Despite rising profits, double-digit dividend growth and a strengthened balance sheet, shares in the FTSE 100 insurer have fallen by 5% over the last year, lagging the wider market. As a shareholder myself, I’m not sure why the market is so cautious about this successful turnaround.

Although half-year profits were hit by severe winter weather in the UK and Canada, overall performance was still pretty solid in my view. Operating profit excluding disposals rose by 4% to £1,421m, and this figure was supported by cash generation of £1,493m.

The group used some of its spare cash to repay £500m of high-cost debt and return £600m to shareholders through a share buyback. Alongside this, the interim dividend rose by 10%.

Aviva’s regulatory ratios also remain comfortable. And its performance over the last few years suggests to me that CEO Mark Wilson’s turnaround plans have been successful. So what is wrong?

No loyalty

We all know why we need insurance. But the reality is that we don’t really like paying for something we rarely use. We tend to shop around for the cheapest insurance that offers the cover we need, and we don’t hesitate to switch insurers when we renew.

Insurance bosses like Mr Wilson aren’t happy about being seen as a necessary evil. They want to customers to stay loyal and purchase multiple services from them. The prize at stake is higher profit margins and an expanded share of mature markets such as the UK.

Achieving this change may not be easy. Efforts so far include a web portal where you can manage all Aviva services, an app to help make you a safer driver, and leak detection kits for home insurance customers.

Will this work? It’s too soon to say. But I suspect it could. In the meantime, I believe that Aviva shares are probably getting close to the bottom of their trading range. Broker forecasts put the stock on a price/earnings ratio of 8.6 with a 6.1% yield for 2018. I maintain my dividend buy rating on this stock.

Just show me the cash

My second pick today is also an insurance firm. But it’s very different. Chesnara (LSE: CSN) buys up closed books of life insurance policies from other insurers and runs them through to maturity.

What this means is that the group doesn’t have to worry about customer acquisition, marketing or developing new services. The key to its success is skilled management of its policies and low costs.

Chesnara has been very successful. Its share price has tripled over the last 10 years, while dividends have risen every year since the group’s flotation in 2004. This gives me a good level of confidence in the company’s management and strategy.

Today’s half-year results suggest to me that this progress is likely to continue. Although the group’s economic value — a valuation measure used by insurers — fell by 3% to £700.8m, this was mostly due to currency headwinds. Cash generation remained strong at £48.6m, providing support for a 3% increase to the interim dividend.

Looking ahead, analysts expect Chesnara to pay a full-year dividend of 20.7p per share, giving the stock a 5.3% yield. In my view these shares are worth considering for a long-term income.

The post How low can the Aviva share price go? appeared first on The Twelfth Magpie.

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Roland Head owns shares of Aviva. 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 firm was hit particularly hard by the demise of Toys R Us, one of its largest customers. The bankruptcy forced Character to warn last year that results for the year ending August 2018 would be “significantly lower than market expectations” following the loss of income from the UK’s largest brick and mortar toy store.

Major setback 

The Toys R Us demise is already having a significant impact on Character. Today, the company published its financial figures for the half year ended February, showing a 36% decline in operating profit and similar contraction in pre-tax profit. Basic earnings per share for the period fell 38% year-on-year, and after including the impact of adjustments on foreign currency derivative positions, basic earnings per share declined 92% year-on-year. Group net cash was £14.3m, down from the £18.6m reported at the end of the same period last year, but up from the £11.5m reported at the end of August 2017.

However, despite Character’s dismal performance during the first half, management is upbeat on the outlook for the rest of the year as the Toy R Us fallout dissipates. 

“We continue to have great strength and depth across our brands and a wide range of long-term customers and suppliers,” the half-year update noted, continuing, “the directors remain optimistic that the business will see a return to its previous growth pattern during the second half of this financial year.“

Still, despite management’s optimism, I’m wary about Character’s outlook as the group has disappointed on growth several times in the past. With this being the case, even though the shares might look attractive today, trading at a forward P/E of 11 and supporting a dividend yield of 5.1%, I’m in no rush to buy the stock.

Slow and steady wins the race 

On the other hand, I’m more optimistic about the outlook for financial services business Chesnara (LSE: CSN). 

This is a holding company engaged in the management of life and pension books of businesses in the UK, a relatively stable and predictable industry. The enterprise buys life insurance funds closed to new customers and then manages them to maximise profit for investors. 

