One way of separating the wheat from the chaff is to look for companies that have better-than-average records of consistently raising their bi-annual payouts.

Here are three examples, all of which come from the FTSE 250 and probably remain under the radar of many private investors.

Cranswick

Meat supplier Cranswick (LSE: CWK) is a great passive income stock, in my view. The company has a long history of growing its annual cash returns to investors. In fact, hikes in recent years have often been by double-digit percentages. So while no dividend stream can be guaranteed, this is exactly the sort of form I’m looking for.

Based on recent trading, I have no concerns over this trend continuing. In its most recent update, the FTSE 250 stock said trading over the festive period has been “comfortably ahead” of the same time in 2020. This was despite “unprecedented industry-wide labour and supply chain challenges” and cost inflation.

Will we still be talking about these headwinds in a few years though? I sincerely doubt it. 

As good as the dividend hikes have been, Cranswick is a fairly low-margin business. Admittedly, the 2.2% forecast yield isn’t all that generous compared to others in the UK market either. 

Still, the amount of free cash flow (essentially, what allows a company to pay passive income to holders) is looking very healthy indeed. This makes me believe the company will continue growing its dividends in the years ahead. 

Bodycote

Heat treatment and thermal processing specialist Bodycote (LSE: BOY) is another FTSE 250 member that’s been increasing its annual payouts to investors for a long time. This quality tends to be indicative of a very resilient company.  

As things stand, Bodycote is expected to yield 21p per share in FY22. That becomes a yield of 3%. Again, this fairly average return doesn’t bother me. I’d rather invest in a company where my passive income is likely to be paid and also increasing every year. 

The shares have fallen 20% in 2022 so far, which highlights how even solid dividend payers can be just as volatile as more growth-focused stocks. Headwinds, such as supply chain disruption and cost inflation, won’t go away overnight either. 

Nevertheless, Bodycote seems to be trading just fine. This month’s full-year results revealed a 7.1% rise in revenues to almost £616m. Operating margins also rose to 15.4%. 

Clarkson

Shipping services provider Clarkson (LSE: CKN) strikes me as another stock that many private investors might be unfamiliar with. Similar to the other two shares mentioned here, the £1.1bn-cap company regularly lifts its annual dividend. In fact, it’s been doing this for the last 19 years! 

A forecast 2.5% yield in 2022 is expected to be covered almost twice by profit. That last bit is important. The greater the dividend cover, the less likely it is that the payment will be cut.

On the downside, shares in Clarkson aren’t a bargain, at almost 21 times earnings. This potentially makes the stock a more risky buy.

Even so, the balance sheet looks pretty solid to me. Earlier this month, Clarkson also announced record underlying pre-tax profit of £69.4m for 2021. Maintaining this kind of form should allow the passive income to keep ticking higher.

The post 3 ‘secret’ FTSE 250 stocks to buy for passive 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 has recommended Bodycote. 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 FTSE 250 integrated shipping services provider revealed in the report that revenue rose 19% during 2018, but underlying profit before tax and earnings per share both slipped back almost 10%. However, the brave directors pushed up the dividend by nearly 3%, which means the company now has a 16-year unbroken record of raising its dividend. Another positive is that free cash resources rose 5% to £57.0m

Challenging trading

Chief executive Andi Case described in the narrative a “challenging” start to 2018. He said geopolitical uncertainty and natural disasters have been affecting global sentiment and exchange rates, “which in part offsets the better visibility from an improved forward order book.” Such headwinds have been affecting the firm’s financial segment, he explained.

The directors said they are “confident” about the longer-term outlook for the company. But I can’t help but focus on what hasn’t been mentioned, which is how they feel about the short- and medium-term prospects of the business. As a cautious investor, I’m inclined to read the unspoken subtext as saying the outlook is less certain for the year ahead and beyond.

Meanwhile, Clarkson sports a robust valuation that I’m struggling to justify. The current share price near to 2,370p throws up a forward-looking price-to-earnings ratio of almost 19 for 2019, and the predicted dividend yield is just over 3.4%. City analysts following the firm expect a bounce-back in earnings in 2019 followed by further advances in 2020. Yet the firm has a patchy record on earnings over the past few years.

