Why SABMiller plc Is A Top ISA Buy

Why should SABMiller plc (LON:SAB) warrant a segment of your ISA allocation this year?

Chris Nials

Published 11 March, 2014 11:16 am GMT

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

There are a couple of indicators in the Nials family household that Spring has sprung:

Firstly, I become physically unable to ever want any pancake-related item of foodstuff anywhere near my person for at least another year.

Secondly, my inbox becomes clogged with emails from numerous financial institutions reminding me that it’s ISA season again. Large in number they may be, but they raise a good point. Stocks-and-shares ISAs should be a key part of any long-term investor’s armoury — they do provide tax-free returns after all!

One of the challenges with leaving it to (or as there’s still the best part of a month left – close to) the last minute before the 5 April deadline, is figuring out quickly what shares to buy into. So, in order to help, let’s have a look at one stock that I think would be a stellar contender for a portion of your £11,520 allocation: SABMiller (LSE: SAB) (NASDAQOTH: SBMRY.US).

To start with, you cannot argue that SABMiller is a FTSE 100 stalwart. It has operations in 75 countries across the world, and sells over 20 billion litres of lager per year. It has a market cap of around £47bn, making it the second biggest brewer in the world after Anheuser Busch InBev, with household name brands such as Fosters, Miller, Grolsch and Peroni under its wing.

So, what about its financials? Well, SABMiller currently trades on a P/E of 13.29, so perhaps could be considered relatively well priced at this moment in time. With regards to dividends, its yield is currently just under 2.4%, so well below the 3.5% FTSE 100 average. However, over the past couple of years its dividends per share has been on the increase, posting totals of $81 in 2011, $91 in 2012 and $101 in 2013.

The main reason, however, as to why I would consider SABMiller a great selection for your ISA is because of its growth potential. In its last half-year results (released in November last year), it posted a 5% rise in group profits. Its basic EPS was up a solid 8%, too.

And that’s just in the short term. SABMillers’s long-term growth has been solid as well. In fact, the share price is up over 318% since March 2009. So, to apply a pound value to that, if you invested your entire £11,520 allocation in SABMiller shares and saw similar growth, they would be worth over £36,600 in just five years’ time.

And when you remind yourself that that’s nearly £37k of tax-free profit, you’ll hopefully understand why this beverage giant is firmly in my thoughts.