So far, Chesnara’s strategy has produced fantastic results. The dividend has grown at a steady rate of 3% per annum over the past five years and including the dividend, the shares have produced a total average annual return of around 16% per annum since 2012, smashing the FTSE 100 over the same period.

As the company continues to consolidate its position in the market, by buying up unwanted pension businesses, I believe that this performance is set to continue. 

With this being the case, compared to struggling Character, which will remain at the mercy of consumer trends, Chesnara, with its more stable and predictable business model (as well as the long-term income stream from pension management) looks to be the better investment. The shares currently support a dividend yield of 5.1%.

The post One 5% yielder I’d buy and one I’d sell after today’s news appeared first on The Twelfth Magpie.

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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.

If you’re looking for the best sustainable dividend investments, I think it’s important to look beyond the well-covered FTSE 100 names to find stocks that are available at attractive valuations.

Strong cash generation

Chesnara (LSE: CSN), the life insurance and pensions consolidator is a great example of small-cap stock with a dependable dividend policy.

Owing to economic tailwinds and the successful completion of the acquisition of Legal & General Nederland, Chesnara’s reported group cash generation in 2017 soared to £86.7m, up from £34.3m in the previous year. Pre-tax profit more than doubled from £40.7m to £89.6m, after it partially benefitted from a £20.3m non-recurring gain from the takeover.

As a result, the board delivered another 3% increase in its full-year dividend to 20.07p per share, marking its 13th successive rise in annual dividends. At its current share price of 414p, Chesnara yields 4.8%.

Dividend safety

But the shares’ high yield is only part of the story — the safety of the yield is just as important. And in Chesnara’s case, the payout is very secure. With group cash generation covering its dividend payout by nearly 2.9 times (and profits covering the dividend by a similar ratio as well), the possibility of a dividend cut is extremely remote, while the likelihood of further dividend growth is high.

Sure, Chesnara can afford a higher dividend amount right now, but the board has made it clear that it is not currently considering it. Instead, the company is looking to save its firepower for future acquisitions.

Acquisitions enable the company to grow more quickly and often at a much lower cost to writing new business. On the downside however, the company’s future growth is dependent on its ability to continually find new attractively valued acquisition targets.

Attractive yield

Looking elsewhere, Rank Group (LSE: RNK) may not be a company that you may have come across, but I’m sure you have heard of some of its brand names. The company’s main operations are in the UK, where it owns Mecca Bingo, and Grosvenor Casinos, the UK’s largest casino operator.

Recent weak trading figures have sent shares in the company tumbling, but I still reckon its shares offer an attractive sustainable yield. At its current share price of 175p, Rank offers a 4.2% yield which is backed up by more than two times earnings cover. The balance sheet is also in a good position, with the company reporting a small net cash position of £4m at the end of its first half.

Certainly, its brick and mortar business is stagnating or shrinking, with recent figures pointing to a 2%-3% decline in its Mecca and Grosvenor Casino revenues. But this is a manageable decline and is partially offset by double-digit growth in its digital business, which continues to trade strongly. Moreover, one-off factors were partly to blame, with Grosvenor Casinos’ underperformance exacerbated by a negative contribution from its VIP players, while both UK venues were hit by unexpected cold weather this year.

Looking ahead, City analysts expect the dividend to continue grow, with forecasts of 8p this year and 8.6p in 2019. Adjusted earnings per share for 2017/18 are expected to be flat on last year, although growth of 5.5% is pencilled in for next year. This means its dividend cover ratio is expected to fall only modestly from 2.2 times last year, to a still resilient two times figure by 2018/19.

The post Income investors: 2 stocks with sustainable 4%+ dividend yields appeared first on The Twelfth Magpie.

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Jack Tang 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’s all down to a failure by the company to adequately inform customers of its Vanquis Bank subsidiary of the full cost of something called a Repayment Option Plan. The firm was fined £2m, but that was small change compared to the compensation it had to cough up to customers, which reached around £170m. 

But with the FCA now happy, and a £330m rights issue getting the company back to the required levels of liquidity, Provident’s problems could now be well behind it. And we could be looking at a nice buying opportunity.

Major investor Neil Woodford seems to think so, having said he believes Provident is already on the road to recovery and that “the company’s intrinsic value is substantially higher than the current share price would suggest.”

