Thursday tips round-up: Jupiter Fund Management, British American Tobacco

31st Jul 2014 09:33

Fund manager Jupiter's shares are set to offer a yield that makes them worth looking at despite analysts' confusion over just how high a payout they can expect from the company. The business model requires relatively low investment. The company had net cash of £170m at the end of the half-year. About a third of excess cash may be paid out. As well, it intends to funnel about half of its earnings per share as a straightforward dividend to shareholders - equivalent to about 14p per share. As well, the proceeds from the sale of its private client business to Rathbones will allow for a one-off payment of another 4.5p. Hence, the payout this year may rise to 24p or 25p, such that the stock will yield about 6%, giving investors every reason to hold on to the stock, says The Times's Tempus.Ethics aside, tobacco companies continue to be ideal for income seeking investors. Yes, British American Tobacco's interim profits took a hit from the strength of the pound on global foreign exchange markets. However, what one needs to focus on is long-term performance. The company's sales volumes only dropped by 0.4%, but that did mark an improvement on the previous year's 2.7% fall. That is also better than the between 2% and 3% drop seen industry wide. Excluding currency effects sales in fact grew by 3%. The company also has strong brands which it is using to good effect to gain market share in several emerging markets. Then of course there is the matter of its pricing power given clients' addiction. The prospective yield on the shares is 4.1%, rising to 4.4% next year. On a 2014 price-to-earnings multiple of 16.8, falling to 15.5 next year, the stock remains a 'hold', says The Daily Telegraph's Questor.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