CMC Markets

My first pick for next year is online trading platform provider CMC Markets (LSE: CMCX). Shares in this company have sold off recently following a reduction in market volatility and, consequently, a fall in net operating income and profits. The dividend has been slashed as a result. 

Considering how much of an anomaly 2020 was, this slowdown was always likely. Compared to pre-Covid-19 numbers, however, CMC is clearly growing well. Its evolving stockbroking business is going great guns and the company is considering separating this from its spread betting business in the future. 

Obviously, further falls are possible and the ongoing threat of regulation in its industry will put some off. However, the shares look tempting at less than 11 times earnings. There’s a stack of cash on the balance sheet and founder and CEO Lord Cruddas still owns a huge stake.

Perhaps most importantly, a flurry of anxiety in the markets as we enter 2022 could cause a rebound in levels of client activity. 

Britvic

For a nice mix of growth and income, I’d snap up stock in Britvic (LSE: BVIC). The Hemel Hempstead-based business owns a portfolio of highly ‘sticky’ brands such as Tango, J20, and Robinsons. It also has an exclusive agreement to produce and distribute Pepsi, 7UP and Mountain Dew in the UK on behalf of US giant PepsiCo until the end of 2040.

Like most businesses, Brivic’s fortunes could be dealt a blow if pandemic-related restrictions were to get particularly tough. However, the eventual, inevitable return to normality should play into the company’s hands as people return en masse to restaurants, bars and cafes.

Its shares trade at a little less than 16 times earnings. That’s pretty cheap compared to others in the sector. It’s also attractive considering the company’s defensive qualities.

As mentioned, there’s a nice dividend stream too. The 3% yield looks easily covered by profits, meaning a cut to Britvic’s payout looks pretty unlikely. 

Somero Enterprises

Somero Enterprises (LSE: SOM) has been one of the top-performing stocks in my portfolio in 2021. I think there could be even more to come in 2022.

Somero produces laser-guided machines that make concrete surfaces perfectly flat. Boring? Arguably. Essential? Yes. Profitable? Increasingly so. The huge rise in demand for warehouse space from retailers has been a boon for this company and Covid-19 has only served to boost this need further. 

Earlier this month, the small-cap announced that it expected to exceed previous guidance yet again for 2021. Thanks to strong momentum in North America, revenue will now come in around $130m — $10m more than thought in September. Better still, project backlogs are seen “extending well into 2022“. 

Despite this good news, the market still looks to be cautious about Somero. As I type, the shares are trading at just 11 times forecast FY22 earnings. That still looks like a steal for a leader in a specialised market, particularly one that generates high margins and returns on the cash it reinvests into itself. Other draws include its robust finances and a big 6.9% dividend yield.

Rio Tinto

FTSE 100 mining giant Rio Tinto (LSE:RIO) hasn’t had the best of years. Nonetheless, I see two big attractions.

The first is the huge dividend on offer. Analysts currently have the company returning 457p per share for FY22. Based on the current share price, that’s a yield of 9.5% — more than adequate compensation for being made to wait for a recovery. The payout should also serve as a great way of outpacing inflation (which shows no signs of slowing just yet).  

The second attraction for me is the potential for a commodities supercycle over the next few years. Huge amounts of copper, lithium and aluminium will be required to meet the demand for electric vehicles and clean energy solutions. This should do the £80bn cap’s bottom line no harm at all.

Obviously, there’s nothing to say that Rio’s share price won’t fall further. As a ‘buy and hold’ dividend stock for 2022 and beyond, however, I think this is among the best available in the FTSE 100. The valuation, at just seven times forecast FY22 earnings is low too.

Boohoo

Suggesting that Boohoo (LSE: BOO) might be one of the best stocks to buy for 2022 sounds nothing short of fanciful right now. The fast-fashion giant’s value has plummeted this year as increased costs, corporate governance concerns, reduced sales guidance and higher levels of returns have all pushed investors to the exits.

