BT
With BT (LSE: BT-A) (NYSE: BT.US) offering broadband customers access to BT Sport for free, as well as the various other deals that it has had on its products in recent years, many investors are understandably wondering whether BT is going to be able to monetise these new customers. After all, BT exists to turn a profit, and the costs of its sports offering, for example, far outweigh the revenue it receives for it.
However, BT is slowly developing a significant amount of customer loyalty which, in the longer term, should allow it to increase prices, margins and profitability. So, it seems as though the market may be somewhat behind the curve when it comes to BT’s longer term growth potential.
In the meantime, BT has the potential to increase the income return of its shareholders. For example, it currently has a payout ratio of just 43%, which means that its current yield of 3.1% could become considerably higher over the medium term.
Standard Chartered
2013 was a disappointing year for Standard Chartered (LSE: STAN), with its bottom line falling by 17%. In fact, in prior years it had been the best performing of the UK-listed banks when it came to profitability, with its focus on Asia helping it to sail through the global financial crisis.
In recent months, though, that exposure has been to its cost, since China in particular has experienced a slowdown in its growth rate. However, for longer-term investors the region still holds huge potential, with it offering a far superior rate of growth to the US and Europe and the chance to access a vast market of new borrowers.
Despite such excellent prospects, Standard Chartered trades on a price to book (P/B) ratio of just 0.75, which indicates that it is extremely cheap at the present time. As such, it could be worth buying right now for its long term growth potential.
British American Tobacco
While cigarette producers such as British American Tobacco (LSE: BATS) continue to enjoy supremely high barriers to entry which protect their margins and profitability, a new threat has emerged in recent years that could have damaged that dominance somewhat.
That threat is e-cigarettes and, encouragingly, British American Tobacco took the threat extremely seriously and released its own e-cigarette brand called Vype. Although only small fry compared to its cigarette brands, Vype nevertheless has the potential to dominate a new and fast-growing market that seems to be popular among younger people.
In addition to having a sound strategy, British American Tobacco continues to offer its shareholders a fabulous return. For instance, return on equity has averaged over 50% per annum over the last three years, which shows that British American Tobacco remains a highly lucrative investment with huge potential.