Should You Buy These 5 FTSE 100 Shares? CRH PLC (UK) (CRH), Randgold Resources Ltd. (ADR) (GOLD)

United Utilities
Although water provider United Utilities (LSE: UU) provides income investors with juicy dividends, I think the group’s shares remain too high at present levels.

City estimates put the dividend yield for the year ending March 2013 at 4.6%, well ahead of the FTSE 100 average, and the income is expected to rise to 4.9% and 5.1% in 2014 and 2015, respectively. In addition, the dividend is buttressed by respectable earnings growth forecasts — analysts expect earnings per share to rise 14% during 2013, followed by 9% and 7% growth in 2014 and 2015.

However, these shares currently change hands at what I consider to be over-the-top prices. A P/E ratio of 18.5 for the current year is due to drop to 16.9 and 15.8 in 2014 and 2015, according to City forecasts.

Furthermore, the effect of forthcoming changes to water industry regulations — to be discussed next year ahead of implementation across the 2015-2020 period — could severely crumple earnings over the longer term.

Next
I believe that clothing retailer Next (LSE: NXT) should continue to shrug off tough conditions on the High Street and post resilient earnings expansion.

January’s trading update revealed a 4% rise in Next Brand sales from the beginning of November to Christmas Eve last year, while revenues at its Next Directory online and catalogue arm leapt an impressive 11.2%. Investment in this division in particular should support future growth.

City analysts expect earnings-per-share growth to maintain double-digit momentum over the medium term — 10% increases are expected during this year and next.

A decent dividend is also on offer to beef up the investment case, with brokers projecting a yield of 2.6% and 2.9% for 2014 and 2015.

Next currently trades on a P/E ratio of 13.4 and 12.2 for the current year and next. I’m convinced this rating is justified given the company’s proven ability to grow earnings despite enduring weakness in the U.K. retail sector.

The expert view to growth elsewhere
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The article Should You Buy These 5 FTSE 100 Shares? originally appeared on Fool.com and is written by Royston Wild.

Fool contributor Royston Wild has no position in any stocks mentioned, and neither does The Motley Fool. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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