There’s a lot of cyclicality inherent in the firm’s operations, which means there’s plenty of scope for the shares to trade on a lower valuation, in my view. The directors didn’t sound as upbeat as they did a year ago, so I’d be inclined to move on from holding the shares today based on these results.

Smoothing out single-company risk

This is another of those occasions where I see a low-cost, passive FTSE 250 index tracker fund as more attractive than buying shares in this particular company. With around 250 firms backing a tracker investment, I’d be protected from single-company risk by the diversification. If headwinds increase for Clarkson, it’s easy to imagine a valuation downrating pushing the shares to around half their current value.

Generally, I like to have a compelling reason to buy any individual company share and, as a minimum, that reason should be that I expect the stock to outperform its index. I don’t feel that confidence with Clarkson today and believe the share price could go either way from where it is now.

Meanwhile, investors following the FTSE 250 index since it started with an accumulation tracker that automatically reinvests dividends have been achieving annual returns around 10% a year. I think there’s a good case for holding some of my funds in a tracker investment alongside individual share picks.

The post Here’s the great investment I’d pile into instead of the FTSE 250’s Clarkson today appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any 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.

Struggling to grow

Based on current City estimates, Clarkson is set to report a net profit of £31m for 2018, up around 100% since 2013. This looks impressive at first glance, but over the same period, the company’s return on capital employed — a measure of profitability for every £1 invested — has declined from nearly 16% in 2012 to just 9.1% on a trailing 12-month basis. That means the group is having to invest more to produce the same amount of profit. At the same time, the average number of shares in issue has increased dramatically. 

There are around 59% more shares in issue today than there were in 2013, which explains why, as net profit has nearly doubled, earnings per share (EPS) have barely budged. The City is expecting the company to report EPS of 103p for 2018, compared to 97p in 2013.

These figures tell me that Clarkson is struggling to grow in the current environment, and with this being the case I don’t think it is worth paying the current multiple of 21.9 times forward earnings to buy the stock. 

Instead, I believe global mining and commodity trading behemoth Glencore (LSE: GLEN) is a much better place for your money.

Bright outlook

I would invest £1,000 in Glencore today because I’m so optimistic about the outlook for the shares. First of all, they are exceptionally cheap. At the time of writing, shares in Glencore are trading at a forward P/E of just 7.7. Then there’s the dividend yield to consider. Analysts believe the company will distribute a total of $0.21 per share in 2018, giving a dividend yield of 5.7% on the current share price.

There are some risks here. Last year, the group was hit by concerns about political uncertainty in the Democratic Republic of Congo, where it mines just over a quarter of the global output of cobalt. A new mining code that was signed into law in June sparked tensions between the company and the government. Investors have also taken fright after the US government announced it was investigating Glencore over bribery and corruption allegations.

It is impossible to quantify how these developments will affect the company over the long term at this point because information is limited. However, I am confident that over the next 12 months, as more information becomes available, investors should return as the cloud of uncertainty is lifted. In the meantime, they can look forward to a 5.7% dividend yield.

Continue to thrive 

The problems above are confined to a relatively small part of the Glencore empire. The rest of the business should continue to thrive in 2019 as the company meets the world’s insatiable demand for essential commodities such as coal and copper. 

Glencore is also the world’s largest commodities trader, which gives a substantial competitive advantage over almost every other mining enterprise in the world. That’s why, despite the company’s current problems, I would invest £1,000 in the share price today.

The post Why I’d invest £1,000 in the Glencore share price right now 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.

Spice up your life

Why that curious date? It marks 22 years between the Spice Girls releasing their first single Wannabe and the announcement of their reunion tour, and was calculated by online platform AJ Bell to explore how the best shares have fared since Scary, Sporty, Posh, Baby and Ginger entered our lives. It’s a worthwhile effort, given that the true rewards of investing are to be measured in decades rather than years.

Cranswick (LSE: CWK) rose a chart busting 3,156% based on share price growth alone. The stock won’t be on everybody’s radar although I recently examined this artisan food-to-fork meat producer and found that it has surfed the foodie wave rather nicely.

Who do you think you are?

