However, it’s not the only dividend stock that could be worth buying today. Reporting on Wednesday was a FTSE 250 property investment company that could generate a high income return for its investors over the long run.

Improving performance

The company in question is CLS Holdings (LSE: CLI). It released full year results for 2017 which showed that it was able to generate a rise in profit before tax of 91.2%, with it increasing from £100.1m in the previous year to £191.4m. Its overall financial performance was boosted by the sale of the Vauxhall Square development for £144.1m. This contributed towards proceeds of disposals on properties across the UK of £170m, while a further £32m of disposals were made in Germany and France.

During the year, CLS was able to reduce its weighted average cost of debt by 40 basis points to 2.51%. This is 269 basis points lower than its net initial yield of 5.2% and could provide it with improving financial performance in the long run.

With a dividend yield of 2.7%, CLS may not be the highest-yielding share in the FTSE 350. However, with its bottom line due to rise 11% this year and by a further 6% next year, it could deliver strong dividend growth over the medium term. And with its net asset value per share rising by 16.5% in 2017, its total return potential appears to be high.

Upbeat outlook

Clearly, Vodafone is likely to appeal to investors given its dividend yield stands at 6.5%. However, the company could also deliver high dividend growth in future years. The reason for this is the high profit growth forecasts which are in place for the business. It is due to deliver a rise in earnings of 11% in the next financial year, followed by additional growth of 24% in the 2020 financial year.

Such strong growth in profitability is expected to prompt a rise in dividends of 6% over the next two years. This puts the stock on a dividend yield for the 2020 financial year that is around 7%. Given the sustainability and diversity of the business, this would represent an excellent income return for investors.

Furthermore, the growth potential of Vodafone may create demand for its shares among growth investors. With a strategy that is focused on investment in its long term product offering within what remains a lucrative quad play industry, the prospects for the business seem to be positive. Therefore, the total returns on offer from the stock could be high, while its risk/reward ratio appears to be highly enticing for the long term.

The post Vodafone Group plc isn’t the only dividend stock I’d buy with £1,000 appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Vodafone. 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 saw pre-tax profit clock in at £119.4m during January-June, soaring from £33.1m in the corresponding 2016 period and thanks in no small part to the impact of massive divestments, including that of Vauxhall Square in London.

CLS saw EPRA net assets per share advance 9.3% year-on-year, to 268.5p, while it enjoyed a total return of 12% (up from 7.1% a year earlier). EPRA earnings per share dipped to 5.3p from 8.1p during the first half of last year.

Chief executive Henry Klotz said: “The first half of 2017 has been transformative for the Group. We crystallised the significant value our team created at the Vauxhall Square scheme and, through our significant recent investments in Germany, we have begun to redeploy the capital in well-located properties with good asset management opportunities, thereby rebalancing the portfolio.”

And Klotz struck a broadly-upbeat tone on the firm looking ahead, advising that “notwithstanding early signs of weakness in the UK property market, we are well positioned for future growth, with a high quality portfolio across the three largest European economies, a low vacancy rate with good tenants and a strong balance sheet.”

Too risky?

Despite this bubbly outlook, the City expects earnings to collapse 52% in 2017, although the bottom line at CLS is expected to get moving in the right direction from next year — a 3% rise is currently predicted for 2018.

As a consequence, the business sports a forward P/E ratio of 18.9 times, a little way above the value benchmark of 15 times or below.

Naturally, CLS is not immune to the pressures created by the political and economic turbulence currently rocking its home market — indeed, 58% of the company’s properties are located in the UK.

But glass-half-full investors may be encouraged by the London firm’s plan to expand its geographic footprint. Indeed, the imminent purchase of £165m worth of properties in Germany means that 53% of CLS’s assets will be right here in Britain, versus 31% in Germany and 16% in France.

I for one won’t be tempted to invest right now, however, given the real estate giant’s still-heavy weighting to the UK and its unappealing earnings multiple. 

Advertising ace

RhythmOne (LSE: RTHM), on the other hand, is not expected to endure the same sort of near-term earnings problems as CLS.

In the year to March 2018, the digital advertising expert is expected to flip to earnings of 1.8 US cents per share from the losses of 4.45 cents chalked up last year. And the good news does not end here, the business predicted to see earnings gallop to 5.3 cents per share in fiscal 2019.

Values investors may be out off by RhythmOne’s weighty forward P/E multiple of 24.3 times. But I reckon now could still be a good time to plough into the California company as its transition into fast-growing mobile, video and programmatic products clicks through the gears (sales in these areas soared 28% year-on-year in fiscal 2017).

The post Why earnings could be set to sink at this FTSE 250 stock 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.

Wealth generates profit

If I showed you a company that has nearly doubled its annual dividend in five years, and has forecasts for big rises this year and next which would massively outstrip inflation and which should be amply covered by earnings, would you be impressed?

And what if I told you its share price had trebled over that same period, to 346p today?

