Income potential
While all the talk surrounding HSBC (LSE: HSBA) (NYSE: HSBC.US) is of whether the bank will relocate to Asia, the real focus for investors should be its income potential. That’s because HSBC currently yields a whopping 5.5% and, with its bottom line set to rise over the next two years, it is expected to increase dividends per share by 5.8% next year. This equates to excellent real-term growth in income over the short to medium term.
And, with HSBC’s dividend being covered 1.6 times by profit, it appears to be highly sustainable and also offers scope for an increase even if profitability does disappoint. On this front, HSBC needs to reduce its costs and, over the next few years, this could provide its bottom line with an additional boost. Furthermore, with a price to book (P/B) ratio of just 0.95, HSBC still offers excellent value for money even though its share price has risen by 7% in the last month.
Value for money
Although part-nationalised RBS (LSE: RBS) (NYSE: RBS.US) has not been a major topic of conversation in this year’s election, its future is highly dependent upon the sale of the government’s stake. Clearly, RBS is not yet back at full health, so a sale of shares may be some way off. However, the decision to eventually sell the government’s stake could improve investor sentiment – just as it did for sector peer, Lloyds, which has seen its share price rise by 163% in the last three years – since it indicates that the bank is capable of standing on its own rather than requiring government support.
As such, buying now for the medium to long term could allow investors to benefit from improved market sentiment. And, with a P/B ratio of just 0.65 and a return to profitability last year, RBS seems to offer excellent value for money as well as improving financial performance.
Attractive yield
It can be a real challenge to find stocks that offer a potent mix of income, growth and value. However, Legal & General (LSE: LGEN) seems to do just that. For example, it currently offers a yield of 5.1%, which is vastly more attractive than the FTSE 100’s yield of around 3.5%. Furthermore, Legal & General is expected to post earnings growth of 13% in the current year and 10% next year, both of which are well ahead of the FTSE 100’s mid to high single-digit growth forecast.
In addition, Legal & General currently trades on a price to earnings (P/E) ratio of just 13.7, which is much lower than the FTSE 100’s P/E ratio of 16. As a result, now could be a great time to buy Legal & General, which is more attractive than the FTSE 100 when it comes to growth, income and value.