The Bury-based food producer’s share price has risen from 90.6p in July 1996 to 2,945p today. If you had invested £10,000 as Wannabe hit number one, you would have picked up 11,037 shares which would now be worth a massive £325,039. 

I’ll tell you what every investor wants, what they really really want: hindsight.

Growth has remained pretty meaty (but not scary). It is up 407% as measured over 10 years and 161% over five (when McFly’s Star Girl was number one, apparently). It is down 10% in the last year but is in a bullish mood, recently commissioning a state-of-the-art products factory.

Say you’ll be there

The downside is that the £1.5bn FTSE 250 stock now trades at a premium valuation of 19.3 times forecast earnings and yields a relatively low 2%, but with cover of 2.6. Four years of successive earnings per share (EPS) growth are slowing, to a forecast 4% in the year to 31 March 2019, then 6% afterwards. I think Cranswick should continue bringing home the bacon despite the growth of veganism, although with a little less sizzle.

Second-best performer is Clarkson (LSE: CKN) which is up 3,000% in 22 years. The FTSE 250 shipping services provider’s long-term performance is good but it has done little to float investors boats lately, rising just 17% over the past five years.

Viva forever

Clarkson was scuppered by a profit warning in 2016 and again this April when management bemoaned a “challenging environment” in both shipping and offshore capital markets, and lower freight rates within the tanker market. This came as a shock as one month before it said 2018 would be a year of continued growth as core markets recovered. 

There was slightly better news in August despite an 18% fall in interim profits to £18m, as conditions picked up in the second quarter. However, macro-economic and political uncertainties have hardly gone away since then, and any slowdown in global growth or recession would knock Clarkson.

2 become 1

My colleague Peter Stephens reckons it could prove rewarding for those who can stand a bit of volatility, with EPS forecast to drop 12% this year then rebound 24% next. However, its pricey forward valuation of 24.3 times earnings, and forecast yield of 3.2% with cover of 1.3 takes the wind out of my sails. Like the Spice Girls, it may struggle to revive the glory days.

The post These 2 monster growth stocks have returned more than 3,000% in 22 years! appeared first on The Twelfth Magpie.

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harveyj 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.

However, National Grid offers much more than just a defensive business model. Its shares appear to offer good value for money, while its dividend growth rate could be highly favourable. As such, buying it now alongside another income stock with positive dividend growth potential could be a shrewd move.

Dividend potential

With a dividend yield that is expected to reach 6% in 2019, National Grid continues to offer an income return which is well ahead of inflation. It is likely to at least keep pace with the rate of CPI over the next few years, since the company is aiming to increase dividends at the same rate as inflation for the foreseeable future. This means that its forward dividend yield of 6% could remain highly relevant, even if the pound continues to weaken and inflation spikes as the Brexit process moves ahead.

Since the company’s dividends are due to be covered 1.2 times by profit in the current year, they appear to be highly sustainable. Given the nature of the company’s business, it may be able to offer relatively resilient performance, even if the UK economy experiences a period of difficulty. This could lead to it offering a more robust dividend than many of its FTSE 100 peers. Therefore, at the present time, National Grid could be a worthwhile addition to a long-term focused portfolio.

Improving outlook

Also offering an impressive income investing outlook is integrated services and investment banking provider to the shipping and offshore markets Clarkson (LSE: CKN). It released a somewhat mixed set of interim results on Monday which showed that its outlook for the full year remains unchanged from its April update. Although the company’s revenue and pre-tax profit declined by 2.7% and 17.8% respectively versus the same period of the previous year, its outlook for the next financial year appears to be positive.

Clarkson is forecast to post a rise in earnings of 39% in 2019. This puts its shares on a price-to-earnings growth (PEG) ratio of 0.5, which suggests that it could offer a high level of capital growth. It also means that a higher dividend may be affordable, with the company expected to increase dividends per share by 9% per annum over the next two financial years. And with dividend cover forecast to be 1.7 in 2019, its current payout expectations appear to be highly affordable. As such, and while the markets in which the company operates could be volatile, the total return potential on offer seems to be high.

The post Have £1,000 to invest? FTSE 100 6% yielder National Grid could help you retire early appeared first on The Twelfth Magpie.

