Today I’m going to look at three stocks which each offer a yield of at least 5%. All three pass my dividend safety tests. Indeed, I’ve already added one of these shares to my own portfolio.

Flying higher

I’m going to start small with £59m jet chartering specialist Air Partner (LSE: AIR). In addition to passenger services, this 50-year old firm provides cargo and emergency planning services for government and corporate customers.

Air Partner’s share price took a knock last year when it discovered some historic accounting irregularities. But this appears to have been a one-off problem. Pre-tax profit rose by 20% last year and management has said that trading so far this year is in line with expectations.

Broker forecasts for 2018/19 suggest that earnings will rise by about 5% to 8.9p per share. The dividend is expected to rise to 5.6p per share. These projections put the stock on a forecast P/E of 12.5 with a prospective yield of 5%. With a history of strong profitability and steady growth, I rate the shares as a buy at this level.

Taking the high road

Another opportunity in the transport sector is bus and rail operator Stagecoach Group (LSE: SGC). This well-known firm operates in the US and Canada as well as the UK, so the group’s profits aren’t dependent on a single market.

One problem faced by the firm recently was the loss of the East Coast rail franchise, which Stagecoach operated in partnership with Virgin Trains. This business contributed about 14% of operating profit, and its loss triggered a dividend cut last year.

However, the reduced dividend should be covered by non-rail free cash flow, making it a much safer payout.

I believe last year’s bad news is in already reflected in the group’s share price. And with the stock now trading on less than 10 times earnings, with a forecast yield of 5.3%, I’d be happy to buy.

Postal gains

The latest addition to my personal portfolio is Royal Mail (LSE: RMG). These shares have fallen by 26% from a May high of 632p. But I see little in the group’s outlook to justify such a gloomy view.

May’s full-year results showed that adjusted operating profit rose by 6% to £581m last year. Profit margins were broadly stable at 5.7%. And strong cash flow helped the group to repay net debt of £338m and finish the year with net cash of £14m.

Although the shift from letters to parcels will continue to require investment, these costs seem to be under control. The group’s 53% share of the parcel market provides a strong foundation for long-term planning, and is also helping to support growth in the group’s international business.

Industrial relations — a historic source of concern — seem to be improving. Strike action has been averted and the company says good progress is being made on pay and pension reforms.

All in all, I think Royal Mail looks too cheap at around 465p. So I was quite happy to pay 12 times forecast earnings to secure the group’s 5.4% dividend yield for my portfolio.

The post 3 stocks I’d buy with dividends yielding more than 5% appeared first on The Twelfth Magpie.

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Roland Head owns shares of Royal Mail. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Although each company faces specific problems, I believe that both of these unloved growth stocks have the potential to beat the FTSE 100 over the next year.

Accounting questions

Shares of aviation services group Air Partner (LSE: AIR) fell by 20% when markets opened on Tuesday after the firm said it had found some historic accounting errors. It seems that a number of bad debts may not have been properly accounted for.

Investigations are still at a preliminary stage, but today’s statement suggests to me that past years’ profits may have been overstated. The company says that “uncollected receivables” (bad debts) were offset against pre-payments from customers, rather than being written off against profits in the appropriate financial year.

The total amount involved is said to be £3.3m, and the period affected stretches from the 2010/11 financial year until 31 January 2018. To put this into context, the firm’s annual profits have been between £2m and £5m per year during this period.

A bargain buy?

Today’s statement stresses that these accounting issues don’t have any impact on the group’s cash position and haven’t disadvantaged any of its customers or suppliers. I don’t see any reason why these issues should affect future profits or cash flow either.

However, it’s worrying that these issues have arisen in the first place, as they suggest poor accounting standards.

After today’s fall, the shares trade on a forecast P/E of 13 with a prospective yield of 4.7%. Although I don’t think there’s any need for shareholders to sell, I’m not sure the shares are cheap enough for me to buy until we know more about this issue.

Printing a profit

Shares of FTSE 250 banknote and identity document firm De La Rue (LSE: DLAR) have fallen 20% since the start of March. The main reason for this was news that the company has lost the contract to produce UK passports.

