Regular readers of my investment pieces know that I remain pretty bullish over the profits potential of Britain’s housebuilding sector.

Telford Homes (LSE: TEF) is one share I am no stranger to tipping and back in February I highlighted the homes shortage that is driving demand for its new-build properties. And latest trading details from the AIM-quoted business underlined the favourable trading environment that is powering the company’s bottom line.

Telford’s share price swelled to three-year highs last week after it said it expected to print record revenue and profit for the 12 months to March 2018, and that a predicted 30% rise in pre-tax profit would come in above City expectations.

The builder commented that “the undersupplied housing market in London has remained robust at the group’s typical price point,” adding that it has been boosted by “a broad customer base of build-to-rent investors, individual investors, owner-occupiers and housing associations.”

Chunky yields

With the homes shortfall in the capital set to persist, I expect demand for Telford’s homes to remain resolute. And I am not alone as broker consensus suggests a 17% bottom line advance is on the cards for fiscal 2019. This makes Telford a brilliant value pick too — it sports a forward P/E ratio of 7.8 times as well as a corresponding sub-1 PEG multiple of 0.5.

City analysts expect profits to keep pounding higher as well, another 4% rise being predicted for next year. And these bubbly numbers give rise to expectations that Telford will continue to deliver robust dividend increases (it has already more than tripled the dividend over the five years to fiscal 2017).

An 18.9p per share reward is currently predicted for this year, up from an estimated 17p for last year, resulting in a meaty 4.3% yield. And the dial moves to 4.5% for next year thanks to the expected 19.7p dividend.

Fun in the sun

Elegant Hotels Group (LSE: EHG) is another London-quoted dividend great that is trading at bargain-basement prices right now.

The AIM-listed business is expected to roar back from recent profits reversals with a 14% advance in the year ending September, meaning it trades on a forward P/E ratio of just 10.1 times with a corresponding PEG reading of 0.8. Another 8% advance is forecast for next year, and I would bank on the company’s hotel refreshment programme and acquisition strategy in the Caribbean, as well as its moves to bolster bookings from the US, to lay the foundation for profits to keep moving higher.

At first glance there may not be much to celebrate for income investors, however, the vast cost of upgrading its resorts being predicted to result in a second successive dividend cut. Still, the 3.5p per share rewards forecast for both this year and next mean that the yield stands at a vast 4.2% through to the close of fiscal 2019. I think Elegant Hotels is a share that could provide exceptional returns now and in the years ahead.

The post 2 ultra-cheap dividend stocks you can buy right now appeared first on The Twelfth Magpie.

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Royston Wild 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.

The hotel operator announced that, although revenues had risen 5.1% in the 12 months to October 2017, to $59.9m, profit before tax had slumped 6.8% in the period to $11m.

Elegant Hotels — which owns and operates seven upmarket hotels and one restaurant in sun-baked Barbados — was struck by an increase in selling, general and administrative expenses which swelled to $22.9m from $20.1m a year earlier. And corporate costs increased following the appointment of a chief financial officer and group operations director.

Today’s release came as particularly troubling news for dividend investors. Reflecting what the company put down to “current market opportunities and the need to reinvest in our properties in an increasingly competitive market” it elected to slice the final dividend for fiscal 2017 to 1.75p per share, down from 3.5p in the prior year.

And as a consequence, the full-year payout dipped to 5.25p per share from 7p last year.

Colossal yield

Now City analysts are currently expecting Elegant Hotels to get building dividends again from this year, supported by expectations that the business will finally see earnings begin to rise again after two successive dips (a 19% rise is currently predicted).

So forecasts are pointing to a 5.7p per share reward for fiscal 2018, resulting in a mammoth 6.4% yield.

Investors need to be aware, however, that of course the factors that saw it slim down the final dividend last year could well endure beyond the current year. And with this year’s projected payment covered just 1.6 times by touted earnings (some way below the widely-accepted safety benchmark of 2 times) the current dividend projection is not as robust as many would like.

Having said that, Elegant Hotels may be worth a visit for many share pickers given the company’s advice that “trading since the start of the new financial year has remained in line with market expectations, and our bookings are currently tracking ahead of the same period last year.” What’s more, in the long-term, the company’s expansion strategy (which saw it snap up the Treasure Beach hotel last year) may lay the groundwork for sustained earnings, and thus dividend, growth.

I reckon an ultra-low forward P/E ratio of 10 times may make Elegant Hotels worthy of serious attention today.