It’s undoubtedly been a tricky year and problems may persist. However, the share price capitulation looks overdone to these eyes. Boohoo is far from being financially vulnerable. Thanks to some canny acquisitions over the pandemic, it also boasts a far larger portfolio of brands. The purchase of Debenhams, for example, opens up a lot of new markets, including make-up and homewares.  

Simplistic as it sounds, it can often be the case that this year’s losers turn into next year’s winners. I wonder if this might be the case with Boohoo. If the next update is even remotely better than forecast, we could see a squeeze on short sellers and the share price could fly. Surely the margin of safety has never been better?

Caution advised

In proposing the above, it’s necessary to clarify a couple of things.

First, I have no idea what will happen in 2022. Not a jot. In my defence, neither do the traders or fund managers that sit glued to their screens. If anyone says differently, feel free to chuck a glass of mulled wine over them. All any investor — professional or armchair — can do is make educated guesses and try to gauge risk correctly. If a few (or all) of my calls come off and beat the market return, I’ll be chuffed. I’ll also preemptively highlight the role of luck. 

Speaking of risk, it’s worth mentioning that my picks have been made with a degree of diversification in mind. While this will lead to lower returns than if I were to pick the best performing part of the market, this presumes that I already know which part of the market that is. And I don’t. Regardless of what may be going on in the world at the time, spreading my money around sufficiently should prevent me from making any impulsive and costly decisions.

Wishing all Fools a safe Christmas and New Year and a profitable 2022.

The post My 5 best stocks to buy for 2022 appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Somero Enterprises and boohoo group. The Motley Fool UK has recommended Britvic, Somero Enterprises, Inc., and boohoo group. 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.

Moreover, it doesn’t require having a whole lot of money to get started. In fact, I think an investor could build a portfolio of solid dividend-generating shares for just £100 a month.

Passive income winners

Assuming that money is within reach, the key is buying stocks that should, bar a ‘black swan’ event, continue paying dividends whatever the weather. Utility firms are a great example, hence my first pick is power provider National Grid. In charge of much of the UK’s energy-related infrastructure, it yields a chunky 5.1% right now.

Tritax Big Box shares look expensive. Nonetheless, the demand for the sort of warehouse space this real estate investment trust (REIT) owns should continue for many years to come. After all, the popularity of online shopping looks set to only increase. I’d therefore begin building a position with the intention of adding more in moments of general market malaise. The yield is 2.8%

Online trading firm IG Group remains one of my favourite listed companies. While the threat of increased regulation is never far away, the company’s bumper levels of free cash flow should ensure there’s no danger of the dividend being cut any time soon. It’s also a potential hedge if markets get volatile. IG yields 5.7% at the moment.

Boasting bursting lists of recognisable brands that shoppers tend to buy through habit, Britvic and Unilever shares — and their respective 2.7% and 3.7% yields — also get my votes. Both have near-perfect records of growing dividends over the years.

Here’s what I might get

Based on their forecast dividends at the time of writing (and assuming I invest equal amounts into each), the above five stocks generate an average yield of 4%. In other words, I’d get £4 in dividends for every £100 I invest. That’s an awful lot more than what I’d get from even the best Cash ISA on the block.

Are there ways of generating more passive income from UK stocks? Absolutely. However, one needs to question just how secure the payouts from cyclical companies involved in, say, banking, housebuilding and mining actually are.

Of course, there’s no guarantee that even the companies I’ve picked out will always be able to return cash to their owners. However, I have made sure to diversify across sectors. So even if one encounters a setback, the level of income should still be decent.

Patience required

Regardless of which stocks are selected, one thing worth highlighting is the time taken to generate a sizeable passive income stream. Initially, the money received will be negligible because the amount invested is small. That may not suit those with itchy trigger fingers and limited patience.

There are ways of speeding things up. Obviously, stashing more than £100 away every month is one option. Saving on fees by using a stockbroker’s regular investment scheme will also help.

If the income isn’t needed right now, an even better solution is to reinvest dividends. This boosts the accumulation of capital via compounding and could give me an even better passive income stream to draw on when I really want to put my feet up.

The post 5 passive income ideas for £100 a month appeared first on The Twelfth Magpie.