The current 10-year contract expires in July 2019 and has a value of £400m. I estimate that this is equivalent to between 5% and 10% of annual revenue each year for the company, which is expected to report sales of £505m and a net profit of £48m for the year ended 25 March.

A contrarian buy?

Press reports suggest that De La Rue plans to appeal against the decision to award the contract to French-Dutch firm Gemalto. But even if the appeal is unsuccessful, I believe the shares could be a contrarian buy at current levels.

The business remains out of favour, thanks to a £191m pension deficit and a forecast for earnings to fall by 8% in 2018/19.

But the pension deficit has fallen by almost half since September 2016 and is expected to shrink by a further £70m this year. The group’s profits have also staged a strong recovery since 2016.

Analysts have pencilled in earnings of 43.4p per share and a dividend payout of 26.9p per share for 2018/19. These figures put the stock on a forecast P/E of 11.7 with a prospective yield of 5.3%. I think the shares could be a long-term buy at this level.

The post Two 5% dividend stocks that could beat the FTSE 100 appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

While share prices may be exceptionally volatile at the present time, there continue to be buying opportunities for the long term. In fact, falling stock prices could present an opportunity to buy high quality companies at reduced prices. And while paper losses may be experienced in the near term, high returns could be on the cards over the coming years.

With that in mind, here are two shares which could offer surprisingly strong growth prospects over the medium term.

Improving performance

Releasing a brief update on Tuesday was global aviation services company Air Partner (LSE: AIR). It released an update on trading since its last release on 18 January. It confirmed that it is still expecting to deliver underlying pre-tax profit for the 2018 financial year that is not less than £6.4m. This suggests that the company has been able to meet expectations for the year and appears to be making progress with its strategy.

Clearly, the outlook for the global economy is becoming stronger. Although stock markets across the globe have fallen in recent days, this is largely due to the prospect of a higher interest rate rather than a slowing of the rate of world economic growth.

As such, Air Partner’s outlook appears to be positive, with the company expected to deliver a rise in its bottom line of 6% in the current financial year. This is due to be followed by further growth of 14% next year, which puts the company’s shares on a price-to-earnings growth (PEG) ratio of 1. This indicates that the company could offer growth at a reasonable price and may deliver a rising share price over the medium term.

Challenging period

Also operating in the aviation sector and reporting this week was Ryanair (LSE: RYA). The budget airline has experienced a challenging period, with pay disputes and cancelled flights causing disruption to passengers as well as negative PR. This situation could continue to some degree, with the company still negotiating with various unions. Therefore, it would be unsurprising for its shares to underperform some of its rivals in the near term.

In the long run though, Ryanair appears to offer significant investment potential. In the current financial year its bottom line is forecast to rise by 13%, while further growth of 6% is due next year. Following this, growth in earnings of 10% is expected in the year to March 2020. This puts the company’s shares on a PEG ratio of just 1.1. This suggests that while it has a risky outlook, the stock could also offer high return potential.

With Brexit set to happen next year, Ryanair could have an uncertain future due to heightened political risks. If there is no deal between the EU and UK then it could cause disruption to the European aviation sector. But with a wide margin of safety, this seems to have been priced-in by investors. Therefore, now could be the right time to buy the company for the long run.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

It issued an unscheduled update today advising the market that underlying pre-tax profit for the current year should be ahead of expectations at “not less than £6.4m”. City analysts had been forecasting a figure of £5.9m for 2017/18 and today’s guidance implies an increase of 25% from the £5.1m figure reported last year.

The group’s businesses include training, air traffic control and brokerage services, but its main business is air chartering. This includes private jet chartering, freight and a specialist business which can provide air transport for emergency situations, such as natural disasters.

Three things I like

I’m attracted to Air Partner for a number of reasons. The first is that despite regular acquisitions, the group’s operating margin has risen steadily, reaching 10.4% last year. Return on capital employed has also strengthened, which suggests to me that acquisitions are chosen well and priced fairly.