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

The company noted that the “challenging environment in shipping” has resulted in “transactions being pushed back within the financial segment” compounding weakness in other areas of the business. As well as this, the firm has “suffered from lower freight rates within the tanker market and a fall in the value of the US Dollar.” All of these factors have combined to form the perfect storm for Clarkson. Management now expects profits for the first half and the full year to be “materially below those of last year.“

Re-rating of the shares 

Up until today, the City had been expecting Clarkson to report earnings growth for the full year of 17.3%, following an increase of 14% last year. 

With this double-digit growth rate expected, the market was placing a high valuation on the shares of 22 times forward earnings. However, now management has warned that income is set to fall, it’s clear the stock deserves a lower valuation, which explains today’s decline. 

Falling earnings could also jeopardise Clarkson’s dividend growth. Analysts had been predicting payout growth of 11% for this year, followed by growth of 8% for 2019. Depending on how severe the earnings decline is, management might be forced to put further dividend expansion on ice. 

With this being the case, I would avoid Clarkson in favour of BBA Aviation (LSE: BBA). 

Booming industry 

BBA is benefitting from the rising demand for air travel and related services around the world. If the company hits City targets for growth this year, over the past six years the enterprise will have grown net profit by 160%, thanks to a combination of both organic and bolt-on growth. 

It seems management is confident of hitting this target. At the beginning of March, alongside full-year 2017 numbers, interim CEO Wayne Edmunds declared “the board remains confident of good growth in 2018 with a good pipeline of further investment opportunities.“

In other words, it looks as if BBA has a much brighter outlook than Clarkson and this is good news for dividend investors. City analysts are expecting BBA to announce a full-year 2018 dividend payout of $0.14 per share, giving a prospective dividend yield of 3.2% at current prices. The distribution will be covered an estimated 1.8 times by earnings per share, leaving management plenty of headroom for further payout increases in the years ahead. 

What’s more, as the outlook for the aviation industry is much more positive, and in my view, more stable than that of the shipping industry, BBA is, in my opinion, a much better long-term investment than Clarkson as it should be able to continue to grow earnings at a steady rate for many years to come. Clarkson meanwhile will always struggle in the unpredictable, cyclical shipping industry, which is not a good backdrop for dividend growth.

The post One FTSE 250 dividend-growth stock 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 owns shares of and has recommended BBA Aviation. 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.

A strong financial position

The FTSE 250 firm facilitates the market for moving goods around in ships with its shipbroking and ship-related financial, support and research services. I think it’s encouraging that market conditions are only at an early stage of recovery because even now the firm is trading very well. I particularly like the way Clarkson paid off its outstanding loan notes during 2017 to leave the company debt-free.

Such financial strength bodes well for a decent advance in the share price if trading conditions continue to improve. During 2017, revenue rose almost 6% and underlying earnings per share lifted 11%. The directors underlined their confidence in the outlook by pushing up the total dividend for the year by 12%, marking 15 consecutive years of dividend increases – that’s impressive.

The directors said in today’s report that “there are a number of exciting opportunities for growth and the creation of shareholder value.” City analysts following the firm expect earnings to increase 21% in 2018 and 11% the next year. Meanwhile, at the current share price of around 3,360p, the forward price-to-earnings (P/E) ratio for 2019 sits just under 21 and the forward dividend yield is almost 2.6%. The valuation looks full, but I think the quality of the underlying enterprise justifies it.

Clarkson looks well placed to ride what could turn out to be a multi-year run of prosperity in the world’s shipping markets, and as such, I reckon the shares look tempting right now. And the quality and operational momentum on offer remind me of FTSE 100 speciality chemicals company Croda International (LSE: CRDA).

A strong defensive element

Since early 2009, Croda’s share price is up more than 800%, driven by steady annual increases in earnings. I think there’s a strong defensive element to the underlying business because it produces ingredients for fast-moving consumer goods in the cosmetic, personal care and pharmaceutical markets, as well as supplying the agricultural and industrial markets.

Revenues, cash flow, operating profit and the dividend all have long records of steady growth, and I think the firm looks well suited to withstand any periods of general economic weakness that may occur in the years ahead. For 2018, the company plans to continue an investment programme aimed at fast-growth technologies, which it expects will drive both organic and acquisition progress.

