Shares have responded positively to the election of a Boris Johnson-led Conservative government committed to taking the UK out of the EU. Those companies most at threat from nationalisation under any Labour government were particularly boosted straight after the results were confirmed last Friday.
I’m looking at two companies that fell into this category. Now that a degree of political stability is returning, I think these companies could reward investors well in the coming years.
Looking for growth
Telecoms company BT (LSE: BT.A) was firmly in the crosshairs of Jeremy Corbyn. Once a nationalised company the now-listed telecoms giant looks after much of the digital infrastructure of the UK.
It has struggled to lift the share price in recent years due to battles over Openreach with the regulator Ofcom, the looming threat of nationalisation (which has gone away for the foreseeable future) and from the strategy of spending large amounts of money on football rights.
The reasons the company could have a much brighter future are that the boss of BT is now focusing far more on improving Openreach. Better relations with Ofcom could allow the high-margin Openreach business to keep monopolising the infrastructure behind high-speed internet connections.
Bundling together home, mobile, TV, and broadband for consumers gives BT the opportunity to make greater revenues per customer. BT’s largest segment, its consumer division, already sells mobile and broadband directly to nearly 30 million people through the BT, EE, and PlusNet brands.
The shares also do look cheap with a price-to-earnings of below 8, which will rise if investors start to think BT has a much brighter future.
The energy company SSE (LSE: SSE) has had a share price bounce recently after a few years struggling along with the other utilities. The push into renewables is paying off now and will likely position the group very well for the lower carbon economy of the future.
Having agreed to sell its consumer business to Ovo this year, SSE is even more focussed on the renewable electricity generation part of its business. This will be the part that will be unregulated and can deliver greater growth. More predictable but regulated income will continue from the group’s networks business, which delivers electricity to homes in Scotland and Southern England and owns high-voltage transmission cables in the Scottish Highlands and Islands.
Together these two arms of the business can deliver growth and should be far more able to provide reliable income and cash that can then be passed onto shareholders through share buybacks and dividends – both of which should push up the share price.
With a 7% dividend yield even after the strong share price growth of recent months I think the shares of SSE are still well-positioned for further growth.
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Andy Ross has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.