Looking towards2016 there are plenty oflarge corporations that trade at very attractive prices. The FTSE 100 has lost nearly 5% over the course of 2015 and in my opinion there are multipleblue-chip businesses that offer growth potential to match smaller companies in the FTSE 250. Investors are on the hunt for the big stock of 2016 and the two below couldoffer a good return through 2016 and well into the future.
A good year, in spite of everything
Its now over two years since the very popular Royal Mail PLC (LSE: RMG) initial public offering but the shares are under pressure at the moment, net profit is set to fall sharply and there are questions about increased competition. However, I believe that this year has been a positive one for the company. Facing decreasing letter and parcel volumes, itsCEO is driving internal cost cutting and over 2,500 jobs have been cut this yearon top ofthe thousands already cut in the past 18 months. Even in the face of obvious challenges, the market reacted positively to full-year results and the shares are in demand with income investors specifically.Royal Mail has a tastydividend yield of 4.5% which is easily covered at a rate of 1.5.Optimistically the company has broker targets from heavyweight houses such as Goldman Sachs and JP Morgan of over 600p, a full 1 above the current share price. This year the shares are up 8.6% but still remain only slightly up since floatation.
HSBC (LSE: HSBA) also has very interesting growth prospects and its backed up by a supersizeddividend. This year the shares are off just over 14% but I believe 2016 will be better forHSBC. The company is heavily focused on emerging markets, which may turn out to be the defining difference to its peers, despite some challenges. Emerging market weakness has been a large problem for the bank but many believe thats about to change.There were encouraging growth rates released from India last weekand if such good growthrates are replicated across other emerging markets then HSBC is in the perfect position to capitalise. Itpassed the Bank of Englands stress test this month too, which adds weight to the investment case.
The company also has a hugedividend yield of 6%, which is set to grow further in 2016 and beyond due to a number of factors. For one, HSBC is well placed to outperform due to its core business taking place in a growing region of the world. Then there are the regulatory headwinds banks face that are beginning to soften, which will meaninvestors are more likely to buy banking shares. To add to this, interest rates are likely to increase in the next few monthswhich shouldlead to greater profitability across all banks.
The two companies above are examples of FTSE 100 businesses that offer good growth potential and, importantly, are both backed up by solid dividend yields. These companies should be in demand over the course of next year and should be trading at higher prices this time next year.
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Jack Dingwall has no position in any shares mentioned. The Motley Fool UK has recommended HSBC Holdings. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.