Another bargain income beauty

Investors on the hunt for big-yielding shares on a shoestring also might want to give Randall & Quilter Investment Holdings (LSE: RQIH) more than a cursory glance.

The insurance business has blasted back into earnings growth over the past couple of years and this is finally expected to culminate in juicy dividends being forked out. In 2017, helped by an anticipated 9% profits improvement Randall & Quilter is predicted to pay an 8.8p per share reward.

And with earnings predicted to rise an additional 9% this year, the dividend is expected to rise to 9p. Consequently shareholders can bask in a sumptuous 6.7% yield.

As I say, Randall & Quilter can be picked up for next to nothing, the company sporting a forward P/E ratio of 9.8 times. In my opinion this is exceptional value given the pace of its profits turnaround, helped in no small part by the impressive pace of its ongoing restructuring drive.

The post Two 6% yielders that could make you stinking rich appeared first on The Twelfth Magpie.

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Royston Wild 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.

The price was recovering from its Brexit referendum crash, but since February it’s been heading down again… if you’d bought then, you’d be down nearly 20%.

With a 39% rise in earnings per share (EPS) forecast for this year, followed by another 23% next, that price fall puts the shares on forward P/E multiples of only 10.6 this year, and 8.6 next, way below the long-term FTSE 100 average of around 14.

Dividend resurgence

The problem really can’t be the dividend. Though there’s only a 2017 yield of 1.6% yield forecast, 2018 should see that jump to 3.4%. And with the bank having been focusing on cost-reduction, efficiency, and strengthening its balance sheet in the years since the financial crisis, I can see that just being the start of a renewed long-term progressive stream of payouts. After all, that expected 2018 dividend would be covered 3.4 times by forecast earnings.

The trouble is, Barclays is still dealing with a lot of legacy issues. Selling off its African operations resulted in a write down, PPI claims haven’t gone away quite yet, and various regulatory bodies are still expected to bring further actions against the bank.

The restructuring into a squeaky-clean operation is slower than expected, but liquidity is enormously stronger now, and I really do think that long-term investors are heading for blue skies with Barclays.

At around today’s 193p, I’d buy.

An unmissable 8%?

While established FTSE 100 companies are often the best dividend bets, there are plenty of very attractive smaller-cap offerings too. I was drawn to Elegant Hotels Group (LSE: EHG) a few months ago when I saw some pretty reasonable interim results.

Since then the share price has fallen a little, but it picked up 10% on Thursday as the operator of “seven upscale freehold hotels and a beachfront restaurant” in Barbados gave us a trading update.

Trading has continued as expected, but current bookings are coming in ahead of the same period last year, and the firm’s new Treasure Beach hotel is due to open in time for peak season; the company bought the property in May this year and has been in the process of refurbishing it for a more upmarket clientele since.

Elegant’s business model of acquisition and repositioning looks like a potentially very profitable one to me. Upmarket tourists don’t really feel the economic squeeze the way most do, and there are higher margins to be had from them.

Growth plus dividends

Though Elegant Hotels is still very much in its growth phase (having floated on AIM as recently as May 2015) it has firmly established its intention of becoming a long-term cash cow for its shareholders by posting big dividends.

Last year brought a 7.4% yield, with forecasts suggesting 8.3% this year and next. That means 2018’s payment would be covered around 1.3 times by forecast earnings. But with modest net debt and a net asset value per share of 98p (with the shares at 88p), I don’t see that as too stretching.

The full year, with results due on 9 January, is expected to show a fall in EPS, but growth on the cards for next year would drop the P/E multiple to a modest 9.6.

An overlooked bargain, I reckon.

The post A ‘secret’ dividend stock I’d buy alongside Barclays plc 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 recommended Barclays. 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 owner and operator of hotels and a restaurant in Barbados floated on AIM in May 2015, and though the share price has been a bit rocky (it’s down 4% since then, to 86p), it rewarded income seekers with a 7.7% dividend yield last year — and analysts have yields of 6.9% pencilled-in for this year and next. So how is 2017 looking?

Occupancy rates have fallen a little, to 66% from 69% at the same time last year, and adjusted pre-tax profit is down from $14.4m to $12.2m with adjusted EPS down from 12.9c to 11c — but forecasts do suggest a 24% EPS fall this year before a recovery in 2018.

The interim dividend was held at 3.5p per share, which bodes well for an impressive full-year payout.

Still growing

This is a company still in its growth phase, having lined up contracts for expansion into Antigua and St Lucia, and it seems quite surprising that it is paying such big dividends at this early stage. So the debt situation is something I’d be careful of, and net debt of $62m is way ahead of adjusted EBITDA of $15.3m.