Croda’s return on capital and its operating margin both run close to a healthy-looking 24%, suggesting a quality underlying business that deserves a higher valuation than many other firms with lower quality operations. Today’s share price of around 4,628p leaves the forward P/E ratio for 2019 sitting just above 22, and the forward dividend yield a little higher than 2%. That valuation seems to accommodate City analysts’ expectations of 7% growth in earning during 2018 and 8% in 2019, but these increases will follow on from several years of growth, and I think the firm’s progress looks set to continue for many years to come. I certainly wouldn’t bet against Croda’s strong operational and share-price momentum now.

The post 2 quality and momentum stocks for investors seeking capital gains appeared first on The Twelfth Magpie.

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Kevin Godbold 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.

However, the valuation placed on Lloyds (LSE: LLOY) by the market is more reminiscent of a bear market than a bull one. Indeed, it appears as though investors are anticipating a very challenging period for the stock. This could present a buying opportunity for long-term investors.

A tough future?

While the risks from Brexit are difficult to quantify, investors probably have two options when it comes to choosing how to deal with it. They can either seek to reduce their exposure to stocks which could be affected by Brexit in the hope of avoiding potential losses, or they could decide to use it to their advantage and focus on obtaining wide margins of safety. Clearly, the first option is less risky, but the second option may bring higher rewards if Brexit proves to be less intrusive in terms of its impact on the UK’s economy than has been forecast.

Since Lloyds is now almost exclusively a UK-focused bank, there are clear risks ahead. Already, sterling has weakened, inflation has risen and the UK’s economic growth forecasts have been downgraded. Yet Brexit is still 15 months away, which means things could get worse before they get better for companies that have major operations in the UK.

An investment opportunity?

While the outlook for Lloyds may be difficult to predict, the company’s valuation suggests that it offers significant growth potential. It is due to deliver earnings per share of 7.3p in 2018. At its current share price this puts it on a price-to-earnings (P/E) ratio of 9.3. A rating this low would normally be applied to a stock that is undergoing severe financial or operational difficulties. In the bank’s case, it continues to offer a relatively efficient business model as well as strong capital ratios. Therefore, it seems to be a worthwhile buy for the long term.

Growth potential

Also offering a low valuation at the present time is integrated services and investment banking provider to the shipping industry Clarkson (LSE: CKN). It released a brief update on Friday which stated that it is expecting to deliver results for the 2017 financial year that are in line with expectations.

Looking ahead to 2018, the company is forecast to record a rise in its bottom line of 20%. Despite this, it trades on a price-to-earnings growth (PEG) ratio of just 1. This suggests that there could be significant upside potential even after its 38% share price rise over the last year.

In addition, Clarkson appears to have income investing potential. It currently pays out around 60% of its profit as a dividend. This suggests that it could raise shareholder payouts by at least as much as profit growth over the medium term, and means that its 2.6% yield could rise in future.

The post Why Lloyds Banking Group plc is a dirt-cheap stock that could make you rich appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Lloyds. The Motley Fool UK has recommended Lloyds Banking 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.

The world’s leading shipping services group is one of two FTSE 250 stocks I think look good value for investors today. They also offer valuable diversification, because they’re both in business sectors that aren’t represented in the FTSE 100.

Promising outlook

Clarkson’s strong first-half performance saw revenue increase by 12% on the same period last year and a 9% uplift in underlying earnings per share (EPS). This was despite the continuation of “some challenging market conditions.”

With £117m cash and no debt at the period end, the company, which has a market cap of £811m, said: “Our solid cash position means that irrespective of market conditions, we are able to invest in the business for future growth, deliver increasing returns to shareholders and take advantage of strategic opportunities as they arise.”

Furthermore, the outlook for the second half and into 2018 looks promising, as management noted “very early signs of recovery in some of the major shipping markets are emerging.”

Strong dividend record

Ahead of today’s numbers, City analysts were forecasting full-year EPS of 111.4p, followed by a 21% increase to 135.2p in 2018. This gives a price-to-earnings (P/E) ratio of 24, falling to 20. The shares look very buyable to me on this rating due to the growth on offer, particularly as I see potential for earnings upgrades in the coming months.

