Is It The Right Time To Buy National Grid plc, Informa plc & Travis Perkins plc?

Bilaal Mohamed asks whether it’s the right time to invest in National Grid plc (LON: NG), Informa plc (LON: INF) & Travis Perkins plc (LON: TPK) for their dividends.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Today I’ll be discussing the outlook for utility company National Grid (LSE: NG), publishing group Informa (LSE: INF) and building materials supplier Travis Perkins (LSE:TPK). Is it the right time to buy any of these FTSE 100 giants?

Inflation-proof

Energy company National Grid has seen its share price reach all-time highs recently, and is now within touching distance of 1,000p. So are the shares over-extended and should we expect a correction anytime soon? I don’t think so. Earnings have been on a steady upward trend for many years, and the share price has naturally followed suit.

This slow-but-steady growth is set to continue with analysts predicting a 6% improvement in earnings for the year just ended, with a further 2% earmarked for each of the next two years. The shares trade on 15.8 times forecast earnings for the year to 31 March 2017, falling slightly to 15.6 for fiscal 2018. This is on a par with recent years and represents fair value.

Utility companies are primarily income plays, and National Grid is no different. The company pays out solid dividends, with 43.77p per share forecast for the last financial year, rising to 44.81p for FY 2017, and 45.79p in FY 2018. This means prospective yields of 4.5%, 4.6% and 4.7%, respectively. This is a solid defensive income play suitable for investors seeking inflation-proof dividends with relatively low risk.

Slow-but-steady

Also reaching all-time highs this year is media business Informa, with the shares punching the 700p mark in recent weeks. Growth has been steady and consistent in the recent past, with single-digit rises over the last five years, and this is expected to continue in the medium term. Consensus forecasts suggest 5% earnings growth for the current year, with a further 4% pencilled-in for next year.

The company is paying respectable dividends, with 20.81p per share forecast for this year, rising to 21.7p next year, meaning prospective yields of 3.0% and 3.2% for the next two years. In fact, you can still get your hands on the latest final dividend for fiscal 2016, before the 28 April ex-dividend date, with the 13.55p per share payout due on 26 May.

So what about the valuation? Informa trades on a forward P/E ratio of 15.6 for this year, falling slightly to 14.9 for the year ending 31 December 2017. The shares look fully-priced to me, given the slow growth, and I can’t see any reason for significant upward movement any time soon. What’s more, the dividends aren’t attractive enough to tempt income hunters.

Bargain builder?

Builders merchant Travis Perkins reported strong full-year results last month, with revenue rising 6.5% to £5.94bn, coupled with underlying earnings growth of 4%. The last three years has seen steady growth for the company that also owns DIY chain Wickes. Is this trend going to continue?

Well, according to the suits in the Square Mile, very much so. They’re talking about a 10% rise in earnings this year, followed by a further 12% improvement next year. Dividend payouts have also been increasing steadily each year, with 50.69p per share forecast for this year, rising to 58.35p next year, offering prospective yields of 2.9% and 3.3% for the next couple of years.

Travis Perkins trades on 13.2 times forecast earnings for the current year, falling to 11.8 for the period ending 31 December 2017. I think the shares are undervalued given the growth outlook, and value investors might want to take advantage of the recent weakness in the price.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

Is the S&P 500 going to 10,000 by 2030? This expert thinks so

One stock market strategist sees animal spirits taking hold and driving the S&P 500 index even higher by the end…

Read more »

Investing Articles

I’m expecting my Phoenix Group shares to give me a total return of 25% in 2025!

Phoenix Group shares have had a difficult few months but that doesn't worry Harvey Jones. He loves their 10%+ yield…

Read more »