Tips Watcher Alert (UK)-Wednesday tips round-up: National Grid, Whitbread, FirstGroup

Date: Wednesday 02 Jun 2010

National Grid has reiterated its target of growing dividends by 8% a year at least until 2012. Based on an adjusted post-rights price, it is now trading on ten times next year’s earnings and yielding more than 7%. On that basis, National Grid remains attractive. Buy says the Times.

Whitbread's stock has fallen back recently, partly because of profit-taking by investors, since hitting a 12-month high of £16.31 on 26 April. The shares now trade on a 2011 forecast multiple of 13, which is a significant discount to rivals. While Whitbread could be hit by a relapse in spending by consumers and businesses, it is over the worst and its shares offer good value compared to rivals, so buy says the Independent.

FirstGroup shares trade on about nine times 2011 earnings, making the company the lowest-rated public transport group. That seems unwarranted, particularly since last month the company also promised to increase its dividend by 7% a year for the next three years. The dividend yield of almost 6% is certainly attractive and makes the shares worth tucking away. Buy says the Times.

Northern Foods shares, which now trade on a 2011 price-to-earnings ratio of 7.2, are starting to look cheap. However, given the tough outlook for the grocery sector and consumers, next year may be a better time to start tucking into Northern Foods, so hold says the Independent.

The markets like certainty above all things, and that's exactly what Scottish and Southern Energy delivered when it said that, though it was still interested in the sale of EDF's UK electricity distribution business (and may take a stake), it will not wade in so deep as to necessitate a rights issue. With the cash call fears dealt with, investors should move in, particularly in light of the increasingly volatile conditions across the capital markets. Buy says the Independent.

Could Namibia be the next Falkland Islands? Followers of the AIM-listed tiddlerChariot Oil & Gas will hope so. Analysts suggest that Chariot is trading at roughly half the value of its peer group of junior explorers. There is no risk-free investment in deep-water exploration, but this could be a good train to ride, if you can afford to lose your stake suggests the Times.