Despite fears over the impact of rising inflation on consumer spending power, investor appetite for pub operator Greene King (LSE: GNK) has remained resilient, the stock touching its highest since November earlier this month.
And I can certainly see the enduring appeal in Greene King. While high street spending has indeed been patchier of late, the amount Britons are spending on social gatherings and nights out remains strong.
Against this backcloth the leisure leviathan has proved successful in hiking the prices of its delicious drinks since the autumn. Indeed, sales rose an impressive 4.5% over the crunch Christmas period, and takings struck a record £7.4m on Xmas Day (also up 6% year-on-year).
Break out the bubbly
Look, those expecting spectacular earnings growth may end up disappointed. The company is predicted to report a 1% earnings rise in the year to April 2017, and further modest increases — of 3% and 4% in 2018 and 2019 respectively — are forecast by City analysts as cost inflation weighs.
But in the long term, I believe Greene King should remain a reliable earnings generator thanks to its focus on the wealthier London and South East regions, while the company’s ongoing rebranding programme (the business still has scores of Fayre & Square sites to convert to Hungry Horse) has plenty more mileage.
And a forward P/E ratio of 10.4 times represents a terrific level upon which to latch onto the brewer’s long-term growth story, in my opinion.
Besides, market-busting dividends should offset those disappointed by Greene King’s less-than-spectacular earnings outlook for the next couple of years. A predicted dividend of 34.2p per share for this year (up from an anticipated 33p for fiscal 2017) yields a brilliant 4.6%. And this moves to 4.9% for 2019 thanks to a projected 35.9p reward.
Build a fortune
3i Infrastructure (LSE: 3IN) is another FTSE 250 star that is predicted to deliver plenty of cheer to long-term growth and income investors.
While earnings expansion has been turbulent more recently, 3i is anticipated to put these troubles behind it with rises of 13% and 5% in the years to March 2018 and 2019 respectively. And current forecasts make the Jersey business brilliant value for money, too (3i carries a prospective P/E ratio of 11.7 times as well as a sub-1 PEG rating of 0.9).
Meanwhile, its progressive dividend policy is expected to keep on trucking with a 7.7p per share payout in 2018, up from 7.55p last year and yielding 3.9%. And a forecast 7.9p dividend next year pushes the yield to 4%.
3i generated a return of £146.3m during fiscal 2017, it announced earlier this month, in line with its returns target of between 8% and 10%. And the company generated income of £85.6m thanks to new investments made during the course of the year.
I believe investors can look forward to 3i continuing to delivering the goods, particularly given its terrific diversification by territory as well as sector. And in a further promising omen for future earnings, it noted this month that it had “identified a healthy pipeline of investment opportunities across our target markets, and we have the funding options and market access to continue to invest selectively.”
I believe 3i has what it takes to deliver knockout returns long into the future.