The FTSE 100 continues to offer growth potential in my view, which is why I’m focusing on the outlooks of Barclays PLC (LON:BARC) (BARC.L), SSE PLC (LON:SSE) (SSE.L), BAE Systems plc (LON:BA) (BA.L), Royal Mail PLC (LON:RMG) (RMG.L) and Royal Bank of Scotland Group plc (LON:RBS) (RBS.L).
Barclays appears to have put in place a sound growth strategy. The company has been able to improve its financial strength in recent years, and may now be in a position to generate excess capital.
With Barclays’ share price offering a 4% dividend yield for 2019, I think that it could be relatively cheap. Sure, the banking sector may experience a period of uncertainty, but in the long run it could be a strong performer.
SSE’s regulatory risk has hurt its share price performance in recent years. The company now faces the prospect of a price cap on its variable rate tariff in the coming months, and this could hurt its financial performance to some degree.
With SSE’s dividend yield being around 6.5%, the company seems to have a large margin of safety. Therefore, with dividend growth set to match inflation, I remain upbeat about its investment potential.
BAE’s profitability could gain a boost from rising defence spending in the US and across the world. The company has a dominant position in a number of segments, and this could allow it to capitalise on rising demand.
With a PE ratio of around 15, BAE is a stock that I think could be undervalued at the moment. Its bottom-line growth potential could improve over the medium term.
Royal Mail’s international growth strategy seems to be working well. It could generate double-digit returns over the medium term, which would help to offset potential weakness in its UK letters segment.
With the Royal Mail share price having fallen of late, it now has a dividend yield of around 4.5%. For me, this suggests that it could offer a margin of safety at the moment.
RBS is in the middle of a period of change. It continues to move away from the legacy issues going back a decade, while its management team is also evolving.
Since the bank has a PE ratio of around 10 and a forward dividend yield of above 5%, I think it could deliver high returns in the long run. While potentially volatile in the near term, it could outperform many of its banking peers.