If you look carefully enough it’s possible to find great FTSE 100-quoted shares that can provide brilliant shareholder returns for five, 10, even 25 years into the future.
I recently picked out Reckitt Benckiser for its profits and share price performances of yesteryear, as well as the top defensive qualities that puts it in terrific shape to keep growing profits and dividends over the next quarter of a century.
The story over at ABF is that of rampant expansion at its Primark value clothing stores.
This division isn’t having the best of it right now thanks to the tough retail environment in the UK, the firm recently declaring that “trading was challenging” in November. This threatens to spill into 2019 due to the tough broader economic backdrop.
I’m confident, though, that foreign expansion should lay the path for strong and steady earnings growth in the decades ahead. The business now has 364 stores spanning North American and Europe, and remarked earlier this year that it “has the potential for growth in all of its existing markets.”
It also has an appetite for moving into new territories and in the summer declared that its medium-term plans include the addition of more stores in the US as well entry into a number of Central and Eastern European markets.
In the meantime, with its other major divisions (bar Sugar) also firing, City analysts are forecasting a 1% earnings increase for the 12 months to September 2019. Hardly spectacular, sure, but it still leads the number crunchers to predict that the progressive dividend policy should keep on trucking.
The full-year payout surged 10% in fiscal 2018 to 45p per share, and although a smaller rise is predicted for this year, to 46.7p, this still yields a chubby 2.2%.
Set to soar
Despite its exciting growth strategy Associated British Foods can be picked up on a pretty-modest forward P/E multiple of 15.9 times. If that impressed you, then you’ll really love IAG, which carries a bargain-basement P/E ratio of 5.9 times.
Margins are notoriously wafer-thin in the airline industry and investors are always concerned over the possibility of rocketing labour and fuel costs in the years ahead, hence IAG’s low rating. This is far too low right now, in my opinion, and particularly as the Footsie firm expands rapidly in the cut-price travel sector on the continent and between Europe and The Americas, a strategy that could light a fire under the profits column.
In the nearer term, City analysts are forecasting that the British Airways owner will follow a 9% earnings rise in 2018 with a 1% decline in 2019. However, I reckon next year’s figure could be upwardly revised in the months to come — the outlook remains solid enough and the International Air Transport Association last week predicted that growing passenger numbers and softer oil prices next year will feed into another period of profits growth across the industry.
Regardless, the number crunchers believe IAG will grow the dividend from a projected 30 euro cents per share in 2018 to 31 cents next year. And this means yields sit at a massive 4.4% and 4.6% respectively. I’d happily buy the flyer today and stash it away for many years into the future.
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.