Shares in asset management and insurance company Standard Life (LSE: SL) were given a boost today as it reported better-than-expected profit for the 2015 financial year. Pre-tax profits were over 9% higher versus 2014, with them standing at £665m and the company said it remains well positioned to cope with the challenging conditions that may persist in global financial markets over the medium term.
Furthermore, Standard Life increased its assets under management by 4% and with its solvency II ratio standing at 162% versus a required level of 100%, it appears to be in a strong position to withstand the one-in-200-year catastrophe that the rules are designed to test.
With shares in Standard Life having fallen by 31% in the last year, they’ve certainly been a major disappointment. However, today’s update proves that it’s a sound business with a great deal of potential. As such, and with its shares trading on a price-to-earnings growth (PEG) ratio of just 0.9 and offering a yield of 5.7%, it appears to be on the cusp of a turnaround.
Shopping for long-term value
Also set to deliver improved share price performance is Morrisons (LSE: MRW). While there are vague rumours of a potential bid, the supermarket chain’s real appeal is with regards to its strategy and the prospect of rising dividends in future. That’s because Morrisons has decided to go back to its core offering of good, honest value and this is likely to resonate well with a customer gradually beginning to enjoy wage growth that’s rising faster than inflation for the first time since the credit crunch.
With Morrisons currently yielding 3%, it may not appear to be a highly appealing income play. However, with its dividend being covered twice by profit, there’s considerable scope for a rapid rise in dividends over the medium term. And with Morrisons due to increase its bottom line by 22% in the 2017 financial year, it appears to be a sound purchase for long-term income investors.
Turnaround potential
Similarly, SSE (LSE: SSE) is also an excellent income play. It yields 6.6% at the present time and while that’s considerably higher than nearly every other stock in the FTSE 100, SSE has the scope to raise dividends yet further. That’s because its dividends are covered 1.3 times by profit, which indicates that there’s sufficient headroom for them to rise by more than inflation in the coming years.
With SSE’s share price having fallen by 9% year-to-date, it has clearly been a disappointment. However, it has turnaround potential on this front since the chances of an interest rate rise have fallen in recent weeks, which makes highly indebted companies such as SSE more appealing. Therefore, it would be of little surprise for SSE’s share price to benefit from improved investor sentiment so as to deliver strong capital gains alongside its high yield.