5 Shares for the Week Ahead
LONDON -- It's the time of year when there is little coming from FTSE 100 companies. So instead of a look at next week's news, I thought I'd examine a handful of companies that I think are well worth considering for the forthcoming year -- ones that have been in the news recently, or whose price movements make them look attractive:
Tesco is a very popular shareholding. But are the shares worth buying now? I think it is, and here's why.
Tesco's post-Christmas price fall was overdone, I reckon, and I added Tesco to the Fool's Beginners' Portfolio. However, more tellingly, Warren Buffett chose to top up his holding. In its recent third-quarter update, Tesco told us its revamp plan is going well, with nearly 300 stores refreshed and more than 3,000 product lines introduced or upgraded. Like-for-like food sales rose by 1.2%, with overall sales up 2.9%.
Tesco is also to pull out of the U.S., just as it exited Japan when it was clear it could not compete with local market leaders. Tesco's directors know when to cut their losses. The rest of Tesco's overseas businesses are doing just fine.
Forecasts for Tesco indicate a dividend yield of around 4.6% on a share price of 336 pence, and I think that is excellent for such a safe company.
Vodafone is another one in the Beginners' Portfolio. The shares reached a high of 191 pence in August before crashing to a low of 156 pence in November. They're back up a bit to 162 pence now.
Tough conditions in Europe which led to some writedown losses, as well as a resulting expectation of a slowdown in earnings, caused the fall. But Vodafone is globally diversified and can handle slumps in some markets without too much pain.
Vodafone's dividend yield should be somewhere between 6.2% and 7% for the year to March 2013, with a pick-up in earnings growth expected for the following year. And with the first-half payout having been lifted by 7.2% to 3.27 pence per share, we should be fairly confident.
Vodafone will also use 1.5 billion pounds of its Verizon Wireless dividend for a share buyback, which will spread future dividend payouts over fewer shares -- and if the price does not appreciate, then the dividend yield should rise.
Centrica shares have been on a bit of a surge, putting on 10% in the past few weeks to reach 340 pence. The rise was spurred further this week by the news that Hinkley Point B and Hunterston B power stations have received approval to operate for a further seven years, from 2016 to 2023.
Centrica is a great dividend payer, and even after the recent price rise, forecasts suggest a dividend yield of around 5% from shares on a modest price-to-earnings ratio of 12. Centrica's dividends are also better-covered than those of some other utilities companies.
People doing a year-end review of their portfolios might do well to consider adding this dependable cash-cow to the mix.
Wolseley is a rare beast -- a FTSE 100 constituent whose share price has galloped. The building-materials firm has seen its price grow from a low of 19 pounds back in December last year to 28.33 pounds today -- close to 50%.
Full-year results in October showed an 18% rise in earnings per share, allowing the dividend to be boosted by a third to 60 pence per share. And then first-quarter results this week showed a 7.6% rise in trading profit from a 2.1% growth in like-for-like sales -- with net debt almost wiped out.
You'd have done well to buy Wolseley shares in November. And it's looking increasingly like there's a good long-term future for this "picks and shovels" company, which should do well from the recovering construction industry.
Royal Bank of Scotland
There must be a point when our bailed-out banks are worth buying again, mustn't there? The Royal Bank of Scotland's share price has hit a 52-week high of just more than 300 pence, surging from a July low of 197 pence.
At the first-half stage, the bank recorded a pre-tax loss of 1.3 billion pounds, but it's forecast to be back in profit for the full year. Analysts have earnings per share of around 17 pence penciled in for this year and 26 pence next, with the 2013 figure putting the shares on a P/E of 11. Is it worth considering as a Christmas present for your portfolio? I'm no banking expert, but plenty of people who are have been buying the shares.
The secret to becoming rich from shares is simple long-term investing in fundamentally sound companies and letting steady growth and dividends power your wealth upward. That's why it's always worth keeping abreast of what news is coming our way each week and doing some background research on promising-looking candidates.
Achieving that near-mythical millionaire status might seem like a pipe dream, but it really is feasible for ordinary everyday investors like you and I. But if you have your doubts, read this free Motley Fool report and see if you change your mind. The report won't cost you a penny, so click here to have a copy delivered to your inbox while it's still available.
The article 5 Shares for the Week Ahead originally appeared on Fool.com.Alan does not own any shares mentioned in this article. The Motley Fool owns shares in Tesco and has recommended shares in Vodafone. The Motley Fool has a disclosure policy.We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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