3 Feel Good Mid Caps

Published in Investing on 8 April 2011

Another trio of nice companies at tasty prices.

In an article last week, I looked at three FTSE 100 companies which I felt had both a feel good factor and an investment case, based on their current valuations.

Marks & Spencer (LSE: MKS), Scottish & Southern Energy (LSE: SSE) and Unilever (LSE: ULVR) earned top marks from me in the warm and fuzzy stakes -- and M&S has since given shareholders some pecuniary joy, too, with a trading update on Tuesday which defied its doubters and the general gloom on the high street.

This week I've cast my eye over the mid cap companies of the FTSE 250.

Northumbrian Water

Utility Northumbrian Water Group (LSE: NWG), which serves the north-east and Essex and Suffolk regions, is the largest of this week's trio of picks, with a market capitalisation of £1.7bn.

Northumbrian ranks in the elite 'Platinum Plus' class of Business in the Community's Corporate Responsibility Index. Companies in this index, which consistently manage and measure their corporate responsibility, have outperformed their FTSE 350 and FTSE All-Share peers in seven out of the last eight years.

Northumbrian has also made it onto the World's Most Ethical Companies list, compiled by US organisation Ethisphere -- quite an achievement for a UK second-tier firm whose business doesn't extend beyond the shores of England.

For investors, the main attraction of Northumbrian, as with most utilities, is the dividend.

The company is targeting dividend growth of 3% above RPI inflation through to March 2015 and is currently on a slightly higher prospective yield (4.2%) than its FTSE 250 peer Pennon Group (LSE: PNN). Also, unlike FTSE 100 water groups Severn Trent (LSE: SVT) and United Utilities (LSE: UU), Northumbrian hasn't subjected its shareholders to past dividend disappointments.

Big Yellow

Self-storage firm Big Yellow Group (LSE: BYG) is a Real Estate Investment Trust (REIT), with a market capitalisation of around £420m.

Big Yellow has made environmental management a key part of its strategy. It makes extensive use of renewable energy in its buildings, several of which are 'zero-carbon'.

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In a global environmental real estate survey, Big Yellow was ranked the number one European real estate company out of the 80% of the listed European property market that participated in the exercise.

Big Yellow did a £33m share placing and suspended its dividend in 2009 to fund the next phase of its organic growth. For investors today, the dividend has been reinstated, adjusted net asset value per share at last half-year end (30 September) was 461p -- a 30% discount to the current share price -- and analysts are forecasting earnings per share growth to return to pre-credit crunch double-digit levels.

Cranswick

Food company Cranswick (LSE: CWK), with a market capitalisation of around £360m, is a producer of high-welfare pork products, such as free range and organic sausages.

Cranswick's animal welfare and environmental commitments, as well as a range of brands that includes Jamie Oliver and Reggae Reggae, give it the feel good factor -- well, for all except vegans and despisers of celebrity chefs!

The company has long been a favourite of veteran green fund manager Charlie Thomas, and is currently the largest holding in his Jupiter Green Investment Trust (LSE: JGC).

The market sent the company's shares tumbling after a recent trading update, but I think the response was overdone. 

There was quite a lot to like in the statement, and the company itself, while acknowledging the difficulties facing the UK consumer in the immediate future, was bullish on its long-term prospects.

As things stand, analysts' forecasts put Cranswick on a price/earnings ratio of less than 10 for the year ending 31 March 2012, with a prospective dividend yield of 3.5%.

Feel good enough?

If these three companies don't give you a warm glow, then a company which is to travel what bangers and mash is to food might just do the trick. 

It's not that things are particularly rosy at National Express (LSE: NEX) at the moment, but the song of the same name by The Divine Comedy never fails to bring a smile to my face.

Next week, I'll travel the small cap world for companies that I think have the feel good factor.

More from G A Chester:

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Comments

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tru2me 09 Apr 2011 , 12:35pm

but the song of the same name by The Divine Comedy never fails to bring a smile to my face.

It's so hard to get by when your arse is the size of a small country.

me too GA

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