Cash generation is also strong. The Gatwick-based group has maintained a net cash balance consistently since at least 2012, and has delivered dividend growth averaging 10% per year over this period.

Despite these advantages, the stock remains relatively affordable. The shares now trade on a forecast P/E of 17.4, with a prospective yield of 3.8%. With earnings growth of 10% pencilled in for the year ahead, I believe Air Partner is still worth buying.

A strong recovery

Equipment hire group Speedy Hire (LSE: SDY) ran into trouble a couple of years ago. But in my view the firm’s management have delivered a decisive turnaround, backed by a healthy balance sheet.

The shares dipped earlier this week due to investor concerns over money owed to the group by collapsed construction firm Carillion. However, this doesn’t seem to be a major concern. Speedy Hire’s total revenue last year was in the region of £380m. Of this, revenue from Carillion totalled about £12m, of which £2m was outstanding at the time of its collapse.

Speedy Hire’s management does not expect the collapse of Carillion to have a material impact on the group, and has left guidance for the year unchanged. Based on the latest broker forecasts, this means that adjusted earnings should rise by 46% to 3.57p per share this year.

This momentum is expected to continue into 2018/19, with analysts projecting a further increase of 27% in the group’s earnings per share next year.

This strong momentum puts Speedy Hire on a forecast P/E of 16 for the current year, falling to a P/E of 12.6 next year. A useful 2.4% yield is also forecast and should be covered by surplus cash, providing an additional attraction for shareholders.

With no signs of a slowdown in the UK construction market, I believe the outlook for the firm is strong. In my view, Speedy Hire’s strong momentum and healthy finances suggest the stock remains a potential buy.

The post 2 small-cap growth stocks I’d buy for 2018 appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

The company – which provides a wide range of aviation services – declared that underlying profit before tax rose 34.4% during the six months ending July, to £4.1m.

Its Broking division traded particularly strongly in the period, within which Commercial Jets enjoyed a monumental uptick in underlying profits,  jumping 44.3% to £2.7m. The company reported “pleasing performances” across all its territories, from both new and existing customers, and added a contract with yet another Premier League football team and renewed an existing deal with a major German carbuilder in the period.

Celebrating the results, chief executive Mark Briffa said: “Our Customer First programme continues to be a key differentiator for us, and has played an important role in both customer retention and new business wins in the period under review. We continue to progress organic and acquisition opportunities that enable us to extend the services and capabilities we offer our global clients.”

Indeed, Air Partner’s appetite to seek out hot growth opportunities was illustrated by news today that it had snapped up SafeSkys, a provider of environmental and air traffic control services to British and international airports. The firm reported revenues of £1.8m during the 12 months to July 2016.

Flying high

Today’s impressive release gives plenty of legitimacy to the City’s perky earnings estimates for Air Partner.

In the year ending January 2018 the aviation ace is expected to deliver a 20% year-on-year earnings improvement, and to follow this up with an 8% advance in fiscal 2019.

Not only do these forecasts create staggering value for money – while Air Partner deals on a middling forward P/E rating of 17.4 times, a corresponding PEG reading of 0.9 suggests it’s a total bargain relative to its growth potential – but predictions of storming profits growth feeds through to predictions of further hefty dividend expansion.

Last year’s payment of 5.2p per share is expected to march to 5.5p in the present period, and again to 5.6p in fiscal 2018. As a result Air Partner carries large yields of 4% and 4.1% for this year and next.

A juicy selection

While Britvic (LSE: BVIC) may not be packing yields as impressive as Air Partner, I am convinced the company’s bright profits outlook should keep delivering impressive payout growth.

Earnings are only expected to rise fractionally in the year to September 2017, according to City analysts, but the beverages star is still expected to hike the dividend to 25.5p per share from 24.5p last year. Consequently the yield clocks in at a very tasty 3.5%.

And the good news does not end here… a 6% earnings rise predicted for fiscal 2018 is expected to feed into a 26.5p dividend, yielding 3.6%. On top of this, profits projections for the forthcoming year leave Britvic dealing on a very attractive P/E rating of 14.8 times.