Turning round

Full-year results lent support to that, with Provident claiming “a significant improvement in customer service and operational performance” since the action it took in its home credit business. Vanquis Bank also saw a rise in new customer bookings, so the fallout from last year’s problems appears limited.

No dividend was paid for 2017, but analysts see a 1.5% yield likely for the current year (with EPS expected to be flat). And if the firm manages the the 36% forecast rise in EPS for 2017, the dividend could be back to a tasty 5.4% yield by 2019. 

Some of that mooted recovery is already built in to the price, but forecasts would drop the 2019 P/E to around 12.5, and I see that as an attractive valuation.

Big yield

What better to accompany Provident Financial’s predicted return to strong dividends than a 5.3% yield paid now? 

That’s what life and pensions consolidator Chesnara (LSE: CSN) has just announced, as it once again kept its progressive dividend ticking along ahead of inflation. We saw a rise of a shade under 3% to 20.07p per share.

The big news in 2017 was the acquisition of Legal and General Nederland (since renamed Scildon), which helped bring 2017 results in ahead of expectations.

Pre-tax profit more than doubled from £40.7m to £89.6m (with a £20.3m gain from the takeover). The company also reported strong cash generation, excluding the impact of the L&G Nederland acquisition, of £83.9m — from £36.5m a year previously.

Future cash

According to chairman Peter Mason, the integration of L&G Nederland is progressing well and helped towards “an impressive set of results on all financial metrics.” He went on to say: “I remain optimistic that Chesnara can continue to deliver against its strategic objectives, which in turn fund our well established dividend strategy,” adding that “the UK business remains a robust source of cash.“

That gives me confidence Chesnara will continue to be a solid dividend payer, and I see longer-term P/E multiples of around 16 as representing good value.

Mason is also optimistic about the company’s ability to continue to focus on acquisitions in both the UK and the Netherlands. And if it can do it the way it acquired L&G Nederland, then I’m looking forward to seeing more of it. 

The post Why I’d buy Neil Woodford favourite Provident Financial plc, along with this 5% yielder appeared first on The Twelfth Magpie.

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Alan Oscroft 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.

Share price down 6%

The group’s share price is down 6% from a year ago, despite steady organic growth in service revenues and improving free cash flow. Progress has been slow, but Vodafone seems to be getting there. Although overall group revenues in the last financial year dipped by 4.4%, operating profits soared by 182% to €3.7bn as free cash flow more than doubled to €4.1bn.

Continuing with the momentum into 2017, first quarter service revenues grew by 2.2% to €10.8bn, with good growth across Continental Europe — particularly in Italy and Spain, where it had come under intense pressure from price cutting by its rivals. This slow but steady progress, however, does not seem to have been well received by investors.

Cut-throat competition

And it’s probably for good reasons too, given that Vodafone continues to face cut-throat competition from the industry. Its rivals are keeping prices low, while ramping up spending on new, faster networks and multi-play solutions. Vodafone is having a particularly difficult time in the UK, where it lacks its own pay-TV services — with organic service revenues there falling by 3.2%, in contrast to positive growth in its other European markets.

Add to that the big investments planned for the next few years, Vodafone seems set to face a challenging road ahead. To make matters worse, the company’s debt pile is fast rising, with net debt of £31.2bn, just while new mobile spectrum auctions are looming. This means that, looking ahead, future returns could be less than enthusiastic as these pressures crimp future dividend growth and threaten the mobile network operator’s uncertain recovery.

What’s more, valuations aren’t looking too tempting either, with shares trading on a forecast P/E of 28.

Good momentum

Instead Chesnara (LSE: CSN), the life and pensions consolidator, might be a better buy for dividend investors. The Preston-based company is showing good momentum following the completion of its latest acquisition, Legal and General Nederland, which has since been rebranded as Scildon.

Its Economic Value, a key measure of the insurer’s underlying worth, climbed by almost £100m in the first six months of 2017, to £700m, while group cash generation rose from £13.6m last year to £46.2m. The insurer also boasted of strong financial foundations as its solvency ratio remained resilient, at 143%, despite the impact of recent acquisitions.

Looking ahead, City analysts expect Chesnara to pay shareholders a dividend of 20p a share, which gives shareholders an appealing prospective yield of 5%. The company is highly cash generative and easily affords its annual dividends internally, with dividend cover expected to rise to nearly two times this year.

