Every investment portfolio benefits from a spread ofstalwartstocks that you can rely on to keep performance ticking over. Do these three fit the bill?
Powered ByGas
Utility companies are regarded as the ultimate portfolio stalwarts, but as investors in British Gas ownerCentrica (LSE: CNA) have discovered, no stock offers complete reliability. In fact, Centrica has been morevolatile than manyon the FTSE 100, and currently trades 37% lower than three years ago. It hashas been hit by a variety of threats , includingEd Milibands price freeze pledge, mild winter weather, growing domestic gas market competition, and plunging oil andgas prices.
Lately it has been volatile in a good way, rising more than 10% thisyear, driven by the oil price resurgence. To add to the excitement,itis intalks over a tie-up with the oil and gas production arm of French energy colossus Engie, would allow both companies to cut costs and boosteconomies of scale. If you think the oil price rise has further to go (we may know more after the Doha talks on Sunday), then todays valuation of 13.77 times earnings looks tempting. Either way, a yield of5.08% helps preserve its stalwart status.
A Shadow Of Itself
Stalwarts aint what they used to be. At least,Rolls-Royce(LSE: RR) isnt. After giving investors a smooth ride for years, lately things have been embarrassingly bumpy. The share price is down 40% over the past three years, although it has rallied 20% over three months, asinvestors got over the shock of that 50% dividend cut in February, and decided that several consecutive months without a profit warning wassomethingworthcelebrating.
New chief executive Warren East is thinking big, or rather small, with plans to reduce costs and simplify operations, inthe hope of putting the companys massive 76.4bn order book to more profitable use. This typeof overhaul takes time, so dont expect a quick return on your investment, especially with earnings per share (EPS) forecast to fall 56% this year. But this British engineering giant will surely hit its stride at some point, possibly 2017, when EPS are forecast to rise 32%. At that point, you will be gladyou bought at todays valuation of 11.44 times earnings.
CloseCall
It has been a long time since mobile phone giant Vodafone Group (LSE: VOD) posted market-beating share price growth, but it is still up a steady 30% over the last five years, with all those juicy dividends on top, too. Yielding 4.93% today, Vodafone remains a great income call. Until you look at the cover, that is, which looks a little perilouslyskinnyat just 0.5. That should improve now that the multi-billion pound Project Spring and infrastructure programmesare mostly complete, easing the strain on its purse.
Struggling European markets such as Spain and Italy have hit growth plans, but rapid growth in India and Turkey have helped offset that. Forecast EPS growth of 22% in the year to March 2017 and 30% the year after offerhope. However,it is hard for a company this size to justify its stonking valuation of 40.9 times earnings. Vodafone remains a stalwart hold, but a less compelling buy.
Harvey Jones has no position in any shares mentioned. The Motley Fool UK has recommended Centrica. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.