Prudential (LSE: PRU) was grabbing the headlines in Wednesday business after announcing massive restructuring plans that will see it split into two separate entities.
The FTSE 100 business has long been an excellent play on the lucrative emerging markets of Asia. And the brilliant profits potential of Prudential’s push into these regions was underlined by news today that it will see it divide itself into M&G Prudential, with a focus on the UK and Europe; and Prudential PLC, which will be devoted to Asia, the US and Africa.
Both entities are expected to be listed on Britain’s elite index and shareholders will have holdings in both entities once the spin-off completes.
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International star
On the back of these exceptional far-flung growth markets Prudential has reported strong and sustained earnings expansion for many years now. And City analysts are expecting this run to continue with rises of 4% this year and 9% in 2019.
Not only do current forecasts result in a forward P/E ratio of just 12.8 times, but they also lead to expectations of further dividend growth. Last year’s 47p per share payout is expected to rise to 52p in 2018, and again to 55.7p in 2019, meaning investors can enjoy meaty yields of 2.7% and 2.7% for this year and next.
I am excited by Prudential’s planned demerger and see this as a fresh chapter in the company’s compelling long-term growth story.
Building back up
But whether or not you fancy the cut of Prudential’s jib, I reckon investors — and particularly those with one eye on monster dividend yields — need to pay serious attention to Bovis Homes Group (LSE: BVS).
The housebuilding giant found itself sat on the naughty step last year after tales of shoddy work forced it to cut construction rates last year and refocus its attention on quality at the expense of quantity.
Having doubled-down on repairing its battered reputation however, Bovis is now looking forward again and in 2018 is seeking to cook up “a controlled increase in volume.” Profit before tax slumped 26% in 2017, to £114m as it put the brakes on build rates, but helped by its formidable cash flows and strong outlook, it still hiked the full-year dividend 6% to 47.5p per share.
What’s more, the company said that it plans to pay special dividends equating to £60m — or 45p per share — towards the end of 2018, and that a total of £180m will be forked out on such payments in the three years to 2020.
City analysts are expecting Bovis to roar back with a 38% earnings recovery in 2018, and why not? After all, the FTSE 250 firm commented that it has witnessed “good demand” in first eight weeks of the year, “with average sales per site per week up 14% to 0.5 and pricing ahead of expectations.” And the number crunchers are forecasting an extra 16% rise next year too.
As I said, dividend chasers should also be excited by Bovis as predicted rewards of 97.6p and 102.6p for 2018 and 2019 respectively yield a monster 8.3% and 8.8%.
Despite its supreme profits picture, the housebuilder changes hands on a forward P/E ratio of 12.5 times. This is much too cheap in my opinion and puts an exclamation point on the company’s strong investment case.
