Dull but consistently profitable companies can often be great investments. Today, I’ll touch on one example each from the small-cap world, the mid-cap space and the FTSE 100.

Locking in profits

I first covered self-storage firm Lok n’ Store (LSE: LOK) in April 2018. Since then, its share price has climbed almost 90%. That’s hardly a bad result considering the simplicity of the company’s business model.

As today’s update showed, there’s no shortage of demand for space to store possessions. Trading over the year to the end of July has been “excellent” with occupancy rates bouncing to 85.8%. Back in mid-2020, this was a little under 70%. Revenue also rose 20.9% on the previous year and is “continuing to accelerate“. 

At £225m, LOK is far smaller than its peers Big Yellow and Safestore. However, it’s quietly building a sizeable estate. A pipeline of 13 sites will give the company 38% more space and should provide another boost to earnings. Whether this and recent trading are enough to justify the current valuation is another thing.

LOK trades at 39 times forecast earnings. That’s steep given the lack of barriers to entry in this industry. So, while I’d still buy today (no one knows where share prices will go next), I’d probably wait for the next, inevitable, market wobble before fully investing my capital here.

Rubbish trading

Another example of a company operating in a dry as dust sector that’s nevertheless done well for investors is waste manager Biffa (LSE: BIFF). Its shares are up almost 80% over the past year. 

As at LOK, this momentum looks likely to continue. Trading in the first three months of its new financial year was “well ahead” of even BIFF’s own expectations. Although the outlook is tied to the UK economy, management now thinks adjusted earnings for the full 12 months will come in roughly 10% higher than analysts were predicting.

There are a few near-term headwinds to consider though. The much-publicised shortage of HGV drivers is one. Ongoing issues with Biffa’s supply chain due to Covid-19 could also knock sentiment. 

Then again, the shares still trade on a reasonable valuation of 19 times forecast earnings. As such, I would feel comfortable taking a position today.

Profiting from pests

A final pick of boring but brilliant UK stocks for me to buy is FTSE 100 pest control giant Rentokil Initial (LSE: RTO). The £10bn cap company is a world leader at what it does.

Like the other stocks mentioned, RTO has done well for those owners able to sit on their hands. Those buying back in 2016, for example, will be sitting on a gain of around 150%. Now that its core business is showing signs of rebounding from the pandemic (revenue growth of 18.3% was seen in the first six months of 2021), I suspect the shares could go on setting new highs.

There are still risks, of course. A valuation of 33 times earnings suggests a lot of good news is already priced in. Should the global economic recovery slow, it’s arguably the pricier growth stocks that will be hit the hardest.

Then again, this is far more defensive than the typically glitzy tech play. Again, while I wouldn’t throw everything at the stock today, I regard this solid company as one to drip-feed my money into gradually. 

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Paul Summers 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.

Of course, some dividend stocks are more worthy of your capital than others. Here are what I believe to be three examples of the former.  

IG Group

In contrast to many companies, online trading giant IG Group (LSE: IGG) benefits from periods of market volatility. This goes some way to explaining why the FTSE 250 constituent’s share price has fared better than most over the last month.

Peers Plus 500 and CMC Markets have already reported an increase in trading. And it looks like IG’s next update on 19 March is likely to contain good news. 

You should treat analyst estimates with caution, given many of these will need to be revised. But IG’s stock trades on a little under 16 times earnings as things stand. For a quality operator that only stands to benefit if traders remain active, I think that’s already a reasonable valuation.

Aside from the consistently high returns it generates on the money it ploughs into the business, IG is in fine financial fettle with stacks of cash on the balance sheet.

Dividends hikes may be on hold as it adjusts to the introduction of new regulations to protect retail traders. But IG’s 43.2p per share payout translates to a yield of 6%. That’s worth the risk, in my opinion. 

Britvic

In contrast to discretionary items like cars and mobile phones, demand for low-ticket beverages is unlikely to drop off a cliff, even during recessionary times. This is why I think Robinsons and J2O owner Britvic (LSE: BVIC) is another solid-looking income stock from the FTSE 250.

Britvic’s share price has slipped over the last few weeks. But it certainly hasn’t been as badly hit as others on the market. Again, for what it’s worth, the valuation is also cheap, relative to industry peers. It’s a touch over 13 times expected earnings. 

