LONDON -- There is a lot of negative analysis of the U.K. economy today. Even if the country is in recession, that doesn't mean shares cannot rise. Indeed, the FTSE 100 is actually up 10% since this time last year. Furthermore, a large number of shares currently trade near their highest point of the last 12 months.
I've trawled the market to find the largest companies whose shares are trading within 5% of their 52-week high.
Market Cap (millions of pounds)
Vodafone (ISE: VOD.L)
British American Tobacco
Reckitt Benckiser (ISE: RB.L)
Centrica (ISE: CNA.L)
Compass (ISE: CPG.L)
Associated British Foods
Four of these look interesting for further research:
Vodafone is one of the bluest of the blue-chip shares on the market today. The company is a long-established global titan with a market capitalization pushing 100 billion pounds.
I've speculated previously on the likelihood that Vodafone might pay special dividends to investors in the future. Since then, market confidence in Vodafone's ability to continue paying outsized dividends has increased. This has attracted a raft of investors who have bid the share price up.
Even without any special dividends, the shares still yield more than 5%.
Vodafone's shares now trade near a 10-year high. The forward P/E rating of 11.7 makes the shares appear moderately priced. The likelihood of more special dividends transforms Vodafone shares into a unique blue-chip investment proposition.
If expectations of another bonus payout increase further, the shares should continue their rise. On the other hand, if such hopes are dashed, the price is likely to take a step back.
2. Compass Group
Compass is a large-scale catering and support services supplier to various industries. The shares are currently trading near an all-time high.
While Britain is basking in Olympic glory, Compass is putting food in the stomachs of athletes and spectators at the Games: The group is the catering supplier at five Olympic venues.
Compass has produced stellar returns for shareholders from what might be considered a boring business. In the last five years, the company has increased earnings per share at an average of 25% per annum. In that time, the shareholder dividend has increased by an average of 14% a year. Few shares on the market can boast a record of such quality.
As usual, the market expects investors to pay up for shares in such a successful company. Compass shares today trade on 16.4 times the consensus EPS forecast for 2012, and the shares are forecast to yield just more than 3%. While Compass' shares are more expensive than the average FTSE 100 name, Compass is not an average FTSE100 company.
Centrica is the owner of energy company British Gas.
As might be expected from a utility, Centrica has a healthy dividend yield that has been growing steadily. Against last year's payout, the shares yield 4.9%. The dividend is expected to increase again this year, putting the shares on a prospective income of 5.1%.
Earnings have also increased rapidly in recent years, and another two years of decent growth are forecast. At the moment, the shares trade at 11.8 times the consensus estimate for 2012, falling to 11.1 times the 2013 figure.
The freak high temperatures enjoyed in the U.K. last year were not repeated in the first half of 2012, which helped Centrica report a 14% rise in earnings for the first half of 2012.
At these prices, Centrica looks remarkably similar to Vodafone. Both offer utility services, a chunky dividend, and a modest price.
4. Reckitt Benckiser
Domestic goods manufacturer Reckitt Benckiser is a paragon of corporate success. The company produces brands such as Cillit Bang, Harpic, and Calgon, and such names bring with them pricing power. Reckitt Benckiser uses its brands and dominant position in the market to deliver fantastic returns to shareholders.
In RB's recent interim results, a dividend of 56 pence per share was declared. Ten years ago the figure was just 12.7 pence. In fact, only seven companies in the FTSE 100 have a better record of increasing dividends in the past five years.
Reckitt Benckiser is now rolling out its leading brands to emerging economies, which is playing a big part in increasing group sales.
Reckitt Benckiser's shares are up 6% in the last month and 12% in the last year. The company today trades on a forward P/E of about 14 times the consensus estimate for 2012. The shares are expected to yield 3.7% for 2012.
Although these shares are trading at recent highs, they might not necessarily move higher. That said, the recent high could be a sign that the market is turning positive on the stock. To understand the markets better, get your copy of the free Motley Fool report "What Every New Investor Needs To Know." This free report will be delivered immediately to your inbox.
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Further Investment Opportunities
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David does not own shares in any of the companies mentioned.Motley Fool newsletter serviceshave recommended buying shares of Diageo, Vodafone Group, and Unilever. The Motley Fool has adisclosure policy. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. Try any of our Foolish newsletter servicesfree for 30 days.
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