Today I am looking at three FTSE superstars offering terrific value for money.
HSBC Holdings
The scandal surrounding HSBC (LSE: HSBA) (NYSE: HSBC.US) and the misconduct of its Swiss unit shows no signs of disappearing from the front pages, and Sky News this week reported that the bank is planning to overhaul its embattled boardroom. The company faces further troubles for sure, particularly as global regulators get tough, but I believe that the bank remains a compelling earnings pick as revenues from Asia take off in the years ahead.
This view is shared by the City’s band of analysts, who expect “The World’s Local Bank” to bounce back from last year’s 18% earnings decline with a meaty 17% increase in 2015, a figure that creates a tasty P/E multiple of just 11.2 times prospective earnings — any reading below 15 times is widely considered stellar value. And this drops to 10.5 times for 2016 amid predictions of a 5% earnings improvement.
And thanks to the bank’s robust balance sheet — HSBC sailed past the European Banking Authority’s minimum capital requirement of 5.5% last November with a reading of 9.3% — dividends are expected to continue rolling along at market-busting levels. Projected payments of 51 US cents per share for 2015 and 54 cents for 2016 create vast yields of 5.6% and 5.9% respectively.
Taylor Wimpey
The supportive trading backdrop for Taylor Wimpey (LSE: TW) and its construction peers was underlined this week by latest data from the Royal Institute of Chartered Surveyors (RICS). This showed 21% of its surveyors reporting house price rises in March, up from 15% the previous month, while expectations of price increases in the next 12 months also picked up.
Indeed, an environment of severe housing shortages — combined with improving lending conditions and government initiatives to help get first-time buyers on the ladder — is expected to blast earnings higher across the housebuilding sector. And for Taylor Wimpey growth of 29% and 13% for 2015 and 2016 correspondingly is expected, creating P/E ratios of 11.4 times and 10.2 times for these years.
These resplendent growth forecasts, combined with Taylor Wimpey’s outstanding cash generation, is anticipated to finance a gargantuan dividend of 9.1p per share in 2015, creating a yield of 5.1%. And a predicted payout of 9.8p for next year shoves the yield to an even-better 5.9%.
Amlin
Insurance leviathan Amlin (LSE: AML) has suffered from a backdrop of intensifying competition in recent times, and pre-tax profit slipped more than fifth last year to just £258.7m. This came about even though net written premiums rose 8.1% to £2.28bn.
These competitive pressures are expected to drive earnings at the business 13% lower in 2015, following on from last year’s 21% decline. But the firm is expected to stage a recovery from next year onwards, and a 1% improvement is currently pencilled in. As a consequence, Amlin deals on a P/E multiple of just 12.4 times through to the close of 2016.
And with the insurer remaining confident over the long-term potential of its key markets, the City believes that dividends should continue to chug higher. An estimated payout of 28.4p for this year produces a meaty 5.5% yield, while a predicted dividend of 29.6p results in a yield of 5.7%.