The J2O and Fruit Shoot maker advised that revenues stomped 6.5% higher at constant currencies in the last fiscal quarter, to £384.6m. And I am convinced the company’s exciting international expansion programme should keep on delivering the goods, pushing both earnings and dividends steadily higher.

The post 2 terrific dividend stocks I want to buy today appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Growth potential

HSBC may not be considered a growth stock by many investors. After all, it is one of the largest stocks in the FTSE 100 and operates within a wide range of markets. As such, the chances of it offering above-average growth may be somewhat limited.

However, the changes the bank is making to its business model are having a positive impact on its bottom line. For example, it is in the process of reducing costs and shifting its focus towards faster-growing markets such as China. In its most recent update, it reported strong growth from Asia in particular and this trend could continue as wealth levels and demand for financial services products increases over the medium term.

Investment prospects

Despite its recent share price rise, HSBC trades on a fairly modest valuation. It has a price-to-earnings (P/E) ratio of 14.7 and yet is expected to grow its bottom line by 8% next year. Both of these figures are impressive and suggest that its stock price could continue to outperform the wider index.

In addition, the bank could prove to be one of the best income stocks around during the course of the next few years. With inflation moving higher and interest rates still at a historic low, the company’s dividend yield of 5.3% could become increasingly popular. That’s especially the case since dividends are covered 1.3 times by profit. And, with HSBC having exposure to markets which could positively catalyse its earnings prospects, a higher dividend could be on the cards in future years.

Cyclical play

Of course, HSBC is not the only momentum stock which could be worth buying right now. Reporting on Friday was global aviation services group Air Partner (LSE: AIR), which has risen in value by 16% in the last six months.

Its pre-close trading statement showed that it has made a strong start to the year, with pre-tax profit expected to be 33% higher than in the previous year on an underlying basis. Its Broking division has performed well across all of its product lines, while the Consulting & Training division is also delivering solid results.

Looking ahead, Air Partner is expected to report a rise in its bottom line of 9% next year. This puts its shares on a price-to-earnings growth (PEG) ratio of just 1.6, which suggests they could deliver strong capital growth. Therefore, while its end markets are highly cyclical, the company appears to have a sufficiently wide margin of safety to merit purchase at the present time.

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Peter Stephens owns shares of HSBC Holdings. The Motley Fool UK has recommended HSBC Holdings. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes

What’s more difficult is to find companies with high yields that still have growth potential. In today’s article I’m going to take a look at two very different dividend growth stocks, each of which offers a dividend yield of about 5%.

Profitable pints

Pub group Greene King (LSE: GNK) appears to be making a decent job of running a fairly traditional business. Sales rose by 6.9% to £2,073m last year, while the group’s underlying operating profit climbed 4.9% to £392.2m.

Adjusted earnings per share were 1.3% higher at 69.9p, while the dividend was lifted 3.6% to 32.05p per share for a yield of 4.7%. Return on capital employed, a useful measure of profit for a business with lots of fixed assets, was unchanged at 9.4%. That’s respectable, if not spectacular.

Greene King shares have traded unchanged since the figures were released this morning, but there was some bad news. The group’s operating margin fell by 0.3% to 18.6%, due to cost pressures and the brand conversion costs resulting from the acquisition of Spirit pubs.

The firm was also forced to book an impairment charge of £58.6m against the book value of its pubs, due to “changes in the local trading environment”. A further £34.9m of impairment was recorded against sites that were closed or sold last year. These suggest to me that market conditions remain tough for pubs.

However, Greene King’s underlying business appears to be trading well and delivering fairly stable profits. For investors seeking income, I think that the forecast P/E of 9.7 and prospective yield of 4.8% could be an attractive long-term entry point.

A dividend flyer

Air Partner (LSE: AIR) may not be a name you’re familiar with. It’s a specialist aviation services company which provides charter services to governments, corporate customers and high net worth individuals. The group also includes an aircraft re-marketing business and consultancy services.

The firm is listed in the FTSE Fledgling index and currently has a market cap of just £61m. But it’s not a fly-by-night newcomer as it was founded in 1970 and has been public since 1989.

