Thursday tips round-up: Booker Group, Aviva

10th Jul 2014 09:52

Shares of Booker Group, which supplies convenience stores, have re-rated to a price-to-earnings multiple of 20 times, versus the high 20's in the not so distant past. Curiously, that comes, in part, as a result of investors - somewhat oddly - perceiving it as an online retailer. More justifiably, markets are cognizant of the fact that the company's margins did take some damage from the "supermarket wars". Nonetheless, the company's like-for-like sales were 3.6% higher for the 12 weeks to June 20th and the catering sector, which accounts for a third of its sales, is set to grow. There is also every chance for another special return to shareholders of 3.5p this year, to be followed by another payment next July. In any case, the drop in the stock means that it is now offering a yield in excess of 5%. "That looks like a good reason to buy again," writes The Times's Tempus. In its investor day presentation Aviva projected that its holding company cash flow - essentially what is available for dividend payments - will reach £800m by 2016, up from £400m last year. However, analysts had been expecting more. The company is trading at a forecast 3.4% dividend yield. That is ahead of the likes of Prudential, but lags Legal&General, Standard Life, Axa or Allianz. As well, reaching the above target entails a lot of 'ifs', such as cost cutting, lowering servicing costs for intra-group debt and better management of existing written business. Even so, on £800m in cash flow, and assuming all of it is paid out, would put the company on a 2016 dividend yield of 5.5%. The possibility is worth the wait, writes the Financial Times' Lex column.Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.AB