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So it’s the FTSE 100 for dividends, and the FTSE 250 to seek out progress shares, proper?
Effectively, there are extra dividend yields of 8% and better to be discovered within the FTSE 250 proper now. And within the FTSE 100, I’m seeing shares on very low PEG ratios, a key progress measure.
Progress valuation
The value-to-earnings (P/E) ratio compares a inventory worth to anticipated earnings. Different issues equal, decrease is best. However higher earnings progress forecasts will sometimes imply the next P/E.
That’s the place the PEG is available in. And we get it by dividing the P/E by forecast earnings progress. Something below about one can point out a attainable progress purchase. And if we see 0.7 or much less, that may be additional particular.
FTSE 100 progress
The next desk reveals some FTSE 100 shares with what look to me like enticing PEGs. And a few of them shock me. It reveals P/E and earnings per share (EPS) progress forecasts for the subsequent three years, along with PEG ratios.
| Inventory | P/E 2024 |
EPS progress 2024 |
PEG 2024 |
P/E 2025 |
EPS progress 2025 |
PEG 2025 |
P/E 2026 |
EPS progress 2026 |
PEG 2026 |
| Lloyds Banking Group (LSE: LLOY) | 9.5 | -23% | n/a | 7.7 | +23% | 0.33 | 6.4 | +19% | 0.34 |
| NatWest Group | 8.4 | -19% | n/a | 7.8 | +8.0% | 0.98 | 6.9 | +14% | 0.49 |
| Marks & Spencer | 12.5 | +22% | 0.57 | 11 | +15% | 0.73 | 10.2 | +7.5% | 1.4 |
| Related British Meals | 14.5 | +40% | 0.36 | 13.5 | +5.1% | 2.6 | 13 | +6.0% | 2.1 |
| Authorized & Normal | 11.2 | +209% | 0.05 | 9.9 | +14% | 0.71 | 9.0 | +9.6% | 0.94 |
One factor instantly appears clear from that desk — 2024 is a really uncommon yr.
Each the banks, Lloyds and NatWest, are set to report falls in earnings this yr. And that’s not what progress is manufactured from, in any respect.
However simply take a look at how low the forecast PEG ratios are for 2025 and 2026! That’s the form of factor that even small-cap progress seekers could be drawn too — and these two are high FTSE 100 banks.
Dividend or progress
This additionally reveals that the excellence between earnings investing and progress investing isn’t all the time clear.
I imply, on high of these low ahead P/E and PEG measures, Lloyds and NatWest supply potential dividend yields of 5% and 5.2%, respectively.
Each reported earnings falls within the first quarter, however they’re each upbeat concerning the future.
Even on this powerful yr, Lloyds expects to report a CET1 ratio of about 13.5%. It’s a key measure of liquidity, and that will be sturdy. And its P/E appears set to drop to about half the FTSE 100 common.
Verdict
Then we see Related British Meals on a low PEG this yr because it will get again to power, however then the expansion attraction wears off.
And these contrasts sum up the present state of the marketplace for me. I wouldn’t purchase any of those simply on these measures, and I’d should analysis the potential positive aspects and the dangers of every one.
However sentiment and rational valuation appear like they’re miles aside for some FTSE 100 shares in the intervening time. And that may imply a good time to search for anomalies and snap up cut price buys.
