While beating the FTSE 100 may not seem all that important after its recent gains, I’m focusing on the potential to do just that from SSE PLC (LON:SSE) (SSE.L), AstraZeneca plc (LON:AZN) (AZN.L), Banco Santander SA (LON:BNC) (BNC.L), BP plc (LON:BP) (BP.L) and Rio Tinto plc (LON:RIO) (RIO.L).
If market volatility increases in the medium term, SSE’s track record of offering defensive characteristics could become more appealing for investors. It currently offers a 6.5% dividend yield, which may seem attractive if the market experiences a period of more modest growth.
Although the SSE share price has been hurt by regulatory risk in the last couple of years, I feel that it has a margin of safety. This could make its risk to reward ratio relatively appealing.
BP’s future prospects remain uncertain in my view. The oil price could remain volatile, and there is no guarantee that gains over recent months will continue.
However, the BP share price could outperform the FTSE 100 due to its 5% dividend yield, as well as the strength of its operational performance. It remains a stock that I feel may be underrated by the market at this moment in time.
AstraZeneca’s growth potential seems to be improving with each quarter that goes by. The company has been able to spend heavily on its pipeline, and this could lead to a turnaround in its financial performance.
With AstraZeneca offering a dividend yield of over 4% at the moment, I think it offers good value for money. As a result, its mix of growth and defensive characteristics seems to be appealing.
Rio Tinto’s growth potential may be closely linked to the iron ore price, but the company’s balance sheet and cash flow strength help to reduce its overall risk in my eyes.
With Rio Tinto seeming to have a strong asset base and a low cost curve, it could have a competitive advantage over sector peers. Therefore, with a 4%+ dividend yield, I remain upbeat about its investment potential.
Santander’s growth potential seems to be high in my opinion. Its exposure to a wide range of economies across the globe means that it could enjoy balanced growth with less risk than some of its more concentrated sector peers.
Although Santander’s share price has a PE ratio of under 10 at the moment, I do not think it is a value trap. The company’s EPS growth forecasts over the next couple of years suggest that it has a solid strategy in place.