The 3.8% yield is not the highest you can find in the second tier. But it does look to be fully covered by profits (for now). This is more than you can say for the cash payouts of other listed firms. It’s also worth mentioning Britvic has a habit of hiking its dividends every year, indicating confidence on the part of management.

Biffa

Third on my list of income stocks worth considering if the market sell-off continues is sustainable waste management firm Biffa (LSE: BIFF).

In last week’s trading update, the company simply said it was monitoring the coronavirus outbreak but that there had “not been any meaningful impact” to business so far. That’s exactly what you’d expect from a company operating in a space where demand should remain stable.

It went on to say that trading had been in line with expectations with growth seen in a number of its divisions. A highlight was the “strong performance” in its recycling business as a result of increased demand for recycled plastics. 

Aside from its defensive qualities, Biffa looks a decent buy for the income it provides. Following a few years of hikes to the payout, the company is predicted by analysts to return 7.71p per share in the 2019/20 financial year (ending 29 March). That’s a yield of 3%. 

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Paul Summers owns shares of IG Group Holdings. 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.

Many of us will be using a Cash ISA for this purpose. The fact that these accounts pay interest way below inflation, however, means it’s vital not to leave any surplus funds in there — that is, anything beyond roughly six months of living expenses.

As such, here are three resilient companies I’d consider buying for my portfolio with what’s left over. 

Recession-proof

People will always need medicine, regardless of what the economy is doing. As such, my first port of call is the pharmaceutical industry and, more specifically, GlaxoSmithKline (LSE: GSK). 

Despite the fact that it’s not been increased since 2014, one of the biggest attractions to Glaxo, aside from its defensive qualities, is its dividend. The 80p per share total payout for the current financial year means a yield of almost 4.8%. Perhaps most importantly, the extent to which this cash return is covered by profits is starting to look more stable after a rocky few years. 

Unsurprisingly given the Brexit stand-off, Glaxo’s shares have been steadily growing in popularity, rising 11% since the beginning of 2019. Assuming analysts are correct in their predictions, the shares currently change hands for just over 14 times earnings — far below FTSE 100 peer Astrazeneca’s frothy-looking P/E of 24. 

Another stock that should hold its own in the aftermath of Brexit, if it happens at all, is waste management and recycling firm Biffa (LSE: BIFF).

Last week’s trading update was as no-nonsense as you can get with the company stating that trading over H1 had been in line with management expectations with no change to the outlook for the full year. 

Of course, a business like this will never generate the same level of excitement as your average tech company. On a little less than 10 times earnings, however, I’m tempted to say that Biffa looks cheap.

At its current price, the forecast dividend yield sits close to 3.6% and is easily covered by earnings. There’s quite a bit of debt on the balance sheet (something I usually steer clear of), but the predictability of its line of work arguably makes this less of a red flag.

My last pick is a retailer. That might sound strange considering that consumer confidence is usually battered during economic wobbles, but stick with me.

Here I’m talking about discount retailers — the sort that offer people the most bang for their buck. FTSE 250 member B&M European Value (LSE: BME) is the standout candidate here, especially when recent trading is considered.

In late July, the company stated that it had made a “solid start” to FY20 with group revenue climbing 21.4% over Q1 (31 March-29 June). In sharp contrast to high street peers, 12 new stores were opened over the period with lots more planned over the entire year.

This optimistic outlook goes some way to explaining why B&M’s shares trade on almost 18 times forecast earnings. The 2.4% yield is also the lowest of the three in focus today (although it’s been hiked by double-digits in three of the last four years). With signs that consumers are continuing to tighten the purse strings, however, I think this is still a reasonable price to pay. 

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK owns shares of B&M European Value. 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.

Today I want to explain why I remain a buyer of the UK’s largest supermarket, Tesco (LSE: TSCO). I’m also going to look at a smaller company that’s focused on delivering similar benefits to its shareholders.

Making progress

Tesco recently announced that it plans to stop offering mortgages through Tesco Bank and intends to sell its current book of mortgages. With just 23,000 mortgage customers and a total lending balance of £3.7bn, the supermarket isn’t big enough to compete profitably in the UK’s highly competitive mortgage market. So it’s not going to try.

