Having risen by 30% in the last year, it is perhaps of little surprise that Transurban Group (ASX: TCL) trades at a premium to the wider index and also to its sector. After all, that kind of performance is extremely strong and shows that investor sentiment in the company has been upbeat.
So, a price to book (P/B) ratio of 2.99 versus 1.31 for the ASX and 1.74 for the transportation sector is somewhat expected, but this doesn’t necessarily mean that Transurban will struggle to continue its share price strength.
That’s because it offers investors double-digit dividend growth over the next two years, with Transurban’s dividends per share forecast to rise by 11.6% per annum during the period. This could not only boost your income, but also cause Transurban to become more in vogue among investors, thereby pushing its share price higher.
BHP Billiton Limited
When the going gets tough, stocks such as BHP Billiton Limited (ASX: BHP) really get going. Clearly, trading conditions within its commodity markets are tough but, with a focus on cost cutting and rationalising its operations, BHP is delivering better results and brighter prospects than many investors had thought possible just a handful of months ago.
This is evident from the company’s recent share price performance, with BHP seeing its valuation soar by 15% since the turn of the year, versus a 9% rise in the ASX’s level. And, with BHP trading on a P/B ratio of just 2.14, it seems to offer good value for money when the diversity of its operations and quality of the company are taken into account. As such, it could make a real impact on your bottom line over the medium term.
One possible effect of a falling interest rate is higher inflation and, while the current level of 1.7% is relatively low, it could move much higher over the medium term. That’s why stocks such as AMP Limited (ASX: AMP) could prove to be strong performers, since it is forecast to increase dividends per share at an annualised rate of 9.8% over the next two years.
This should ensure that investors in the stock still receive a generous real terms increase in their dividends. And, with AMP currently yielding a very impressive 3.9%, it could become a very in-demand income play moving forward.
The effect of this could be a rising share price and AMP seems to be worth buying right now for its medium to long term potential.
Of course, finding the best stocks for the long term is a tough task – especially when work and other commitments limit the amount of time you can spend trawling through the index for them.
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Motley Fool contributor Peter Stephens owns shares in BHP Billiton.
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