Well, that’s the recent track record of investment manager Brewin Dolphin Holdings (LSE: BRW). That stock market bullishness we’ve seen of late, fuelled by the fall in sterling, has helped make that look good. But over the five-year period, Brewin Dolphin shares have run massively ahead of the FTSE 100 overall — a good investment manager can be a nice way to gear up profits from a rising stock market.

Good so far

Interim results in May support the City’s predictions, with funds under management up 6.8% (against a 6.1% rise in the FTSE 100), and net discretionary inflows up by an annualised 7.6%.

Adjusted EPS gained 13%, which is well ahead of the mooted full-year rise of 7%, and the interim dividend was lifted by 10.4%.

We’re looking at a forward P/E of 15.6 for 2018, which I see as a modest valuation for a company whose dividend is expected to yield 4.7% that year. And the big share price rise we’ve already seen — well, I see that as a nice extra bonus for income seekers.

Top property share?

As dividend picks go, a company that only started paying them in 2016 might look like a strange one to plump for, but that’s deceptive.

And the commercial letting business might not sound very exciting (though if you want excitement, I’d say put your money into safe long-term investments and go bungee jumping). But that’s what CLS Holdings (LSE: CLI) does, and I reckon it does it pretty well.

The thing is, CLS has actually been redistributing cash to shareholders for years, in the form of buybacks — so those who wanted income would have to sell some shares to get it. But last year, after more than doubling its EPS over the previous five years, the company switched to a progressive dividend policy and shelled out for a 2.6% yield.

That’s a 23% increase in distributions over the previous year, and analysts are expecting the yield to reach 3.4% by 2018. Those rises are well ahead of inflation, and with strong cover by earnings, I can see an attractive long-term upwards trend here.

Oodles of cash

CLS aims to provide stable long-term cash flows, which is the lifeblood of any income investment. And along with 2016 results, executive chairman Henry Klotz spoke of the company’s “strong balance sheet and ample liquid resources“.

The share price has more than trebled over the past five years to 214p, though now that distributions have switched to dividends that’s likely to slow. We’re looking at P/E multiples of around 19, which might seem a bit high, but with a basic net asset value per share of 215p at December (adjusted for May’s 10-1 split), I’m seeing good value.

The post Two ‘hidden’ income stocks that could help you retire a millionaire appeared first on The Twelfth Magpie.

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Alan Oscroft 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.

Solid results

The company’s performance in 2016 was robust, even though the operating conditions it experienced were highly uncertain. Its basic net asset value per share increased by 18.8% to 2151p, while net rents increased by 8.2% to £107.1m. This was aided by the company’s lowest ever vacancy rate of 2.9%, and this allowed dividends to grow by 23% for the full year.

Although operating conditions are still challenging, CLS is investing for the future. It acquired four properties in 2016 for a total amount of £45.7m, which were purchased at an average net initial yield of 6.9%. It has also made five further acquisitions since the end of the year for £31.4m, at a net initial yield of 8%.

Its development progress remains upbeat, while its financial position has also improved. It has been able to reduce the weighted average cost of debt by 49 basis points to 2.91%, which is around 270 basis points below the company’s net initial yield of 5.6%.

Dividend prospects

CLS’s dividend yield of 2.2% may sound rather low. That’s especially the case at a time when inflation is around 2%. However, with shareholder payouts rapidly increasing it has the potential to become an increasingly attractive income play. For example, during the course of the next two years its dividends are forecast to rise by almost 43%, which puts it on a forward yield of 3.2%.

Since dividends are due to be covered 1.8 times by profit in 2018, there seems to be a relatively high chance of further growth in future years. Since the company has a relatively resilient business model that is highly diversified, dividend growth could significantly exceed profit growth over the medium term and allow CLS’s shareholder payouts to remain highly affordable and sustainable. As such, it looks set to become a relatively attractive dividend play in future years.

Competition

However, other property companies such as British Land (LSE: BLND) also offer impressive income prospects. The commercial property business may be expected to record a rise in dividend payouts of just 6.4% over the next two years, but its forward yield of 5.1% is likely to remain ahead of that of CLS for a number of years. Therefore, the income return from investing in British Land is set to exceed that of CLS even when the latter’s stunning growth is factored in.

While both stocks seem to offer excellent value for money based on their price-to-book (P/B) ratios, British Land appears to have the widest margin of safety. Its P/B ratio is just 0.7, while CLS has a P/B ratio of 0.8. With a higher yield and lower valuation, British Land could be the better buy, although CLS is quickly becoming a super income stock.

The post Does a 23% dividend rise make CLS Holdings plc a super income stock? appeared first on The Twelfth Magpie.

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

CLS’s first half was positive. Net assets per share increased by 7.8% and earnings per share rose by 92% to 80.5p. This allowed it to increase distributions to shareholders by 10%, with a proposed £7.2m tender buyback of one in 95 shares.

The vacancy rate at CLS’s properties remains low at 3.7%. Its interest cover continues to be high at 3.6 times, while it has been able to reduce the weighted average cost of debt by 0.13% to 3.27%. This will provide it with greater headroom when making debt repayments and provides additional financial security.

