The Motley Fool

ANZ, Leighton Holdings Limited, M2 Group Ltd, Transurban Group: Are they a buy?

Great businesses are worth paying up for. Companies which can pay a stable dividend, drive earnings per share year-in year-out and have management with a predisposition towards growing shareholder wealth over the long term are great investments.

These next four stocks are good businesses but are they worth their high share prices?

Australia and New Zealand Banking Group (ASX:ANZ) is the best ‘big four’ bank on the ASX. But that doesn’t automatically make it a buy. As seasoned investors know, to invest successfully requires us to consider only two prices. The price we pay and the price we sell.

In my opinion, ANZ is currently a hold. The reasoning behind my rating is it’s priced on potential and, indirectly, the interest rate environment. There are many fancy reasons with pages of financial jargon which explain why interest rates impact stocks, dividends, and the market, but for simplicity it comes down to the price difference between fixed income securities and dividends paid.

Although ANZ has tremendous potential in Asia – a distinct growth strategy amongst the big four – it’ll be a slow and steady path to success, and at over 14 times earnings with a book value of 1.95, it’s too high to be a bargain.

Leighton Holdings Limited (ASX: LEI) has been a contentious subject in recent months (years). After cost overruns on huge projects such as Brisbane’s Airport Link and Victoria’s desalination plant, Leighton had negative press coverage which included alleged corruption amongst management figures. In recent times Leighton had to contend with rising debt and slowing resources investment.

However, with a stellar profit over $500 million in its most recent report, Leighton continues to impress shareholders and is proving it’s on the right track moving forward. My biggest concern is the group’s major shareholder, Hochtief, who now own 60% of the company. The number has been creeping higher and higher every quarter. However at the company level, Leighton continues to win contracts and is on track to profits of nearly $600 million in FY14. It currently yields 5.8% and I rate it as a buy.

M2 Group Ltd (ASX: MTU) is the owner of Dodo, eftel and Primus telecom. It, like its competitors, has benefited from rising demand for the internet and general tech offerings from retail and business customers. Dodo and Primus continue to offer fixed internet services which are on-par or superior to its competitors.

Although it has already undergone years of rapid consolidation and profit growth, the future is just as exciting as the past for M2’s shareholders as it moves into an organic growth model and adds new offerings to its arsenal including electricity, gas and insurance. I recently connected my gas and electricity with Dodo and the service was great. Having a greater technology offering and a rapidly growing utility business provides further upside potential for this top dividend and growth stock. I rate it as a buy.

For stable but growing earnings, it’s hard to go past companies which offer monopolistic-like dominance. Transurban Group (ASX:TCL) is the owner of toll roads throughout Australia and the USA. It trades on high multiples and may be deserving of the price-tag, but an investment would require you to be as bullish as me. Over the past 10 years, its total annual shareholder return (not including dividends) is 11.3%. I believe it is priced for perfection but long-term investors will unearth considerable value as it continues to grow its total number of roads and pays a higher dividend. Transurban is a long-term buy.

The top ASX pick you’ve never heard of…

Top Motley Fool analysts just identified their #1 ASX pick for 2014, a small-cap stock that could be poised for big gains (and offers a fat, fully franked dividend!). Discover all the details now, including the name and code, in this FREE investment report, "The Motley Fool’s Top Stock for 2014."

Motley Fool Contributor Owen Raszkiewicz does not have a financial interest in any of the mentioned companies.

FREE REPORT: Five Cheap and Good Stocks to Buy now…

Our Motley Fool experts have FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.7% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.