Recent performance has been strong. Underlying pre-tax profit rose by 17% to £5.1m last year, while underlying earnings rose by 10% to 6.5p per share. Shareholders enjoyed a 7.2% dividend hike last year, giving a total payout of 5.2p per share. That’s equivalent to a 4.6% yield at the current share price of 114p.

Air Partner has made several acquisitions over the last few years. These are helping to broaden the range of related services it offers and may deliver more stable profit growth. Although the company’s profits are likely to slump during recessions, its long history suggests to me that this business has staying power.

Analysts covering the stock expect underlying earnings to rise by 20% to 7.8p per share this year, putting the stock on a forecast P/E of 15 with a prospective yield of 4.7%. I believe this business could be a long-term growth story, and is worth a closer look.

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Roland Head owns shares of Air Partner. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Solid performer

Since the EU referendum shock, small-cap holiday operator On the Beach’s (LSE: OTB) shares have been on a rather lovely journey northwards. A steal when priced just above 176p back in July, they’ve more than doubled since (including a 15% rise over the last month alone). Based on today’s interim results, this momentum appears justified.

In the six months to the end of March, Group revenue increased 7.3% to just over £38m with Group profit rocketing 33.8% to £9.9m.

As far as business in the UK was concerned, revenue climbed 7.1% to £37.5m. Once marketing costs are taken into account however, this percentage rises to 16.9% (£19.4m) with EBITDA up 23.3% to £14.3m. 

Elsewhere, the company’s first foray into international markets appears to be going well with revenue from its Swedish operation climbing 20% (to £600,000). H1 also saw the company launch in Norway.

At the time of writing, shares in On the Beach are down over 7%, suggesting a degree of profit-taking is underway. Given recent performance, that’s to be expected. However, with management reasserting the belief that performance in H2 will be stronger than H1 (thanks to more favourable year-on-year comparisons), I suspect this slight break in momentum won’t last for long.

While a price-to-earnings (P/E) ratio of 22 would suggest that On the Beach is now a fairly expensive stock to acquire, a PEG ratio of just 0.9 for 2017 indicates that investors are actually paying relatively little for every unit of earnings growth. Importantly, this is before the recent acquisition of industry peer Sunshine.co.uk — announced yesterday — has been taken into account.   

Perfect partner

Another stock that still looks cheap is aviation services company Air Partner (LSE: AIR). Like On the Beach, shares in this market minnow have taken off since the EU vote. Since hitting a low of 65p in late July, the stock has climbed a stonking 85% to just under 120p.

In its recent full-year results (announced at the end of April), the company reported a 17.2% increase in underlying profit before tax to £5.1m with underlying earning per share climbing 10.2% to of 6.5p.

In terms of operational highlights, the company’s broking division continues to deliver with performance from its Commercial Jets and Jet Card services more than making up for sluggish Freight numbers. Encouragingly, Air Partner’s Consulting and Training division now contributes 10% of underlying profit before tax.

As far as the new financial year is concerned, Air Partner has stated that recent trading has been in line with the management expectations and that Q1’s pipeline of work allows it to enter 2017/18 “with a degree of optimism“.

Based on analyst estimates, the company is expected to grow earnings per share by 44% by this time next year, leaving the shares on a tempting valuation of less than 15 times earnings. Factor-in a 4.5% forecast yield and Air Partner looks a solid pick for value, growth and income investors alike.

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Paul Summers owns shares in On the Beach. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More often than not, those companies with the most eye-catching dividend yields end up cutting their payouts. On the other hand, stocks with the lowest yields can turn out to possess the most sustainable payouts.

One of the best dividends around 

I believe Air Partner (LSE: AIR) has one of the most sustainable dividends of all income stocks listed in London. The company is a cash cow. 

As a private jet broker, Air Partner has a high return on capital and no requirement for hefty capital spending. Most of the cash generated from operations is split between employees and shareholders, although over the past two years management has been investing heavily in acquisitions to grow the business and diversify. These acquisitions complement the group’s existing offering. 

