Associated British Foods (LSE: ABF) was one of the rare FTSE 100 stocks to thrive in October while the rest of the index was sinking.
Its share price rose 4% last month as the Footsie fell 5%, the investment community jumping in due to anticipation of bright full-year results at the beginning of November. And those optimists were not disappointed, Associated British Foods spiking to four-month highs following last week’s release.
I’ve long championed the food and clothing giant’s long term earnings outlook, particularly because of the success of its Primark value fashion chain and plans to replicate its successful model across Europe and the US.
And my faith was paid off again this month when Associated British Foods declared that its Retail division “delivered its most significant profit growth in recent years.” With Primark revenues having risen 6% in the year to September 15, to £7.48bn, adjusting operating profit leapt 15% to £843m.
Sales were helped by the opening of 15 new stores across eight countries in the last fiscal period, and the Footsie firm has no intention of slowing down on its expansion drive. Indeed, it commented that “Primark has the potential for growth in all of its existing markets,” the business adding that it plans to open more stores in the US as well as to enter a number of markets in Central and Eastern Europe.
A great dividend grower
The Retail division may have been the showstopper once again, but that business is not the be-all-and-end-all for Associated British Foods. The company’s Grocery, Ingredients and Agriculture divisions also traded strongly in the past 12 months, robust performances that helped group adjusted operating profit rise 3% year-on-year to £1.4bn.
The exceptional result for fiscal 2018 encouraged Associated British Foods to hike the total dividend a mighty 10% to 45p per share, and City analysts are expecting further profits progress to 46.5p per share in the current period, a figure that yields a handy 1.8%.
I reckon, though, that this projection — as well as the anticipated 1% earnings advance — could be subject to significant upgrades as the months roll by.
Catch this 5.7% yielder too!
All things considered, I think the Primark owner is well worth an elevated forward P/E ratio of 19 times. But for share investors seeking true value then fellow FTSE 100 star RSA Insurance Group (LSE: RSA) is certainly worth a look, in my opinion.
The financial giant was put on the defensive after a disappointing third-quarter trading update in late September, and although investor appetite for it has improved more recently it still carries a dirt-cheap prospective P/E ratio of 13.3 times.
This makes RSA a bargain. In my opinion its long-term outlook remains robust thanks to its improving international businesses, divisions that are expected to help RSA recover from an anticipated 7% earnings reversal in 2018 with a 24% rebound next year.
And like Associated British Foods, the City expects dividends to keep bounding higher too. Last year’s 19.6p per share reward is expected to stomp to 23.3p this year and to 30.8p in 2019, figures that yield a giant 4.3% and 5.7% respectively.
If you’re looking to retire on a fortune, I reckon both of these firms are a great shares to help you to achieve this goal.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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.