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3 top LSE shares I’d buy for 2020

The London stock exchange is packed with opportunities. For example, I’d be keen to buy shares in the three companies below.

Power Solutions 

Modular power generator provider Aggreko (LSE: AGK) is listed in the FTSE 250 index and the valuation looks attractive, to me. With the share price close to 855p, the forward-looking earnings multiple for 2020 sits just below 14 and the anticipated dividend yield is around 3.3%.

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The directors have done a good job of holding the dividend broadly flat since 2015, despite a general decline in earnings. The good news is that City analysts following the firm predict rising earnings this year and a modest single-digit percentage increase in the dividend. It seems to me that trading could have stabilised after the wind-down experienced by the firm after higher-than-normal demand during the period around the London Olympics in 2012.

The share-price chart tells the story, with a big drop in the price since 2012. But there’s a nice, flat consolidation pattern since the beginning of 2018, which encourages me. In November, the company reported steady trading in line with the directors’ expectations, so expect earnings and the dividend to rise from here.

Fast-moving consumer goods

The FTSE 100’s Reckitt Benckiser (LSE: RB) operates in the areas of health, hygiene, post-natal and home products. And generally, consistent cash flow has been driven by the success of the firm’s many popular brands.

However, earnings and dividends have been slipping a little lately, and the shares have been trading below the highs set in mid-2017 ever since then. But the operational problems are being addressed by the management team, and I’m optimistic that they will prove to be temporary.

Meanwhile, the valuation looks more attractive than it has done for quite a while. A slightly murky outlook can work wonders for finding value among high-quality companies, so we could be seeing a decent opportunity with Reckitt Benckiser right now.

With the share price at 6,226p, the forward-looking price-to-earnings ratio is just over 19 for 2020 and the anticipated dividend yield is a little over 2.7%. That’s not a bargain-basement valuation, but I reckon it qualifies as being a fair price for a business with a decent underlying business.

Premium alcoholic drinks

Premium alcoholic drinks producer Diageo (LSE: DGE) is known for its brands such as Guinness, Baileys, Captain Morgan, Smirnoff, Johnnie Walker, Tanqueray and others. They sell well, customers keep coming back for more, and the company’s cash inflow tends to grow every year.

Such attractive characteristics are good for the dividend, which has been going up too. City analysts expect further progress in the current trading year to June 2020 and again the year after that. We are talking about mid-to-high single-digit percentage increases in both earnings and the dividend. Diageo is trading and growing well, just as we have become used to over the years.

With the share price at 3,279p, it’s down a little from its highs of last summer, but not by much. Meanwhile, the forward-looking earnings multiple for the trading year to June 2021 is just over 22 and the anticipated dividend yield is around 2.3%. No super bargain on offer here, but this is a great, high-quality business and I’d be tempted to pay up, then hold the shares for the long term.

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Kevin Godbold has no position in any share mentioned. The Motley Fool UK has recommended Diageo. 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.