One of the reasons for CLS’s strong performance in recent months has been its exposure to non-UK markets. In fact, 37% of its business is conducted in Germany and France, which provides it with significant diversification and reduced risk. Furthermore, CLS derives 52% of its UK income from central government and it believes that this will help to protect it against the effects of Brexit.

Brexit risk

On this topic, Brexit poses a major risk to all property companies that rely on the UK for a significant proportion of their income. The outlook for the UK property industry is the most uncertain since the credit crunch and this could cause investor sentiment towards CLS as well as other property stocks such as real estate investment trust (REIT) Tritax Big Box and estate agent Purplebricks to fall.

The Bank of England expects unemployment to rise by 250,000, the UK GDP growth rate to fall to 0.8% in 2017 and has stated that house prices will fall. This would suppress activity in the housing market, since sellers wouldn’t’t wish to sell at a lower price and buyers would wait for a lower price. As such, the volume of transactions is likely to fall and cause Purplebricks’ sales to come under pressure. The effects of this lack of activity would be exacerbated in Purplebricks’ case since it’s a low cost/high volume operator and so requires a significant amount of demand to turn a profit. As a result, its shares lack appeal right now.

Clearly, Tritax Big Box is somewhat shielded from the effects of Brexit because of its focus on large logistics facilities. They tend to be relatively stable and robust assets to hold during a period of difficulty. However, this stability appears to be adequately priced-in to Tritax Big Box’s valuation. It trades on a price-to-earnings (P/E) ratio of 17.1, which is higher than CLS’s P/E ratio of 15.6. This indicates that there’s greater upside potential from a rerating for CLS than for Tritax Big Box.

Certainly, Tritax Big Box has a higher yield than CLS at 4.4% versus 3.4%, but it’s not as well covered. Tritax Big Box’s profit covers shareholder payouts 1.3 times, while for CLS this figure is higher at 1.9. This indicates that CLS’s dividend could rise at a much faster pace than Tritax Big Box’s and alongside its non-UK exposure and lower valuation, this makes CLS the pick of the three companies.

The post Is this the best property-focused stock after today’s results? appeared first on The Twelfth Magpie.

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

Stop digging!

Metals and energy giant Vedanta Resources (LSE: VED) has dipped 3% in Thursday trading, the firm’s full-year update failing to stoke investor appetite.

Vedanta saw revenues in the period to March 2016 slump 17%, to $10.7bn, causing full-year EBITDA fell to $2.3bn from $3.7bn in 2015.

The digger has subsequently slashed 2016’s dividend to 30 US cents per share, a colossal markdown from last year’s 63 cent reward.

Vedanta is attempting to hurdle the impact of low resources values by hiking output across its key commodity classes — the company started expansion of its aluminium, iron ore and electricity divisions last year, while zinc, lead, silver and copper cathode output all surged higher in fiscal 2016.

Still, expectations of prolonged commodity price weakness is expected to push Vedanta into the ‘loss’ column both this year and next, according to City brokers. And with the company also nursing a colossal $7.3bn net debt pile, I reckon shrewd investors should steer well clear of the battered stock.

Property star

In stark comparison, investor appetite for CLS Holdings (LSE: CLI) has taken off after announcing a massive share buy-back programme, the stock last dealing 6% higher on the day.

The property investor said that “the current share price, which is at a significant discount to its last reported NAV per share, does not adequately reflect the value of its property portfolio and development pipeline.”

CLS Holdings will pay a maximum of 105% of the average market value of the shares in the five business days proceeding the purchase, it said, and will buy no more than 4,140,618 ordinary shares. The scheme will start immediately and end no later than 30 June.

Robust economic conditions across Europe have underpinned steady earnings expansion at CLS in recent years, and the City expects this trend to keep on rolling with growth of 5% and 11% chalked in for the firm for 2016 and 2017, respectively.

I reckon consequent P/E multiples of 17.1 times for this year and 14.9 times for 2017 represent fair value given the company’s strong momentum.

Paper giant

Packaging play Mondi (LSE: MNDI) has also risen following a positive trading update, the stock last 2% up from Wednesday’s close.

Mondi advised that underlying operating profit had galloped 14% higher during January-March, to €269m, prompting the firm to reaffirm its full-year guidance.

So while Mondi advised it had seen “some price weakness in certain of our packaging paper grades,” it added that “demand for these products remains strong and we believe the fundamentals remain robust.”

The company is also benefitting from higher uncoated fine paper prices, lower energy and input costs, and the contributions from capital investment programmes, it advised.

The City expects earnings at Mondi to keep chugging along during the medium-term at least — indeed, growth of 4% and 3% is pencilled-in for 2016 and 2017. And I believe subsequent earnings multiples of 11.6 times for this year and 11.1 times for 2017 represent splendid value.

The post Should you buy Vedanta Resources plc, CLS Holdings plc and Mondi plc following today’s news? appeared first on The Twelfth Magpie.

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• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

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