Valuations are also attractive as shares in the company trade at a 15% discount to its Economic Value, with a forward P/E of just 10.3 indicating that it offers substantial upward re-rating potential.

The post Why I’d buy this under-the-radar dividend stock instead of Vodafone Group plc appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended AstraZeneca. 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.

Sweat and hard graft

The FTSE 250 flyer, which has a market cap of £1.87bn, has just reported another positive set of results, with revenue up 9% to £1.3bn, or 6% in constant currency. Adjusted operating profit before property profit rose 19% to £77m. It also reported strong organic growth in its Irish Merchanting, Woodie’s DIY and Mortar Manufacturing businesses, while increasing scale and profitability at its Netherlands merchanting business.

Strong cash generation has reduced net debt from £95.7m to £80.2m year-on-year, leaving gearing at just 7%. Grafton has invested £68.6m in acquisitions and capital expenditure as it looks to expand the business, and has also treated investors by increasing the dividend 11%. Chief executive Gavin Slark reports all geographies contributing to double-digit growth in profits and earnings per share in the first half and said Grafton is well placed to deliver its full-year expectations.

Brexit bother

It has also delivered five consecutive years of double-digit earnings per share (EPS) growth but there are signs this could slow, with forecasters anticipating 5% in 2017 then 8% in 2018. Brexit is the main concern, given that the UK supplies more than two-thirds of group revenues.

That may explain its undemanding valuation of 15.4 times earnings despite the growth spurt. The yield is a forecast 1.9%, which may not be spectacular but as we have seen, management policy is progressive. Grafton should be on your watchlist in case we get news on the UK’s future EU relationship. At that point, it could fly again.

Life is life

Life insurance and pension provider Chesnara (LSE: CSN) has also issued its latest half-yearly report this morning with investors hoping it will sustain recent strong momentum, that has seen its share price rise 15% in a year and 105% over five years. So far, markets seem happy, with the share price up 3% this morning.

Chesnara’s speciality is buying up portfolios of insurance policies and managing them until they’ve expired. It currently administers over a million life and pension policies worth around £7.5bn and continues to add to its portfolio, recently completing the acquisition of Legal and General Nederland, now rebranded as Scildon, which created £65.4m of economic value (EcV). The group’s total EcV now stands at £700.4m, up from £602.6m on 31 December 2016.

Capital value

Today’s results also show Chesnara posting IFRS profit before tax of £51.6m, up from £200,000 one year ago, which includes a better-than-expected £20.7m gain on the Legal and General Nederland acquisition. The underlying core operating profit of £16.6m easily beats last year’s £9.5m. The group solvency ratio is steady at 143%, and the company remains well capitalised.

Chesnara, whose market cap is £584m, increased its interim dividend by 2.9%. Its forward yield is now a handsome 5.3%, with solid cover of 1.7. Today’s forecast valuation of just 11.3 times earnings may now be a good entry point. 

The post Two spectacular momentum stocks with exciting growth prospects appeared first on The Twelfth Magpie.

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Harvey Jones 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.

Chesnara

Life insurance and pension provider Chesnara (LSE: CSN) specialises in buying portfolios of insurance policies from other insurance firms and managing them until they’ve expired. The £580m market cap firm currently administers over a million life and pension policies and manages over £7.5bn in funds.

Chesnara takes great pride in rewarding shareholders with sizeable dividend payouts, and the dividend growth generated by the company over the last 10 years has been impressive. Indeed, over the last decade, Chesnara has increased its dividend from 13.1p to 19.5p, a compound annual growth rate (CAGR) of an inflation-beating 4.1%.

City analysts forecast a payout of 19.8p for this year, meaning that the forward-looking yield is now a formidable 5.1%, higher than the yields of many FTSE 100 companies. Furthermore, dividend coverage for this year is estimated to be around 1.5 times, suggesting that there’s little chance of the dividend being cut.

Chesnara’s share price has climbed from around 320p a year ago to 390p today, a gain of 22%. However, with earnings of 30.5p forecast for FY2017, the stock’s valuation still looks attractive at a forward-looking P/E ratio of 12.8.