I think that’s a sensible decision. It’s also a good example of how group chief executive Dave Lewis has reshaped the business since taking charge.

Troublesome or loss-making activities have been culled. The range of stock carried in stores has been optimised and the company has made considerable cost savings. Mr Lewis has also identified a key opportunity for growth and expanded into the wholesale market with the acquisition of Booker.

The results are already impressive. The group’s operating profit margin has risen steadily and reached 3.4% last year. That’s significantly higher than Morrisons (2.1%) or Sainsbury (1%).

Tesco probably can’t get much bigger as a supermarket. But I think it can expand in wholesale and continue to profit from economies of scale. The share price has cooled recently and the stock now trades on 13 times 2019/20 forecast earnings, with a 3.5% dividend yield. I would be happy to buy more at this level.

A dividend + growth opportunity?

If you’re looking for a company with more growth potential, my second pick, Biffa (LSE: BIFF), may be of interest. This £570m waste management group floated on the London market in 2016, since when its shares have risen by nearly 30%.

Results released today show that nearly 60% of the group’s £1.1bn revenue last year came from collecting waste from industrial and commercial customers. Of the remainder, the majority came from recycling and energy-from-waste operations.

Both areas are more profitable for companies operating at scale. Biffa’s aim is to be a consolidator in this industry, buying up and integrating smaller firms.

Since its flotation, the group has completed 17 acquisitions. This would normally be a warning flag for me, but the balance sheet remains healthy and underlying free cash flow is very strong.

Although this strategy will require continued financial discipline and skilled management, I’m comfortable with the situation. I believe there’s an opportunity for this company to continue expanding, especially if the political environment remains supportive.

Looking ahead, Biffa shares trade on less than 11 times forecast earnings for 2019/20 and offer a prospective yield of 3.3%. I think BIFF stock could be a good long-term buy.

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Roland Head owns shares of Tesco. The Motley Fool UK has recommended Tesco. 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.

Indeed, at the end of last year, I said that due to the company’s strong balance sheet, “highly profitable” business, and plans to return hundreds of millions of pounds to investors over the next few years, the stock was a better income investment than Royal Mail. 

However, over the past few months my views have changed. Today, I’m going to explain why Persimmon is now on my ‘sell’ list. 

Time to sell 

Persimmon’s profits have boomed over the past 10 years and, only a few weeks ago, the group became the first homebuilder in the UK to earn more than £1bn in a year. For shareholders this is fantastic news, but the company’s booming profitability is starting to ruffle some feathers. 

The business makes around 50% of its money from the government’s Help to Buy scheme. Last year, the group sold a total of 16,449 new homes, of which 7,970 were to people using the Help to Buy scheme. Overall, the number of dwellings Persimmon sold only increased by 406, but profits surged 13%. The average price of each home sold rose 1% year-on-year. 

Persimmon has been criticised for benefitting excessively from the Help to Buy scheme, and the figures above seem to support this argument. The company is also being attacked for the poor quality of its new builds, treatment of customers, selling homes with onerous leases, and executive pay. 

With all of these issues hanging over the business, some analysts are speculating the group could be stripped of its right to participate in the Help to Buy mortgage scheme, which would decimate profits. 

In reality, I don’t think the government will strip Persimmon of this right — the UK needs every new house it can get right now — so I think money will continue to flow into Persimmon’s bank accounts for the time being.

Still, the company’s outlook is no longer as bright as it once was and. With this being the case, I think it might be best to avoid Persimmon and perhaps invest in one of the UK’s other leading homebuilders if you want to invest in the sector. 

Trash talk

As the UK rushes to build new homes, companies and councils are struggling to expand their services to meet the demand of the new residents, including waste disposal . One company at the forefront of this sector is Biffa (LSE: BIFF). 

I like Biffa as an investment because I think the company is extremely defensive. The world will always produce waste, in ever greater quantities, and its disposal will never stop being a key priority for the government. 

