3 UK Stocks for the Long Term

06/28/2013 7:00 am EST

Focus: GLOBAL

Market experts are forecasting at least two years of strong earnings growth from these three London-traded stocks, writes David O'Hara of The Motley Fool UK.

BG Group
Profits will soar for BG Group (London: BG) as more oil and gas production comes onstream.

Earnings per share is forecast to rise by 30% in 2013. Another 19% increase is expected next year. More modest dividend growth is expected, with the payout forecast to hit $0.31 in 2014.

There is very little difference in the oil and gas that BG produces versus other companies. This means that it has to take the price that is dictated by the global energy markets. BG's future profits are thus dependent on the future price of energy, and there is little they can do about it.

BG's forecast yield for the year is just 1.5%. That's not much compensation for holding shares in a company exposed to factors beyond its control.

Bunzl
One of the elite dozen FTSE 100 companies that has reported rising EPS and dividends year-on-year for the last five years, Bunzl's (London: BNZL) record has seen the shares rewarded with a premium rating. Bunzl shares are today trading at 20.5 times 2012 earnings.

More earnings growth is expected. Analysts have penciled in EPS of 77.1p for 2013, rising to 81.8p the year after. The dividend is expected to be increased ahead of inflation this year and next. This pushes the 2014 yield on the shares to 2.6%.

While Bunzl may look expensive today, any market decline could present an opportunity to buy a top-quality share at an average price.

John Wood Group
As an engineering services firm supplying expertise to the oil and gas industry, the fortunes of John Wood Group (London: WG) are aligned with the large producers.

That has not stopped Wood Group from rewarding its shareholders handsomely. The company's dividend to shareholders has risen year-on-year for the last ten years. Since 2007, the average rate of dividend increase has been 13.6%.

According to the consensus of analyst expectations, the market is forecasting 47% EPS growth this year, followed by a 13% rise in 2014. Despite the dividend increases in recent years, the payout is still well covered by earnings. A 24% dividend hike is expected this year and a 14% rise for 2014.

If the growth is delivered, the shares look too cheap today, at 11 times the 2014 estimate.

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