The shipping sector is both cyclical and volatile but it’s a measure of the strength of Clarkson’s business that it’s delivered 14 years of consecutive dividend growth — so, through the financial crisis as well as the recent challenging market conditions. The record is set to be extended with a forecast dividend of 68p this year, followed by 73p next year, giving a handy yield of 2.5%, rising to 2.7%.

Brands powerhouse

The other FTSE 250 firm that looks a good buy to me today is Britvic (LSE: BVIC). It’s the biggest London-listed soft drinks group — a market cap of £1.95bn at a share price of 740p — and has a stable of notable brands. These include Robinsons, J2O and Fruit Shoot, which are the UK number ones in the squash, premium juice and kids’ soft drink categories respectively.

The company’s strong position at home is supplemented by its increasing internationalisation, where a tremendous long-term growth opportunity in massive markets, such as the US and Brazil, is already being grasped.

Britvic is forecast to deliver EPS of 49.1p this year, followed by 51.5p next year, giving a P/E of 15.1, falling to 14.4. Meanwhile, forecast dividends of 25.3p and 26.3p give a yield of 3.4%, rising to 3.6%. I think this looks a highly appealing package for a defensive business with prospects of steadily rising earnings and dividends over the long term.

The post 2 top dividend stocks for shrewd investors appeared first on The Twelfth Magpie.

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

The best companies are rarely cheap, so I’ve recently forced myself out of my comfort zone to look at some of today’s most expensive stocks.

The market leader

There’s no doubt in my mind that the best quality gold miner on the London Stock Exchange is Africa-focused Randgold Resources (LSE: RRS). Led by founder Mark Bristow, this stock has delivered a 10-year gain of 545%, plus dividends.

I believe the continuing attraction of this company lies in the quality of its mines and its large scale. The company’s threshold for developing a mine is that it must break even at a gold price of $1,000 per ounce. This policy helped the group to remain profitable during the post-2011 gold slump, when many other miners struggled.

A cash-generating machine

Today’s half-year results confirm that the company’s performance is still improving.

Profits for the period rose by 53% to $187.7m, despite the price of gold rising by just 1% to $1,237/ounce. The surge in profits was down to two factors. Production climbed 15% to 663,786 ounces, while the group’s total cash cost per ounce fell 13% to $595.

This disciplined performance makes for a strong balance sheet. Net cash has doubled to $572.8m over the last 12 months. Some of this cash will be returned to shareholders through the group’s annual dividend, which is expected to rise by 91% to $1.92 per share this year, giving a prospective yield of 2.1%.

The remainder of the cash will be held in reserve to fund the group’s next big project — Mr Bristow said today that “we are well on our way to achieving our goal of defining three new projects that pass our investment filters within five years”

A must-buy?

After climbing 3% today, Randgold shares trade on a 2017 forecast P/E of 30 with that prospective yield of 2.1%. This isn’t a cheap share, but it offers long-term growth potential and a cash-backed, growing income. I’d consider buying at current levels.

Smooth sailing

The shipping industry is a sector where inside knowledge and experience is essential. It’s prone to dramatic boom and bust cycles and many big operations are privately owned. This is why I believe the only sensible way to invest is through the shares of a well-established shipping services business.

One of my top picks in this sector is Clarkson (LSE: CKN), a UK-based name that’s been trading since 1852. Its main lines of business are ship-broking and providing investment banking services for the sector.

The group’s share price has bounced back from last year’s lows, with a 12-month gain of more than 40%. However, I believe this stock still has the potential to deliver significant profits. The shipping market recovery is expected to gather pace over the next couple of years. Analysts expect Clarkson’s adjusted earnings per share to rise by 10% in 2017, and by 21% in 2018.

Although the stock isn’t cheap on a P/E of 24 and with a yield of 2.5%, the group’s dividend has increased each year for the last 14 years. I rate Clarkson as a buy-and-hold stock with growth potential.

The post 2 ‘expensive’ stocks I’d buy today appeared first on The Twelfth Magpie.

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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.