BP
The BP (LSE: BP) (NYSE: BP.US) share price continues to be buffetted in the aftermath of the Gulf of Mexico oil spill. With its half-year results, the company announced that just $300m of the original $20bn provision remains. If further claims beyond this have to be met, they will come out of BP’s future income.
While that news may have spooked some investors, the 12.5% increase in the Q2 dividend is a great sign of management confidence.
Analyst forecasts for the full year are for earnings per share (EPS) of $0.80 and a dividend of $0.37. At today’s price, that is a price-to-earnings (P/E) ratio of 8.8 and a yield of 5.2%. Another significant dividend hike is expected for 2014, pusing the yield to 5.6%.
Aggreko
Shares in power-supply company Aggreko (LSE: AGK) have had a great run, more than doubling in the last five years. In that time, sales have risen at a similar rate. The increase in fleet utilisation has produced dramatic increases in profits and shareholder dividends. Back in 2007, Aggreko reported net profits of £81m. By 2012, this was nearly £280m. In that time, dividends per share increased from 8.69p to 23.9p.
This success led the market to award Aggreko a super-high rating. That is why news in November of slower trading at the company led to a sharp sell-off. Aggreko shares now trade near a two-year low.
Aggreko shares are today priced at 17.2 times forecast 2013 profits. That’s the cheapest that they have been in a long time.
Imperial Tobacco
The most recent results from cigarette firm Imperial Tobacco (LSE: IMT)(NASDAQOTH: ITYBY.US) revealed a 6% decline in cigarette sales and a 3% EPS drop. It should come as no surprise to learn that the market is now pricing Imperial Tobacco at a substantial P/E discount to the average FTSE 100 company.
Imperial today trades at 11.5 times 2012 earnings, versus 17.2 for the average blue chip. Using the consensus of analyst forecasts for this year, Imperial’s P/E is 10.6. That’s another big discount to the FTSE average of 14.5.
Like Aggreko, the shares today trade near a two year low. Imperial traded at an all-time high near 2,700p before the credit crunch. As tobacco consumption declines, I expect that price will not be seen again.
With the prospect of a 5.2% yield, many investors will be holding Imperial Tobacco for the income. However, our team of analysts here believe that there is a better dividend share available in the FTSE 100 today. Their analysis is available free of the charge in their report “The Motley Fool’s Top Income Share For 2013”. To get this free report today, just click here.
> David does not own shares in any of the companies mentioned.
