Barclays
It may seem somewhat surprising that shares in Barclays (LSE: BARC) (NYSE: BCS.US) have outperformed the FTSE 100 during the last year. Certainly, it’s by just 1%, but shows that even when it is going through regulatory challenges, allegations of wrongdoing and a major transition, Barclays is able to post index-beating gains.
And, looking ahead, there could be much more to come. That’s because Barclays trades on a very low price to book (P/B) ratio of just 0.65, which indicates that significant upside could lie ahead. And, the catalyst for future share price gains could be a rise in the bank’s dividend, with dividends per share expected to increase by a third in each of the next two years. As such, continued FTSE 100-beating performance looks likely, thereby making Barclays a strong buy at the present time.
IG
On the face of it, IG (LSE: IGG) does not appear to be an appealing investment. For starters, its bottom line is forecast to fall by 9% this year, with losses from the Swiss franc’s recent move set to hurt the company in the short run. And, with IG trading on a price to earnings (P/E) ratio of 19.7, its shares appear to be rather richly valued.
However, when the company’s growth prospects for the next two years are taken into account, it is a different story. For example, IG is expected to increase earnings by 19% next year and by a further 9% in the following year. This puts it on a price to earnings growth (PEG) ratio of 0.9, which indicates that while its future may be volatile, it could post strong gains over the medium term.
Beazley
While Beazley (LSE: BEZ) does trade at a significant discount to the wider index, it is the company’s income prospects that offer the greatest appeal to investors. That’s because, while there is significant scope for an upward rerating due to Beazley having a P/E ratio of 12.5 versus 16 for the FTSE 100, its dividends are forecast to rise rapidly in future. For example, next year they are due to be 11.6% higher, and this puts Beazley on a forward yield of 3.6%.
Furthermore, Beazley has significant dividend growth prospects post-2016. That’s because it has a payout ratio of just 40%, which provides it with the scope to increase dividends even if earnings growth is volatile and disappoints in the short run. As such, Beazley seems to be a strong buy right now.