Biffa is building a rubbish conglomerate through acquisitions. Today, it announced a deal to acquire Specialist Waste Recycling Limited for a cash consideration of £25.8m, or around 7.4 times EBITDA. This is a bit on the pricy side, but the deal does make sense overall as it will accelerate Biffa’s expansion in rapidly expanding recycling market. 

Overall, analysts expect Biffa to report earnings growth of 32% for 2019, putting to stock on a forward P/E of 10.7. It also supports a dividend yield of 3.5%. 

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Rupert Hargreaves owns no share 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.

Up until 2016, I would have agreed with the rest of the market that Kaz deserved a wide berth. It was a speculative bet spending billions of dollars building new copper mines, which is always a risky endeavour. However, these bets started to pay off in 2016 when the group swung to a profit after several years of losses. Since then, earnings have exploded as Kaz’s new mines have come on stream and the business has reaped the rewards of its lengthy, and costly, capital spending programme.

For 2018, City analysts believe the company will report a net profit of $494m, rising to $537m next year. Based on these numbers, the shares are trading at a forward P/E of just 6 for 2018, falling to 5.8 for 2019.

Overstretched? 

So what’s gone wrong? It seems investors are once again concerned about the company’s expansion plans. A few months ago, Kaz announced that it had acquired a new copper mine in the Baimskaya region of Russia from Roman Abramovich for $900m. It’s not the initial price tag that seems to be worrying investors, but the capital spending required to get this mine up and running. Figures suggest Kaz will need to fork out $5.5bn to develop the Baimskaya prospect — a colossal sum for a business with a market-cap of only $3bn at the time of writing.

Nevertheless, considering the company’s record of developing mines, I think the chances that Kaz could pull this off are high, and that’s why I think now could be a good time to buy the stock. 

Kaz’s current valuation seems to suggest investors don’t think the company has a future. But if it does manage to develop Bimskaya successfully, then the upside could be tremendous. I’m highly attracted to the risk/reward here.

Rubbish investment 

If Kaz isn’t your cup of tea, then I also like the prospects for slow and steady Biffa (LSE: BIFF). 

For 2018, analysts are expecting this rubbish (waste management) company to report earnings per share growth with 33%, and it looks as if the business is on track to meet this forecast. In its half-year report published today, CEO Michael Topham declared management growth “expectations for the full year remain unchanged.“

As a result, I think the market is currently undervaluing Biffa and its prospects. The shares are changing hands right now for 11.2 times forward earnings, which would be appropriate for a low-growth business. But in my opinion, with earnings growing at a double-digit rate, a multiple in the mid-teens might be more attractive.

On top of the attractive valuation, investors can also look forward to a dividend yield of 2.9%. As the distribution is covered twice by earnings per share, the payout has room to grow substantially in the years ahead, and I can’t see any reason why it won’t.

So overall, if you’re looking for an undervalued income and growth stock, I reckon Biffa certainly deserves your research time.

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Rupert Hargreaves owns no share 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.

Predictable earnings 

Self-storage firm Safestore (LSE: SAFE) has been a stonking investment for those who’ve bought and held on over the last few years. Our growing need for places to house our possessions has seen the shares climb 285% in value since September 2013. 

There could be more to come. Highlights from the mid-cap’s Q3 update earlier this month included a 10.3% rise in group revenue and 5.6% rise in like-for-like revenue, both at constant exchange rates. Performance in the UK and in Paris was described as “strong” with Alligator — the company’s 12-store recent acquisition — trading in line with expectations. 

And Brexit? CEO Frederic Vecchioli certainly doesn’t appear concerned, having stated that the company’s business model should allow it to “withstand any macroeconomic uncertainty that may arise over the coming months“.

On almost 20 times earnings, Safestore isn’t cheap, but this may still be a reasonable price to pay based on its growth strategy and all-round stability. It’s also not as expensive as main rival Big Yellow. 

The company is forecast to return 17.1p per share in the next financial year (beginning November), which translates to a decent 3.2% yield at the current share price.

Robust model

When it comes to searching for robust business models, waste manager Biffa (LSE: BIFF) also fits the bill nicely. 

This month’s update from the firm was appropriately predictable. Trading in the first half of the financial year (six months to 28 September) had been in line with management expectations, with its Industrial & Commercial division continuing to generate “good organic and acquisitive revenue growth“. 

