Barclays
As with many of its banking peers, Barclays (LSE: BARC) (NYSE: BCS.US) is aiming to significantly increase the proportion of profit that it pays out as a dividend. In fact, when it conducted a share placing in 2013 it stated that a payout ratio of 45% was within its sights and, in the current year, it is expected to pay out around 35% of profit as a dividend.
This leaves scope for further dividend growth moving forward and, when you consider that Barclays is expected to grow its bottom line by 19% next year, it means that the bank’s dividends could rise at a rapid rate due to the dual effect of an increasing payout ratio and excellent earnings growth. And, with interest rates set to stay low over the medium term, Barclays’ dividends could be the catalyst to push its share price northwards at a rapid rate.
ICAP
Shares in broking firm, ICAP (LSE IAP), have soared by 21% since the turn of the year, which is well ahead of the FTSE 100’s performance. Of course, it’s easy to see why, since ICAP is forecast to increase its bottom line by a hugely impressive 19% in the current year. This puts it on a price to earnings growth (PEG) ratio of just 1, which indicates that its growth prospects are on offer at a very reasonable price.
Of course, the last few years have been somewhat disappointing for ICAP, with its earnings expected to be around 25% lower in the last financial year than they were five years ago. Despite this, the company’s shares are up 40% in the same time period and, with growth set to return this year, investor sentiment could tick up and cause ICAP’s share price to keep moving upwards.
Schroders
Shares in fund manager, Schroders (LSE: SDR), have risen by an impressive 25% since the turn of the year, as a higher wider index level means more fees for the asset manager. And, with a beta of 1.4, any further gains in the FTSE 100 should send Schroders’ share price to even higher highs.
However, the General Election and the uncertainty surrounding it could cause weakness in Schroders’ share price in the short to medium term. That’s especially the case since it offers an earnings growth rate that is roughly in-line with that of the wider index (8% per annum during the next two years) and yet it trades at a premium to the FTSE 100, with Schroders having a price to earnings (P/E) ratio of 18.8 versus 16 for the wider index. As such, it may be worth waiting for a keener price before adding Schroders to your portfolio.
Hargreaves Lansdown
Shares in Hargreaves Lansdown (LSE: HL) were weaker this week as investors reacted to the news that co-founder, Peter Hargreaves, has stepped down from the board. And, while the reason for his departure is to spend more time pursuing outside interests, the performance of the company in the current year is rather disappointing, with Hargreaves Lansdown expected to grow its bottom line by just 1%.
Of course, this follows a number of years of excellent growth and, in addition, the company is forecast to return to double-digit growth next year with a rise of 15% in its bottom line. However, with such a major departure from its board and the fact that it trades on a PEG ratio of 2, there seem to be better opportunities to invest elsewhere.