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Paul Summers owns shares in IG Group. The Motley Fool UK has recommended Britvic, Tritax Big Box REIT, and Unilever. 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.

Reliable payer

Last year aside, drinks giant Britvic (LSE: BVIC) has a great track record of regularly hiking its dividends. That makes it attractive at a time of rising prices, since my buying power should be maintained (and potentially increased).

Right now, analysts have the business returning 27.8p per share in FY22 — a stonking 18% increase on that expected for the financial year just completed. 

Using the current share price, this equates to a decent yield of 3.1%. Although buying single company stocks traditionally involves more risk, it’s worth noting this is far more than the 1.9% offered by the index.

Aside from its income credentials, Britvic strikes me as a defensive option, thanks to its bumper portfolio of brands. Returns on capital have also been consistently good. And, thanks to exporting to more than 100 countries, earnings are about as geographically diversified as I could want.

Of course, there’s a chance global supply chain issues and ongoing investment will hit sentiment in the short term. So we could see a bit of selling pressure (and potentially a great opportunity to buy) when full-year results arrive on 24 November.

Meaty hiker

I doubt meat supplier Cranswick (LSE: CWK) hits many income investors’ radars. That’s understandable. A forecast yield of 2% doesn’t grab the attention quite like one offering fives times this amount does. However, I think this qualifies as a stellar dividend stock.

The fact is that CWK is an excellent source of rising cash returns with an average growth rate of over 13% per year. That’s impressive, considering capital expenditure in this (low margin) industry can often be pretty hefty.

In addition to its rising dividend stream, Cranswick has also delivered solid capital growth. Holders would have seen a 55% gain since October 2016. That’s better than the 32% achieved by the FTSE 250 index. Clearly, this margin will have been even greater had those dividends been re-invested. 

Since I doubt whether many people are prepared to give up their sausages and bacon any time soon, CWK should go on rewarding investors long into the future.

Volatility hedge

A final FTSE 250 dividend stock I’d feel comfortable buying today is one I’ve already held for a number of years. That’s online trading platform provider IG Group (LSE: IGG).

Now IGG may not be every investor’s cup of tea for a few reasons. For one, the industry in which it operates is always susceptible to regulatory scrutiny. It’s also fair to say that IG faces significant competition for clients. That’s despite it being the recognised market leader in the UK. 

As credible as these concerns are, I continue to regard this stock as a potentially great hedge against market volatility. When emotions run high (as they did last year), trading activity increases and IG benefits. That’s good news for revenues, profits and, ultimately, dividends.

Currently yielding a forecast 5.4% for the current year, analysts have predicted a 10% uplift to IG’s total payout in FY23. With free cash flow looking very healthy and a US market ready to tap, I don’t see this as unrealistic.

The post 3 FTSE 250 dividend stocks to buy and hold for years appeared first on The Twelfth Magpie.

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Paul Summers owns shares in IG Group. The Motley Fool UK 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.

FTSE 250 recovery play

Before mid-March, shares in high-performance polymer producer Victrex (LSE: VCT) had been reluctant to take part in the recovery. Since then, they’ve climbed almost 30% in value as demand has bounced back. Based on last Friday’s Q3 management statement, I think this momentum should continue.

Last week, the FTSE 250 company said that it had “delivered a strong quarter” over the three months to the end of June. Group revenue now looks to be back on track after last year’s disruption in all of the company’s markets.

Looking ahead, the resurgence in business seen to date and a “robust” order book for Q4 now mean full-year numbers should be closer to “the upper end of market expectations”.

Naturally, there are potential bumps in the road ahead. According to Victrex, these include rising prices of materials, currency headwinds and the inevitable need for ongoing investment. Moreover, the shares aren’t cheap at 32 times FY21 earnings (falling to 27 times in FY22).

However, Victrex’s quality goes some way to justifying this valuation. It had £88.3m in cash at the end of June, has now reinstated dividends and consistently posts great margins and returns on capital. 