Elsewhere, trading at its Resource Recovery & Treatment and Energy Divisions was adequate, although the bin-collecting Municipal division continues to be impacted “by cost inflation and local government spending cuts“.

Trading on 13 times forecast earnings, Biffa still looks fair value in my opinion. There’s a 2.7% dividend yield for this year with an 8% hike to the total payout predicted for 2019/20, all easily covered by profits. 

German strength

The last pick would be Sirius Real Estate (LSE: SRE) which operates business parks in Germany. That might not be enough quicken your pulse, but it’s fair to say that recent trading has been anything but dull. 

Earlier this month, the company announced news of three new lettings to a German sports car manufacturer, a division of the Berlin government and a global humanitarian charity (Care International). A “significant renewal” by existing tenant Daimler AG (owner of Mercedes-Benz) is also on the cards, with the latter looking to secure 40,000 sqm of space for an extra five years.

On a forecast price-to-earnings ratio (P/E) of a little under 18 for the current year, Sirius is — like Safestore — a little expensive. That said, this moves down to 15 in 2019/20 should analyst estimates on growth prove correct. Having now entered into exclusivity to buy another €60m of assets (following the €40m already spent), I wouldn’t bet against profits continuing to rise.

A chunky 5% dividend yield at the current share price is the icing on the cake.  

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Paul Summers 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.

Meanwhile, City analysts are expecting a slight decline in EPS this year (from 13.4p to 13p) but a recovery in fiscal 2020, which should take earnings back to where they were last year. 

Rebuilding the business

Saga has suffered recently due to the restructuring of its insurance operations and the failure of Monarch, the largest UK airline to go bust, which affected nearly one million of its passengers and sparked a restructuring at its travel division.

However, now these issues are behind the enterprise, Saga’s outlook is improving. Key to the company’s future growth are two new-build boutique cruise ships. Management believes that investing in these new ships will turbocharge the group’s growth and cash generation. I am inclined to believe in this projection as, by operating cruises itself, Saga should be able to achieve higher profit margins.

Still, what concerns me is the growing level of competition in the cruise, travel and general over-50s market. The world’s population is ageing and more and more products to help retirees are hitting the market every month. Saga’s brand has helped the company stay ahead of competitors for many decades, but with competition growing, I reckon it could only be a matter of time before customers start to go elsewhere. For this reason, I’m wary of recommending the shares. 

A better buy? 

Because of the growing opportunity in over-50s travel, competition is increasing, which could ultimately squeeze Saga’s market position. One market where competitors are not rushing to grab market share is the waste management business.

Biffa (LSE: BIFF) is one of the most significant players in the UK waste management business. Best known for its large bins usually parked around the side of convenience stores or at festival campsites, Biffa is eponymous with waste management. The company’s size, scale and reputation give it a substantial competitive advantage over peers.

Management is using the group’s robust balance sheet to consolidate the waste management sector. Its industrial and commercial waste division has completed four significant acquisitions to date, spending a total of £20m to acquire £22m of expected annual revenues. More deals will likely follow as “the acquisition pipeline remains robust,” according to management.

Following these deals, City analysts are expecting EPS growth of 33% for the current financial year, which translates into a forward P/E of 13.1. A dividend yield of 2.7% is also on offer. The payout is covered 2.8 times by earnings per share, so there’s plenty of room for dividend growth. However, for the time being, it looks as if the company is going to concentrate on reinvesting capital into acquisitions, which in my view should generate better returns for investors over the long run

So overall, as Biffa continues to consolidate and dominate the UK waste market, I believe it could be a better investment than struggling Saga.

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Rupert Hargreaves owns no share 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.

These companies are both major players in essential sectors. Unlike some sexy tech stocks, I’m pretty certain that the services provided by these companies will still be needed in 10 or 20 years’ time.

Keep it rolling

When Edward Stobart took over the running of the Eddie Stobart haulage business from his father in the 1970s, he realised that customers would pay more if he could combine transport and warehousing services. This insight helped him to build the group into one of the UK’s largest logistics operators.

After several changes of ownership, Eddie Stobart Logistics (LSE: ESL) floated on London’s AIM market last year. Share price performance has been disappointing so far and the stock is down about 17% since its flotation.