For example, back in May 2015, Air Partner paid £1.2m for Cabot Aviation, a leading global Aircraft Remarketing broker. In its filed accounts for the year ended 31 March 2014, Cabot Aviation achieved a profit before taxation of £274,000 on a turnover of £706,000. So it seems Air Partner acquired this new division for an extremely attractive price. Further acquisitions such as the buyout of air safety consultant Baines Simmons for £6m have followed.

Despite these deals, Air Partner still has plenty of firepower for further acquisitions and shareholder payouts. At the end of July 2016, the firm reported a net cash balance of £5.2m after the payment of dividends and acquisitions, up 274% year-on-year.

Over the next 12 months, City analysts expect the company to pay out 5.2p per share in dividends, equal to a dividend yield of 4.5% at current prices. While this isn’t the highest dividend yield around, Air Partner’s strong cash balance should reassure investors that the payout is here to stay. For the year ending 31 January 2017, the firm’s earnings per share are expected to grow by 26%, and analysts have pencilled-in a further 16% growth for 2018.

Air Partner is something of a model dividend stock. BT (LSE: BT) on the other hand does not have the same desirable income qualities.

An income stock to avoid 

While shares in BT do support a forward dividend yield of 5.1% based on current analyst estimates, the company is facing numerous headwinds, all of which threaten to slow earnings growth and constrict cash flows. 

Unlike Air Partner, BT’s net gearing is over 150% and over 300% including pension obligations. Meanwhile, the company is having to spend billions fighting off competitors by buying expensive sports broadcasting rights, which may not end up producing a return for the firm. Today the company revealed it would pay around £394m a year for the rights to broadcast all UEFA Champions League and Europa League football until the 2021 season.

City analysts are expecting BT’s earnings per share to fall 16% the year ending 31 March before rising 3% the following year.

So overall, if it’s income you’re after, I believe Air Partner is a much better buy than BT.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

This asset-light business model that doesn’t require Air Partner to own or operate any aircraft allows it to return considerable cash to shareholders, which is why the shares now yield a very attractive 4.9%. Earnings only covered dividends 1.22 times last year but this should improve in the coming years as new acquisitions begin contributing fully and margins improve.

Air Partner’s earnings have been steadily rising as it diversifies out from its core booking services into the aforementioned consulting and re-marketing business. The company has a very healthy balance sheet with £5.2m of net cash at the end of June. This gives it substantial firepower to continue its policy of small bolt-on acquisitions that cement its market leadership in niche markets and provide further cross-selling opportunities to existing customers.

This plan is very attractive and reminds me quite a bit of James Fisher and Sons, which has successfully executed this strategy in the marine services sector. Investing in such a small company that operates on the edges of a highly cyclical industry isn’t for the faint of heart. But a dividend yield nearing 5%, rising earnings and an ambitious yet sustainably executed growth strategy definitely make Air Partner one to watch.

Closer look?

Motor insurer Esure (LSE: ESUR) may seem an unlikely income-seeker’s dream as the company slashed its interim dividend from 4.2p to 3p back in August. But rather than a red flag, I think this dividend cut was not only a good idea, but also a decision that income investors should be cheering.

Why? Because it wasn’t falling earnings or debt worries that caused management to lower payouts, but rather the belief that the cash would be better used invested back into growing the business. This was an audacious decision considering investors’ attachment to dividends, but one I found laudable. Indeed, Q3 results show this plan is already working wonders. In the first nine months of the year, Esure saw motor insurance premiums rise 18.3% year-on-year and the number of its policies in force increase 7.6%. Together with solid growth in the smaller home insurance segment, this sets up Esure for years of continued earnings growth, which will filter down into increased dividends.

In the short term, income investors won’t be too disappointed, as even after August’s dividend cut the shares still yield a very healthy 4.19%. With the balance sheet and dividend cover looking quite healthy following the de-merger of Gocompare in November, as well as rising earnings, I reckon Esure is well worth a closer look for yield-hungry investors.

The post Tired of record low bond yields? Try these secret income stars appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.