RSA Insurance Group plc (LON:RSA)
Insurance giant RSA Insurance Group (LON:RSA) has recently initiated a massive overhaul of its dividend policy in order to boost near-term investment, and underpin lucrative shareholder payouts further out. But I believe that uncertainty over future dividends in the meantime should prompt investors to look elsewhere for more dependable income stocks.
The company saw its combined operating ratio rise to 95.4% last year versus 94.9% in 2011, which, in turn, pushed operating profit 6% lower, to £684m. RSA Insurance Group (LON:RSA) is becoming increasingly bashed by rising operational and claim costs, as well as increased insurance rate competitiveness, and slashed last year’s dividend to 7.3 pence, from 9.2 pence in 2011.
EPS is expected to explode 31% in 2013, according to City estimates, before growth slows to 3% the following year. Still, the company is expected to remain relatively cheap compared to a forward earnings multiple of 10.2 for the whole non-life insurance sector — figures of 9.5 and 9.2 are pencilled in for 2013 and 2014, respectively.
However, the spectre of further earnings pressure, and consequent implications for the dividend moving forwards, represents too much of a gamble, in my opinion.
SABMiller plc (LON:SAB)
I reckon that global beverages behemoth SABMiller plc (LON:SAB) is set to shoot higher as it increases its footprint in key emerging markets.
The company — whose portfolio of more than 200 beer brands include Peroni, Grolsch, and Pilsner Urquell — saw revenues increase 17% in quarter three, or 8% on an organic basis, with total volumes rising 6% on year. Global lager sales rose 2%, pushed by Latin American growth of 6%, and African demand rising 4%.
City brokers anticipate EPS to have risen 4% in the year ending March 2013, with a return to double-digit growth expected over the medium term — rises of 19% and 12% are expected in 2014 and 2015, correspondingly. In my opinion the brewer’s history of generating meaty EPS growth in recent years justifies the company’s current premium, with a P/E ratio of 20.3 and 18.2 for this year and next.
A rapidly improving dividend policy sweetens the deal, with an expected payout of 63 pence for the last fiscal year anticipated to rise to 74.2 pence and 83 pence in 2014 and 2015, respectively.
J Sainsbury plc (LON:SBRY)
I think that J Sainsbury plc (LON:SBRY)’s should continue to snatch market share from its beleaguered supermarket rivals. The chain is set to drive higher as rising activity at its “online and “convenience” divisions, new store openings, and active brand-improvement drive rings up solid revenue growth.
An expected 6% increase in EPS for the year ending March 2013 is set to advance 5% in the current year before edging 6% higher in 2015.
Sainsbury’s currently changes hands on a P/E rating of 12.4 and 11.7 for 2014 and 2015, which compares favorably to an average forward earnings multiple of 13 for the entire food and drug retailers sector.
As well, the supermarket is an excellent deliverer of equity income, with forecast yields of 4.6% and 4.8% well above the average for Britain’s 100 largest-listed entities. The company has steadily increased the dividend for many years, and I expect this to continue as earnings ramp up.
Zone in on other sterling stocks
If you already hold shares in these companies, check out this newly updated special report, which highlights a host of other FTSE winners identified by ace fund manager Neil Woodford.
Woodford — head of U.K. Equities at Invesco Perpetual — has more than 30 years’ experience in the industry, and boasts an exceptional track record when it comes to selecting stock market stars.
The article Are These FTSE 100 Shares a Buy? originally appeared on Fool.com.
Royston Wild does not own shares in any of the companies mentioned in this article. The Motley Fool has no position in any of the stocks mentioned.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
