5 Shares For The Week Ahead

Published in Investing on 19 October 2012

AstraZeneca (LSE: AZN), Unilever (LSE: ULVR) and ARM (LSE: ARM) report their latest figures next week

Next week we have one important set of full-year results from the high street, accompanied by interims from a few other big names in the dividend game -- mostly on a rather busy Thursday.

Debenhams

Thursday brings us full-year figures from Debenhams (LSE: DEB), the FTSE 250 department store that has been doing well. The shares fell below 60p in January, but since then they've more than doubled to 112p. So what should we expect from the results?

A trading update last month and current City forecasts suggest earnings per share (EPS) growth of 3%, to put the shares on a price to earnings (P/E) ratio of 12, alongside a modest dividend yield of about 3%. Like-for-like sales look to be up 2.3% over the year, with online sales up 40%. Chief executive Michael Sharp has said he's been "delighted with [the] strong performance".

I think most of the share's undervaluation has probably disappeared now, but further earnings growth next year, with a rising dividend, could still make Debenhams a decent long-term investment.

AstraZeneca

FTSE 100 (UKX) pharmaceutical firm AstraZeneca (LSE: AZN) reports third-quarter figures on Thursday. At £29.59 today, the share price is 13% down from its 2010 high point of £33.85. The fear is that the Astra's product development pipeline is drying up, and the group has not been as successful as rival GlaxoSmithKline (LSE: GSK) when it comes to expanding into newer biotechnology by way of acquisition.

That was reinforced at the interim stage, when Astra said: "As expected, generic competition and challenging market conditions reflected in lower second-quarter revenues."

But has the sell-off been overdone? Despite indicating EPS falling for the next two years, current forecasts suggest a dividend yield of around the 6.5% mark, and the payment should be about twice covered.

Unilever

Consumer brand giant Unilever (LSE: ULVR) also reports on its third quarter on Thursday, and we are likely to hear of slow and steady growth. The firm is known for bringing home stable EPS and dividends, though the payout did dip in 2009. But for this year, the City is expecting a 10% rise in earnings and a dividend yield of around 3.5%.

The share price has had a strong few months, and is now up around 12% over the past year, so is it looking a bit toppy now?

Well, companies such as Unilever and AstraZeneca, which have good track records of dividend payouts, are often favoured by successful investors such as Neil Woodford, and it can pay handsomely to learn from a professional who has beaten the FTSE year after year.

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Reckitt Benckiser

On to Wednesday, when we should have a Q3 update from Reckitt Benckiser (LSE: RB), a key FTSE 100 competitor to Unilever. Reckitt's shares have risen only modestly during the past few years, to stand at £36.53 today, but they have been paying reasonable dividends. And current forecasts suggest we'll receive more of the same, in the form of a 3.6% payout for the year to December 2012.

That's slightly more than is expected from Unilever, and with a P/E of under 15, Reckitt's shares are more lowly rated. Could they be the better bargain of the two?

ARM

Switching to a different day, ARM Holdings (LSE: ARM) will release a Q3 update on Tuesday. ARM has gone through a classic growth phase, and its share price has powered up from 80p at the start of 2009 to a peak of 650p in early 2011, sporting a very high P/E along the way. Since then, the price has flattened, and is even down a little from that peak to 593p today -- the price appears to be taking a break while earnings catch up.

How's the valuation looking today? The company is still priced as a growth share, with forecasts putting it on a forward P/E of over 40 with only a tiny dividend of less than 1%. We're still some way from the transition between growth and dividends, and there is a fair bit of growth still in the price, but is there a new growth spurt to come? There could be.

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> Alan Oscroft does not own any shares mentioned in this article. The Motley Fool has recommended shares in Unilever.

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