It’s true that you take on some risk by buying shares because share prices and dividends can fall as well as rise. But in many cases, an underlying business that is performing well can deliver a rising share price and annual increases in the dividend payment. So, as well as taking on the extra risk, by holding shares in companies, you expose yourself to extra opportunities as well.

Good figures and an impressive record

When things click on the stock market, there’s nothing nicer than seeing your capital increase as a stock rises, alongside an income stream from dividends that increases in size a bit each year. One share that I think looks capable of delivering those benefits to shareholders in the coming years is Gateley Holdings (LSE: GTLY), the professional and legal services company.

I find the figures in today’s full-year results report to be encouraging. Revenue rose just over 20% compared to the previous year and adjusted diluted earnings per share increased by almost 18%. The directors expressed their satisfaction and confidence in the outlook by slapping an extra 14.3% on the total dividend for the year.

Since arriving on the stock market around four years ago, the firm has been making strong operational progress. The dividend is now more than 40% higher than the maiden payment in 2016, and the share price has risen just over 60% since the stock first traded on the stock market in 2015. Those strike me as impressive returns for shareholders so far, and City analysts following the firm expect earnings to advance by a mid-single-digit percentage during the current trading year to April 2020, suggesting further progress ahead.

Trading well and a positive outlook

The year was a busy one for Gateley during which it achieved “record-breaking” revenue above £100m, its highest-ever staff numbers, and three acquisitions. Looking ahead, trading in the current year has started well and the directors are confident of achieving further growth in the business in the years to come.

Despite the robust growth and strong operational momentum, Gateley is maintaining, the valuation doesn’t look stretched to me. With the share price at 165p, the forward-looking price-to-earnings multiple for the trading year to April 2020 runs close to 12 and the anticipated dividend yield is around 5.3%.

Gateley is no giant with its market capitalisation running near £182m, but I’m impressed by its trading record as a public limited company and believe it could grow to become a much larger enterprise. I wouldn’t bet the farm on it, but I think the combination of income and growth that the stock appears to offer makes it eligible for a place in a diversified portfolio.

The post Forget a Cash ISA! I’d buy this 5% dividend paying growth stock 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.

You may not have heard of Gateley Holdings (LSE: GTLY) or VP (LSE: VP) so here’s why they’re worthy of your investment cash.

More great news

Gateley is a share I’m particularly excited about. Since it listed on AIM four years ago, it’s been rapidly growing its headcount across the UK and the Middle East to capitalise on the soaring demand for legal services. This has helped to power earnings — and thus dividends — higher over the period.

I’m pleased to say that its strong bottom-line momentum is yet to show signs of running out of steam. Indeed, the release of more excellent trading details on Tuesday illustrated that energy. Revenues soared 20.1% in the six months to October to £46.4m, a period which also saw organic sales rise by 10.2%. Pre-tax profit also jumped 18.6% to £5m.

What’s more, with cash conversion at the firm improving by 2.1% year-on-year to 87.4%, the business elected to hike the interim dividend by an eye-popping 18.2%, to 2.6p per share.

The headcount at Gateley’s core legal operations has risen by almost 50% since its IPO in 2015, underpinning the relentless profit growth of recent years. Looking away from the steady expansion at its bread-and-butter divisions, the company’s foray into other professional services, like tax and accountancy matters, adds another layer of growth potential for the years ahead.

In the meantime, City analysts forecast an earnings increases of 11% for the year to April 2019 and 9% for fiscal 2020. And these projections underpin dividend predictions of 7.8p and 8.4p per share for these respective years, up from 7p last year, yielding a jumbo 5.6% and 6%.

Despite the recent share price bump, Gateley still trades on a low, low forward P/E ratio of 11.4 times. I believe that this rating is far too cheap given the company’s breakneck top-line momentum.

Another income star

Like Gateley, VP has also been splashing the cash to expand its geographical and operational base. The benefits of this programme were laid bare in November’s latest financial statement.

Following the acquisition of Brandon Hire last year, both revenues and profits boomed between April and September — by 42% and 22%, respectively. As a consequence, the half-time dividend was hiked by more than a fifth year-on-year to 8.2p per share.

An expected 10% earnings hike for the full year to this March results in a prediction for a 30.3p total dividend, yielding a chubby 3.1% and suggesting a meaty upgrade from last year’s 26p reward. And the yield moves to 3.3% for fiscal 2020 as a predicted 7% profits rise by City analysts leads to an anticipated 32p dividend.