I’m also excited by the company’s growth potential via its ‘mega programmes’. These include the use of the company’s PEEK products in new applications such as knee replacements. Last Friday, it was announced that five patients had now been implanted with ‘PEEK Knees’ via its partner Maxx Orthopedics. Although still early days, no issues have been reported so far.

Still around 20% below its all-time price high, I see more upside for this stock and would be comfortable adding to my current stake.

Share price momentum

A trading statement from FTSE 250 soft drinks giant Britvic (LSE: BVIC) is due later this month. Based on its performance in 2021 so far, I don’t think investors should have much to fear. Those buying in January will have already enjoyed a gain of around 20%.

Sure, the share price won’t double overnight and there’s an opportunity cost to consider. It can be tempting for me to prioritise racier stocks over one that should provide steadier performance.

Nevertheless, Britvic strikes me as a great, defensive pick and one I’d buy regardless of what economists and analysts were saying about interest rates, inflation and the like. It’s got a portfolio of easily recognisable, ‘sticky’ brands that shoppers both like and will buy through habit. This makes earnings far more predictable than your typical tech stock. There’s also a 2.4% yield, easily covered by profits, to consider.

Back in May, Britvic reported that trading in the first weeks of H2 had been “encouraging“. As such, some of the Covid recovery is surely already priced in. Even so, I think a full return to normality in bars, pubs and restaurants should allow it to breach its previous record share price high before too long.

I’d be happy to add Britvic to my own portfolio today. 

The post 2 FTSE 250 stocks to buy now appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Victrex. The Motley Fool UK has recommended Britvic and Victrex. 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.

Same rules, different index

Once again, my loose ‘rules’ for separating the wheat from the chaff include avoiding companies offering the highest dividend yields. Buying these stocks for income can often be counterproductive (not to mention costly). Outsize payouts are usually indicative of a company in trouble.

What I’m looking for is a decent income stream, but not one so great that there’s a risk I’ll never receive it. This is why ‘dividend cover’ — the extent to which profits cover the payout — is something I always investigate before buying.

On top of this, I’m trying to find a good spread of companies across sectors. This kind of diversification is particularly important when focusing on FTSE 250 stocks. After all, they tend to be more focused on the UK market and derive less of their money from multiple overseas markets. And while all companies have a degree of cyclicality to their earnings, I’m on the hunt for those where they are relatively consistent.

Here, then, are five stocks I’d be happy to buy for income.

FTSE 250 stocks for passive income

A 2.9% yield isn’t the largest an investor can get in the FTSE 250. However, drinks firm Britvic‘s predictable earnings make this a go-to income pick for me. The re-opening of hospitality venues in a couple of months should provide a further boost. Like Britvic, ingredients supplier Tate & Lyle‘s 4% yield is solidly covered by profits too. 

For diversification, I’ve long been attracted to Tritax Big Box REIT. In addition to the 3.7% yield, the company gives investors exposure to the ongoing growth in demand for warehouses from retailers. Pandemic or not, the growth of e-commerce looks unlikely to slow. 

IT infrastructure services provider Computacenter is a great, albeit low-margin, business. Earnings have accelerated markedly over the last few years. Factor in a sharp rise in free cash flow and its 2.2% yield is about as secure as you can find. 

The annual dividend from online trading platform provider IG Group hasn’t budged for a while now (43.2p per share). Even so, this still gives a chunky yield of 4.9% at the current share price. And if markets do calm down once lockdown is fully over and people return to work, IG’s attempts to scale its presence in the US market should still keep the money rolling in. 

Risky business

Is the risk involved in buying these individual FTSE 250 stocks worth it? I’d say so, particularly as they all bear hallmarks of quality businesses. We’re talking robust balance sheets, strong brands and/or consistently goods returns on capital employed. Moreover, all currently offer dividend yields above that of the index itself (1.75%).

Notwithstanding this, it’s important to remember that nothing stands still in the market. The stocks highlighted above could all encounter specific, unforeseeable issues that lead to their dividend policies being revised. The possibility of a third wave of coronavirus hitting these shores also needs to be borne in mind.

