Rio Tinto Limited
Investing in Rio Tinto Limited (ASX: RIO) really hasn't paid off in recent years. That's because its share price fell heavily last year, but even when dividends are taken into account it has returned just 0.2% per annum during the last five years. That's hugely disappointing and it is little wonder that many investors are not at all keen on the idea of buying a slice of the iron ore miner.
However, much better performance could lie ahead. As its recent results showed, Rio Tinto remains financially sound and highly profitable, which means that in the long run it could become stronger relative to many of its smaller peers.
And, with Rio Tinto now trading on price to book (P/B) ratio of just 0.49, it seems to scream 'value' and could see its rating move upwards – especially when you consider that the ASX's P/B ratio is far higher at 1.29. As such, now could prove to be an excellent time to buy Rio Tinto.
Scentre Group Ltd
Although the Aussie economy is currently enduring a challenging period, with the unemployment rate being relatively high and lower commodity prices putting pressure on profit margins for key industries, the long run still looks bright. That's because all economies naturally move in cycles and, as such, it makes now a great time to buy cyclical stocks while they offer good value for money.
One example is Scentre Group Ltd (ASX: SCG), which currently trades on a P/B ratio of just 1.08. That's considerably less than the ASX's P/B ratio of 1.29 and shows that the shopping centre operator has considerable upside potential from a possible rerating.
Certainly, it may take time to come good but, with the RBA seemingly willing to cut rates even further, the Aussie economy is likely to return to full strength and that makes now a great time to buy a slice of Scentre Group.
Australia and New Zealand Banking Group
Looking back at the last 10 years, Australia and New Zealand Banking Group (ASX: ANZ) has been able to increase dividends per share at an annualised rate of 5.5%. That's hugely impressive and means that it now pays out 71% more in dividends than it did in 2005 which, when you consider that the period has included the global financial crisis, is pretty good going.
In fact, if ANZ can maintain this rate of growth then it is very likely that its investors will enjoy a real terms increase in income, with inflation being just 1.7% at the present time.
Certainly, ANZ may not be viewed as cheap at the moment, with it having a P/B ratio of 2.05, for example, but its stable track record of rewarding shareholders over a long period of time coupled with a fully franked yield of 5.1% mean that it is an enticing stock that could perform well over the medium to long term.