However, today’s half-year results suggest to me that the firm’s share price could soon find some support. Revenue rose by 25% to £359m during the first half, thanks to a mix of acquisitions and major contract wins. Underlying operating profit rose by 7% to £18m, cutting the group’s underlying operating margin from 5.9% to 5%.

The company says that profit growth lagged behind sales growth due to the costs involved in setting up several major new contracts. That’s understandable, given that these new contracts are expected to deliver annual revenue of £158m, or around 20% of forecast sales for this year.

My view

Chief executive Alex Laffey expects the investments made in the first half of the year to support strong profits growth during the second half. That sounds reasonable to me.

However, the group’s net debt has now risen to two times EBITDA (earnings before interest, tax, depreciation and amortisation). That’s at the upper end of what I’m comfortable with for a low-margin business of this kind.

When Stobart’s full-year results are published in 2019, I’ll be looking for evidence that cash flow and margins have reversed recent declines. I’d also like to see a reduction in borrowing levels.

Despite these concerns, I believe this could be an attractive long-term income pick. Trading on less than 12 times forecast earnings and with a 4.9% yield, Eddie Stobart’s valuation seems reasonable to me.

Making money from muck

Collecting and managing waste is an essential function in any modern society. I don’t see that changing in my lifetime.

With this in mind, I think that waste management firm Biffa (LSE: BIFF) could be an interesting investment. 

Biffa’s revenue rose by 8.8% to £977.7m last year. This increase was split evenly between acquisitions and organic growth. The group’s profit margins were maintained, lifting underlying operating profit by 10% to £81.2m.

Cash generation was also encouraging, with underlying free cash flow improving from £28.8m to £44.4m.

Growth opportunities

As one of the largest firms in this sector operating in the UK, Biffa enjoys economies of scale not available to smaller firms. I feel that this should allow management to expand profitably in areas such as energy from waste and recycling.

Overall, the stock looks quite good value to me, on 12.8 times forecast earnings with a well-covered yield of 2.8%. In my view, Biffa could be a good long-term buy for UK investors.

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Of course, it’s not the only utility company that could offer an impressive income return. Reporting news on Friday was a stock that could deliver strong dividend growth, with its valuation also suggesting that it could offer investment potential.

Improving prospects

The company in question is integrated waste management services specialist Biffa (LSE: BIFF). It announced that it has acquired Weir Waste Services, which is a provider of waste and recycling solutions in Birmingham. The company has been acquired for a consideration plus debt taken on of £16.2m. The deal will be funded from the company’s existing cash and debt facilities.

Alongside the acquisition, Biffa also announced that is has agreed a further three purchases in the current financial year for a total consideration plus debt taken on of £3.9m. All of the acquisitions will be incorporated into its Industrial & Commercial division, with them enhancing its platform in a number of different regions across the UK.

Although the company has a dividend yield of just 2.9% at the present time, it could offer strong dividend growth over the medium term. It is expected to report a rise in earnings of 7% next year. When combined with its dividend coverage ratio of 2.8, it seems to have scope to raise shareholder payouts. As such,  the stock could become an increasingly appealing dividend option for the long term, with a price-to-earnings (P/E) ratio of 13 being relatively attractive.

Changing business

SSE’s dividend prospects may also be relatively bright. Although the company faces regulatory risk, the changes it is making to its business model could lead to a stronger entity over the medium term. It is set to merge its retail arm with Npower in order to create a new market model which could become a dominant player in what remains a highly-competitive industry. The demerger may also allow the existing company to focus on its core operations and deliver greater efficiency over the medium term.

This could help to support strong dividend growth for the business which matches inflation over the coming years. This may help to maintain its status as one of the stocks with the highest income return in the FTSE 100, with its current yield of 7.7% being double that of the wider index.

Furthermore, with a price-to-earnings (P/E) ratio of around 12, it seems to offer good value for money. Although there may be a period of change and uncertainty ahead for the business, the SSE share price seems to include a margin of safety which indicates that investors have already priced-in its potential challenges.

The post SSE is a 7%-yielding FTSE 100 dividend stock that could boost your retirement savings appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of SSE. 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.