As such, I certainly wouldn’t dissuade anyone without the time, energy, or inclination to keep track of their investments from buying a FTSE 250 index tracking fund instead.

The post FTSE 250 shares: how I’d invest £20,000 for a passive income appeared first on The Twelfth Magpie.

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Paul Summers owns shares of IG Group Holdings. The Motley Fool UK has recommended Britvic and Tritax Big Box REIT. 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.

FTSE 250 dividend stock

As one might expect, coronavirus-related restrictions in the run-up to Christmas, coupled with the third UK lockdown soon after, heaped more pressure on the hospitality sector. Understandably, this has impacted Britvic — the owner of soft drink brands such as Robinsons, J20 and R Whites.

Total revenue for Q1 of its financial year was a touch over £328m. On a reported basis, that’s a fall of 9.8%. In its GB market, total revenue fell 4.1% thanks to a huge 32% tumble in ‘out-of-home’ sales. Overseas revenue fell more than 19%, although sales in Brazil were a bright spot, rising almost 26%. 

Naturally, the outlook for this FTSE 250 member’s profits is as cloudy as it is for most businesses. Today, Britvic said that it expects restrictions to stay during Q2 and that performance would continue to be “significantly affected“.

Not that CEO Simon Litherland seems too concerned. Commenting today, he said that Britvic is confident that it will “continue to successfully navigate the pandemic, emerge stronger, and be at the forefront of the recovery when it comes”. 

Time will tell. In the meantime, analysts have Britvic returning 26.3p per share to shareholders in FY21. Taking today’s 4% tumble in the share price into account, that equates to a forecast yield of 3.6%. For an established company in the resilient beverage sector, that really helps to mitigate the risk, in my opinion.

What’s more, Britvic’s shares still look reasonably priced at 15 times earnings before markets opened. Although capital gains are not the point for me when I’m looking to generate income, I think we could see the stock fizz when pubs, bars and cafes are allowed to reopen. 

Chunky cash returns

Another FTSE 250 stock offering a great source of dividends, in my opinion, is online trading platform IG Group (LSE: IGG).

A little over one week ago, it released a set of record-breaking H1 numbers to the market. Thanks to existing and new clients being so active, net trading revenue increased 67% to almost £417m. Pre-tax profit jumped 129% to £231.3m. 

In addition to these figures, IG also announced its proposed acquisition of US site tastytrade. This will give the £3bn cap a route into the fast-growing market of exchange-traded options and futures. It will also further diversify the company’s earnings by geography.   

Naturally, all investment involves risk and IG is no exception. While the shares have been riding a wave of positive momentum following the Covid-19 pandemic, there will come a time when clients become less active. The possibility of even more regulation of its industry can’t be dismissed either.

Even so, the dividends alone give me a reason to stay invested.  Assuming there’s no change to its 43.2p per share payout in this financial year, IG yields 5.8% at its current share price. That’s a lot more than I’d get from even the best Cash ISA.

Like Britvic, IG’s valuation is also inviting. A P/E of 12 looks cheap to me for a market leader generating high margins and returns on the money it invests.

The post With £2,000 to invest in FTSE 250 dividend shares, here’s what I’d buy appeared first on The Twelfth Magpie.

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Paul Summers owns shares of IG Group Holdings. The Motley Fool UK 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.

The good news is that there are still many bargain dividend payers around. Here are three from the FTSE 250 that I’d buy right now if passive income were my goal.

Passive income powerhouse

Yesterday’s brief trading update from online trading platform provider IG Group (LSE: IGG) was well received by the market and it’s not hard to see why. 

Thanks to traders remaining active, IG now believes net trading revenue for the first six months of FY21 will come in at around £416m. That’s a stonking increase of 67% compared to the same period in the previous year. 

Naturally, there will come a time when the market becomes less volatile and IG’s trading volumes normalise. Even so, I still think the shares are worth grabbing for the dividends on offer. Another 43.2p per share return in this financial year gives a yield of 5.1% at the current share price. That’s far better than the ridiculously low 0.6% offered by the best instant access Cash ISA

What’s more, IG’s shares still trade on just 14 times expected earnings. I think that’s got to be a steal for such a high-quality, industry-leading firm.

