Some investors prioritise capital growth through a rising share price; some prioritise income growth from a rising dividend. But some shares — growth-and-income shares — offer investors a bit of both.
Imperial Tobacco Group (LSE: IMT) (NASDAQOTH: ITYBY.US), United Utilities (LSE: UU) (NASDAQOTH: UUGRY.US) and Hammerson (LSE: HMSO) are three companies from the UK’s elite FTSE 100 index that have grown both their earnings and dividends faster than inflation and are forecast to continue doing so.
Imperial Tobacco
Imperial Tobacco has averaged earnings-per-share (EPS) growth of 7.3% over the last three years. Management said within this year’s third-quarter update that the company is on track to deliver full-year growth within the board’s annual earnings target range of 4-8% — albeit towards the lower end (before the beneficial impact of share buybacks).
Meanwhile, dividend growth has been in double figures over the period, and the board lifted this year’s interim in line with its intention to grow the payout by 10% a year over the medium term.
At a recent share price of 2,232p Imperial Tobacco is on a forward price-to-earnings (P/E) ratio of 10.7 and offers a prospective dividend income of 5.2%.
United Utilities
The now misnamed United Utilities is a pure regulated water company, having disposed of its other utilities businesses. The company delivered 11% EPS growth last year and analysts are forecasting a similar level of growth for this year.
Dividend growth last year (7.2%) and the forecast for this year (5%) are in line with the board’s policy of targeting an annual growth rate of 2% above retail price inflation through to at least 2015.
At a recent share price of 696p, United Utilities is trading on a forward P/E of 15.9 and offers a prospective dividend income of 5.2%.
Hammerson
Hammerson is a retail property company operating in the UK and France. The group specialises in prime regional shopping centres, retail parks and premium designer outlet villages.
Hammerson increased EPS by 8.3% during 2012 and lifted its dividend by 6.6%. For this year’s first half, EPS was up 8.8% and the interim dividend 7.8%. The board is anticipating “strong growth in earnings and dividends over the three year period to 2015”. The target is to grow EPS by more than 3% above retail price inflation.
At a recent share price of 500p, we’re looking at a 9% discount to net asset value (a more useful measure of value than P/E for property companies) and a forecast dividend yield of 3.8%.