SafeCharge International 

Turning my attention to a company with an even smaller market capitalisation, £410m market cap SafeCharge International (LSE: SCH) also sports a sizeable dividend yield at present.

The UK-based small-cap company is engaged in the provision of online and mobile payments services, and has a diversified client base which includes William Hill, Paddy Power Betfair and McDonald’s. Online and mobile payments is a fast-growing area right now, and the company has enjoyed a strong rise in profitability over the last few years.

Indeed, between FY2014 and FY2016, revenue climbed from $77m to $104m and net profit surged from $14.4m to $26.6m. This impressive growth has enabled the company to reward its shareholders with increasing dividend payouts, and over the last three years, shareholders have received payments of 8.3 cents, 11.3 cents and 16.5 cents. City analysts envisage a dividend hike of a further 13% this year, which would take the payout to around 19 cents, a yield of an impressive 5.2%.

It’s worth noting that dividend coverage isn’t particularly strong, at a level of 1.1 last year. And there are other risks involved in the investment case, including the fact that the online gambling industry, a sector that the company has significant exposure to, is prone to interference from regulators.

However, in late July, management stated that “the Board remains confident that the outcome for the year will be broadly in line with market expectations” and on a forward-looking P/E ratio of 16.7, the valuation here looks very reasonable.

The post Two small-cap stocks with 5% dividends I’d buy today appeared first on The Twelfth Magpie.

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Well, after rising over 50% in value over the past two years the company’s stock only yields 3.2%, which is below the FTSE 100’s average 3.84% yield as of June 30. However, given that BATS’ payout is covered 1.46 times by earnings and that the dividend safety of some of the largest yielders out there such as Pearson, Shell and BP is suspect, conservative investors may find it worth taking the lower but safer yield.

And its healthy dividend is about as safe as they come these days as it’s supported by sales, profit and earnings growth. In the half year to June, the firm increased constant currency adjusted sales by 2.5% year-on-year (y/y), and adjusted operating profits by 3.2% y/y as operating margins rose by 30 basis points to 37.1%. Revenue growth is being driven by increased market share in key markets as well as management increasing prices to compensate for falling volumes.

Statutory results in actual exchange rates were even better thanks to the weak pound, which allowed the interim dividend to rise 10% to 56.5p. And looking ahead, there should be further income growth as BATS completed its £41.7bn acquisition of Reynolds America post-period end. This will increase the company’s market share in the most profitable tobacco market outside China and offer even more pricing power with suppliers and customers.

And while BATS’ post-deal net debt-to-EBITDA ratio will rise to four times, this isn’t too much of a worry given the company’s considerable cash flow and dependable income. At the end of the day, it may not be the single best income stock out there, but it pays out a safe and healthy dividend, offers decent growth prospects and is attractively valued at 19 times forward earnings.

A hidden income star 

But if you’re after a bigger yield than BATS can offer, one option may be life insurance and pension plan manager Chesnara (LSE: CSN). The company pays out a very nice 5% dividend yield at today’s stock price and has raised dividends every year since going public in 2004. Last year the company’s payout was covered 1.41 times by earnings and with a year-end solvency ratio of 158% the company is in very good financial shape.

Looking forward, there is still considerable room for the company’s dividend payments to continue rising as it acquires its way into new markets, builds scale and improves cash flow from subsidiary companies. And there are plenty of potential acquisition targets as Chesnara pursues both small operators open to new business as well as large closed pension and life insurance books that it then outsources management of until the policies expire.

This business model isn’t without its risks but so far the company’s management team has proved adept at navigating rocky economic environments. With a stellar track record of raising dividend payments and a decent valuation of 11 times forward earnings, Chesnara is worth taking a closer look at for income-hungry investors.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended BP and Royal Dutch Shell B. 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.

+223% in five years

FTSE 100 publishing and information group Relx (LSE: RELX) is a rare beast — a print publisher that’s successfully made the switch to the internet. Known as Reed Elsevier until 2015, Relx publishes a large number of academic journals. It also fulfils a similar function in the legal sector and provides a range of information-based analytics tools.

Most of the firm’s products are high-margin subscription services, which customers cannot afford to be without. This stickiness has given the company tremendous pricing power over the years.

This power becomes obvious when you look at the group’s financial results. Revenue has only grown by an average of 3.2% since 2012, but adjusted operating profit has risen by an average of 5.4% per year. This suggests that Relx is continually able to increase its profit margins through a mixture of price hikes and cost-cutting.