Sweet yield

Ingredients supplier Tate & Lyle (LSE: TATE) is another FTSE 250 member offering a juicy passive income stream right now. 

Last month, the company revealed some better-than-expected numbers from the six months of trading to the end of September. These included a 1% and 9% rise in revenue and profit respectively at its Food & Beverage Solutions division. Its other business — Primary Products — “delivered steady earnings despite a significant reduction in out-of-home consumption in North America”. 

Like IG, shares in Tate don’t look particularly expensive. A price-to-earnings (P/E) ratio of 12 for the current financial year looks very fair to me, even if the company is still cautious about trading going forward.  

And the dividends? A possible 30p per share cash return gives a yield of 4.5% at the current share price. What’s more, this payout is expected to be covered 1.8 times by profits, suggesting it’s unlikely to be cut any time soon.

Drink in those dividends

A final stock from the FTSE 250 that I think should continue generating passive income for holders is soft drinks giant Britvic (LSE: BVIC).

Last month’s results for the year to the end of September were adequate enough given the impact of the pandemic. Although revenue fell 6.8% to £1.41m, post-tax profit rose almost 17% to £94.6m. The company also highlighted that it has extended its UK bottling deal with PepsiCo for another 20 years.

Most importantly for passive income seekers, Britvic confirmed a 21.6p dividend for the full year. This gives it a trailing yield of 2.7%.

Given that the soft drinks industry tends to bounce back strongly after setbacks, I see no reason why this company won’t increase its cash returns to holders. Indeed, if analysts are correct, the company could return 26.9p per share return in the new financial year. That gives a yield of 3.3%!

Trading on 15 times earnings, Britvic remains another highly tempting dividend pick, in my view. I’d buy.

The post I’d spend £3k right now on these cheap FTSE 250 dividend stocks for passive income appeared first on The Twelfth Magpie.

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Paul Summers owns shares of IG Group Holdings. The Motley Fool UK 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.

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%. 

The post 3 top dividend stocks I’d buy if the coronavirus sell-off gets worse appeared first on The Twelfth Magpie.

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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.

Tonic water specialist Fevertree and Vimto-maker Nichols are recent examples of seemingly temporary setbacks have caused sentiment to sour. 

Today, it was the turn of Hemel Hempstead-based Britvic (LSE: BVIC) to update the market. Based on early trading, it would seem investors were very relieved by what the company had to say. 

Going pop

Revenue over the first quarter of the financial year fizzed 2.6% higher to just shy of £370m. That’s far from explosive but it’s good enough, at least in my view, for such an established business.

As a result of this performance, the £2.3bn market cap firm stated that it was confident of meeting analyst expectations for the full year while cautioning that conditions would “remain challenging“.

The only other news worth mentioning related to the sale of some of its troublesome French assets to independent bottling firm Refresco. Britvic now believes the deal will be completed at some point this year, assuming regulatory approval is received. 

Considering the relatively defensive nature of its business, I continue to like this company’s valuation. A forecast price-to-earnings (P/E) ratio of 14 (at least before markets opened this morning) doesn’t seem too steep for a firm that boasts a portfolio of brands such as Robinsons, Tango, and J20 and also holds the licence to produce and sell PepsiCo products in the UK and Ireland.

Britvic’s income credentials shouldn’t be overlooked either. A likely total dividend of 33.5p per share in the 2020 fiscal year gives a yield of 3.7%. That’s higher than the 2.8% or so you’d receive from buying an exchange-traded fund that tracks the FTSE 250 index of which it is a member. 

Taking all this into account, I continue to think that the mid-cap warrants attention from investors looking for a mix of steady growth and decent income from their stocks. 

Buy the dip?

The reaction to today’s update from Britvic (+4%) is in complete contrast to yesterday’s response to the latest interim results from FTSE 100 spirits giant Diageo (LSE: DGE).

