financial performance.
Over the next two years the bank’s dividend is expected to increase from 3p per share to 7.9p per share. This puts the stock on a forward dividend yield of 4.5% for the 2019 financial year, which is over 10% higher than the FTSE 100’s dividend yield.
With Barclays expected to post a rise in earnings of 13% in the next financial year, its financial prospects seem to be improving. Despite this, it trades on a PEG ratio of just 0.7, which makes it one of the cheapest banking shares in the FTSE 100. As such, it could offer high returns over an extended time period which would help to boost its shareholders’ retirement savings. Given the rising State Pension age, this could make it a worthwhile long-term investment opportunity.
Peter Stephens owns shares of Barclays. The Motley Fool UK has recommended Barclays. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.