BHP Billiton Limited
With the price of a range of commodities including oil and iron ore having fallen rapidly in recent months, some resources stocks such as BHP Billiton Limited (ASX: BHP) have become relatively attractive income plays. For example, BHP now yields a fully franked 4.5% and, with dividends forecast to rise at an annualised rate of 11% over the next two years, it could become an even more enticing income stock.
Certainly, it is less stable as a business and its share price is more volatile than many other ASX stocks. However, with highly appealing future income potential, such negatives could be outweighed by the positives and may lead to improving sentiment in BHP during the course of the year. As such, now could be a great time to buy a slice of it.
Newcrest Mining Limited
Unlike BHP, Newcrest Mining Limited (ASX: NCM) has largely avoided the difficulties of the commodity markets because its main focus, gold, has seen its price remain much more stable than many other commodities in recent months. As such, Newcrest's bottom line is expected to grow at a rapid rate over the next couple of years, with the market currently pricing in an annualised rise of 19.4% over the next two years.
Its cash flow has increased by an incredible 46.5% over the last year and at an annualised rate of 7.3% over the last 10 years, which means Newcrest appears to be a more financially sound business than the market appears to be giving it credit for. As such, its current price to earnings (P/E) ratio of 25 seems to offer good value for money and it could continue to deliver an excellent return moving forward.
Oil Search Limited
Although it currently yields just 1.1%, Oil Search Limited (ASX: OSH) is expected to increase dividends per share at an annualised rate of 84.3% over the next couple of years and this means that it could be yielding as much as 1.9% next year.
Clearly, this doesn't make it a particularly appealing income play in the short run, but it does show that the company could prove to be a surprisingly strong income stock in the long run. And, with it continuing to trade on a very appealing price to earnings growth (PEG) ratio of just 0.41, it also seems to offer growth at a reasonable price, too.
In fact, this long term growth and income potential, when combined, could cause investor sentiment in Oil Search to pick up and send its share price considerably higher during the course of the year.
Of course, finding the best stocks for the long term is a tough ask – especially when work and other commitments limit the amount of time you can spend trawling through the index for them.