Due to “increased levels of volatility” in parts of the world including India and Latin America, the owner of brands such as Johnnie Walker whiskey and Smirnoff vodka said that organic net sales growth for the year would now be at the lower end of its 4-6% mid-term target.

Compounding investors’ fears, CEO Ivan Menezes also mentioned “ongoing uncertainty in the global trade environment”, and added that the company “would not be immune from further policy changes”. Shares duly fell.

Of course, one should avoid judging a specific stock based on a short period of trading or macroeconomic issues. Investing is a long game. Diageo remains a global leader in what it does, is hugely cash-generative, and delivers reliably good returns for shareholders on the money it invests.

It’s also a consistent dividend-hiker, further evidenced by yesterday’s 5% increase to the interim payout (to 27.41p per share). The consensus from analysts is that the company will return 72.9p per share to its owners in this financial year, giving a yield of 2.4%.

With shares almost 20% lower in value now than they were in September last year, I’m very tempted to get involved.

The post This FTSE 250 stalwart isn’t the only stock I’d buy for growth and income appeared first on The Twelfth Magpie.

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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 Britvic. The Motley Fool UK has recommended Diageo. 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.

Once again, the emphasis will be on picking established, quality businesses with room to grow that also pay dividends.

High returns

While some might view kitchen supplier Howden Joinery as cyclical, I still think it warrants consideration from investors willing to look outside the FTSE 100. Howden sells kitchens to builders rather than homeowners, which means it should get repeat business, regardless of what’s going on with the economy. It also has a couple of things I’m attracted to when screening for stocks: a consistently high return on the money it invests in its business, and zero debt. 

The shares have had a very good run of late and I’d prefer to buy at a cheaper price, but it’s hard to rule out a firm of this quality. The yield is 2%.

Top brands

Like fund manager Terry Smith, I’m rather partial to companies selling small-ticket, branded items that are in demand during good times and bad. That’s why I particularly like stocks in the drinks industry.

The natural pick from the FTSE 250 for this sector would be Robinsons and J2O-owner Britvic. Recent results from the £2.6bn-cap weren’t exactly sparkling, due to problematic trading in France. But this should turn out to be blip rather than a crisis. The shares currently trade on a little less than 16 times expected earnings and yield 3.3%

Food on the go

If you regularly buy something at a station or airport, you’ll know just how valuable a captive market can be for a business. That’s why my third pick is SSP Group, which manages food and drink sites at busy travel locations. Its brands include Upper Crust and Ritazza, but it also manages Burger King and Starbucks outlets.

Perhaps, understandably due to the uncertainty surrounding how Brexit will impact the travel industry, it’s been a rollercoaster 2019 for the shares. However, the long-term trend is most definitely up. SPP’s shares trade on 21 times earnings and come with a 1.9% dividend yield.

Chunky yield

A combination of new regulatory hurdles and a lack of volatility in the markets have made the last couple of years pretty uncomfortable for online trading specialist (and market leader) IG Group.  

That said, recent performance has been far from disastrous and the forthcoming general election should be lucrative since traders will want to get involved in a potential ‘Corbyn crash’ or, perhaps more likely, ‘Boris bounce’. While not as cheap as they once were, its shares currently trade on a still-reasonable 17 earnings and yield a chunky 6.3%. 

Go small

All long-term investors should have some exposure to market minnows, in my opinion. That’s why my final pick is actually not a single company but a near-30-year-old FTSE 250-listed investment trust with 79 holdings.

While ongoing costs will be higher than if you were to adopt a passive investment strategy, the fact the Aberforth Smaller Companies Trust share price has grown annually by almost 13% since inception should compensate for this. Moreover, the Trust pays a dividend (most small-cap funds don’t) which, when reinvested, should help compound gains even further. 

The post Have £5k to invest? Here are 5 stocks I’d buy for a FTSE 250 starter portfolio appeared first on The Twelfth Magpie.

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Paul Summers owns shares of IG Group Holdings. The Motley Fool UK owns shares of and has recommended Britvic. The Motley Fool UK owns shares of SSP Group. The Motley Fool UK has recommended Howden Joinery Group. 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.