Low costs and upfront subscription payments from customers mean that on average, 95% of the group’s profits are converted into cash flow each year. That’s a strong performance and has allowed the company to increase its dividend per share by an average of 10% per year since 2012.

Is Relx a buy?

The firm’s share price has risen by 223% over the last five years. As you’d expect, this stock isn’t cheap. However, the forecast P/E of 20 and 2.5% yield isn’t necessarily too high to consider buying. If the company can continue to increase its profits at the rate we’ve seen in recent years, then I believe further gains could be possible.

A tempting 5% yield

You may not be familiar with Chesnara (LSE: CSN), but it belongs to a class of company that’s performed well for investors in recent years. It specialises in managing closed books of life insurance business. It buys portfolios of insurance policies from other insurance firms and manages them until they’ve all expired.

In addition to this, some of the group’s European subsidiaries write new insurance business, potentially providing a long-term growth opportunity.

The group’s management seem to have done a good job of expanding while generating plenty of surplus cash for shareholders. The dividend has grown from 11.85p per share in 2005 to 19.5p per share today. Although that’s only an average increase of 4.2% per year, I think it’s pretty impressive given that dividend growth continued throughout the financial crisis.

Broker forecasts for 2017 earnings have risen by 22% since January, driving the shares higher. But the stock still only trades on a forecast P/E of 13 and offers a forecast yield of 5.2%. Also, this positive earnings momentum could bode well for 2018.

In my view, Chesnara could be a strong income buy. I’m definitely tempted to take a closer look.

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Roland Head 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.

The London outfit saw revenues soar 19% between March and August, according to its latest trading update, to £62.7m. This was driven by strength at Bloomsbury’s core Consumer division, where blockbuster titles like its illustrated Harry Potter books helped drive sales 36% higher to £37.3m.

But the publisher isn’t content to sit on cash cows like the spectacled wizard to drive revenues further down the line, Bloomsbury seeing revenues from its academic and professional digital resources double during March-August to £2m.

And via its Bloomsbury 2020 investment programme, the company is dedicating vast sums to build its position in the critical digital segment through the likes of Arcadian Library Online and Bloomsbury Popular Music.

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These factors are expected to see the bottom line recover from an anticipated 23% earnings fall for the year that ended in February. And City analysts are predicting a 1% dip in the present period before Bloomsbury bounces back with an 8% earnings rise in fiscal 2019.

And current forecasts make Bloomsbury splendid value at the minute, the company dealing on a prospective P/E ratio of 14.9 times, just below the benchmark of 15 times widely considered attractive value.

Furthermore, broker estimates also provide particularly good news for dividend chasers. An estimated 6.7p per share dividend for fiscal 2017 is expected to rise to 7p and 7.4p in the following two years, meaning Bloomsbury checks out with handsome yields of 4.1% and 4.3% for these periods.

Cash machine

Those seeking market-mashing dividend yields should also take a long look at Chesnara (LSE: CSN), in my opinion.

Like Bloomsbury, the life insurance giant is anticipated to endure earnings turbulence in the near term. In 2017 the company is expected to enjoy a 7% earnings rise before an 18% bottom-line slip transpires next year.

But as a side note, current projections leave Chesnara dealing on a mega-cheap forward P/E multiple of 12.9 times.

Despite the predicted profits pain however, the company’s excellent solvency position — not to mention its still-robust long-term growth outlook — mean Chesnara is still expected to keep dividends rolling higher. The company’s Solvency II ratio rose to 158% as of December from 146% a year earlier.

Chesnara has hiked dividends for 12 years on the spin, and this year is predicted to pay a 20.1p per share dividend, up from an expected 19.5p in 2016 and yielding 5.3%. And an anticipated 20.6p reward in 2018 yields a spectacular 5.4%.

The Preston business snapped up Legal & General Nederland in November 2016 for €160m, a move which is expected “to have a significant positive impact on the Economic Value of the group and will further enhance ongoing cash generation thereby supporting the continuation of our dividend strategy.”

And Chesnara’s healthy appetite for acquisitions could provide the ammunition for dividends to keep on climbing.

The post Two cheap dividend stocks I’d buy in May appeared first on The Twelfth Magpie.

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Royston Wild 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.