But the freehold ownership of its hotels provides a lot of assets to stack against that, with the firm indicating an implied net asset value of 175p per share.

That suggests some undervaluation too, in addition to that tasty dividend, and that makes me cautiously bullish.

Insurance cash

My second pick is very different, but another big payer. It’s specialist insurer Lancashire Holdings Limited (LSE: LRE), and Neil Woodford holds it in his Woodford Equity Income Fund. It’s not hard to see why with its forecast dividend yield of a whopping 7.8% this year after big payouts over the past couple of years.

That’s part of the firm’s policy of returning surplus cash to shareholders when it doesn’t expect better returns elsewhere.

The other side of the coin is that earnings per share have been falling for the past few years, but that’s all part of the firm’s balanced and conservative approach. And when opportunities for earnings growth are there, its cash will be used to pursue those opportunities, rather than paying such a hefty dividend.

Sensible approach

I do like that approach over the single-minded pursuit of growth that has brought many a company to its knees, and which overstretched more than a few of Lancashire Holdings’ bigger sector rivals during the financial crisis.

The firm recorded an impressive return on tangible equity last year of 15.7% (up from 11.8%), which I reckon lends further support to its conservative business model. And though we’re still in a difficult market, as chief executive Alex Maloney pointed out at Q1 results time, the company will stick to its “track record of consistent underwriting discipline for the longer-term interests of our shareholders and counter parties.“

There’s a forward P/E of around 15.5, which is higher than it’s been for a few years, but I see that as good value for a well-managed company that’s concentrating on long-term shareholder returns.

The post Two 6%+ dividends that could power you to a million appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• 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
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

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.

Bargain stocks like this are more common among smaller companies, where analyst coverage is patchy. Today, I’m going to look at two small cap stocks with 7% yields and — in my view — the potential for big gains.

This sell-off has gone too far

Shares of recruitment group Gattaca (LSE: GATC) — formerly known as MatchTech — have fallen by 34% over the last year. Investors have stayed away from this sector since the referendum due to fears that Brexit could trigger a recession.

There’s no way to know what might happen in two years. But the evidence so far suggests that demand from the engineering and technology sectors in which Gattaca specialises remains strong.

In its latest trading update, the company said that “vacancy flow is increasing” after a slow period following the referendum. Although the group’s net fee income fell by 5% to £35.1m during the first half, this was apparently due to “elongated hiring decisions”, not a slump in demand.

The board expects profits for the year ending 31 July to be in line with expectations. Forecasts from the firm’s house broker suggest that this will mean earnings of 39.9p per share, together with a dividend of 23.3p per share. That puts the stock on a tempting P/E of 7.9, with a prospective yield of 7.4%.

For what it’s worth, forecasts for 2017/18 show further growth. But a lot could change before then. I’m more attracted to Gattaca’s low debt levels and its historically strong free cash flow.

These, plus the stock’s modest valuation, suggest to me that the dividend should be sustainable. If I’m right, I’d expect the shares to move significantly higher at some point.

An alternative property stock

If you’re not sure about UK property stocks, Barbados-focused luxury hotel group Elegant Hotels Group (LSE: EHG) could be an interesting alternative.

The group’s shares currently trade at a 15% discount to book value and offer a dividend yield of 7%. This payout is expected to be covered about 1.3 times by earnings this year, and debt levels look comfortable to me.

Elegant Hotels’ share price is up by 5% so far in 2017, having slumped last year in the wake of the referendum. However, although the weaker pound has made staying in Elegant’s four and five-star hotels more expensive, customer demand seems to have remained strong. The group’s latest trading update reported bookings in line with expectations so far this year.

The group has recently acquired a new hotel, Treasure Beach, which will cement its hold on a prime beachfront area in Paynes Bay, Barbados. The group plans to spend $10.5m refurbishing this before launching Treasure Beach back onto the market in November.

This is clearly a growth opportunity, but it also flags up my main concern about Elegant Hotels. Although the company’s financial situation looks strong enough, I suspect its cash flow could be strained by the costs of keeping its hotels freshly updated.

I haven’t yet made a decision about Elegant Hotels, but I’m leaning towards a buy at the moment.

The post Two 7% dividend stocks that could help you retire early appeared first on The Twelfth Magpie.

More reading

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• How much is needed in an ISA to unlock £1,220 of passive income a year?
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• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Roland Head owns shares of Gattaca. 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.