The rental equipment company has proved immune to the wider implications of Brexit so far. Yet this resilience is not reflected in its low valuation, in my opinion, with a forward P/E multiple of 10.2 times. Like Gateley, I reckon VP is a great budget buy right now, particularly for those seeking excellent dividend growth.

The post 2 unknown but amazing (and cheap!) dividend stocks I’d buy for 2019 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.

Whether you’re hunting for big dividend yields or proven profit generators there’s no shortage of contenders amongst the capital’s smaller indices. In fact, if you’re looking for both right now then a quick glance at Gateley Holdings (LSE: GTLY) is definitely worth your while.

The firm is a specialist in commercial law with operations spanning from the UK to Dubai. Since listing on AIM back in 2015 — it was the first business of its kind to do so — it has continued its long story of churning out robust earnings growth, culminating in last year’s impressive double-digit-percentage advance.

And trading at the business remains extremely robust, leading brokers to suggest more sustained earnings growth (rises of 8% and 9% are predicted for the years to April 2019 and 2020 respectively). A critical driver of its strong performances has been its dedication to investing across the business.

Expanding its labour base is one such way that Gateley continues to thrive, and last year it bulked up the average fee-earning staff numbers on its books to 509 from 457 the year before, up 11.4% year-on-year. But what has really lit a fire under the bottom line is the company’s dedication to hunting down tasty acquisitions.

Acquisitions coming thick and fast

After making its first two acquisitions back in fiscal 2016 Gateley now has the bit firmly between its teeth. The legal eagle made a further two takeovers in the last 12-month period and since then it has seized business psychologist Kiddy & Partners to boost its employment services portfolio.

The business is showing little appetite to slow down on the M&A front. At this week’s AGM, non-executive chairman Nigel Payne said it continues to hunt for “additional complementary businesses which are earnings accretive and assist in diversifying the Group even further.”

Gateley certainly has the financial clout to keep its spending spree on the boil. Cash generation remained impressive last year and operating cash flow rose to £12.2m, up from £7.7m in fiscal 2017, while net debt tumbled £4.1 year-on-year to just £0.7m.

Delicious dividend yields rise to 5%

To the delight of income investors, Gateley’s rock-hard balance sheet and bright earnings prospects are leading the City to predict that dividends can keep growing and that it can offer inflation-busting yields as well.

Last year’s 7p per share total dividend is anticipated to advance to 7.5p in the present period, and again to 8.2p in the following year. As a consequence, yields stand at 4.6% and 5% for fiscal 2019 and 2020 respectively.

The market seems fairly oblivious to Gateley’s exceptional growth (and income) prospects, however, and this is reflected in the company’s cheap forward P/E ratio of 13.8 times. I’m convinced that the law specialist is a share that offers plenty of upside at current prices.

The post An impressive 5%-yielding dividend growth stock you’re probably overlooking 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.

Thanks to its multi-year Devro 100 growth strategy, designed to supercharge sales growth and slash costs, the business has seen revenues from emerging markets rebound sharply, and especially from China, Russia and South East Asia.

The strong progress the sausage casings maker is seeing in these territories was underlined by latest trading details released this week in which the firm said: “The Devro 100 programme continues to progress well, with actions on track to deliver the targeted cost savings for the year.” It added that it made “good progress” with its productivity and output targets at its US plant, while its China factory continues to “perform well” too.

Porky dividends

My optimistic take on Devro’s profits outlook is copper bottomed by City analysts’ consensus, which also suggests strong earnings growth from here. Indeed, rises of 12% are forecast for both 2018 and 2019 respectively.

Current forecasts leave the business dealing on a forward P/E ratio of 15.4 times, a pretty undemanding valuation in my opinion, given that its revenues-boosting plan is clicking through the gears and population increases will likely deliver strong demand growth for its edible collagen tubes.

It is in the dividend stakes where Devro really sets itself apart, however. With the business finally on course for sustained profits growth again, and cash generation also steadily improves, dividends are expected to get moving again after years of being locked at 8.8p per share.

A 9.1p reward is forecast for 2018 and this jumps to 9.4p for next year. As a consequence, yields stand at a chubby 4.2% and 4.4% for this year and next.

Take this advice

Investors on the hunt for punchy payout growth should also pay Gateley Holdings (LSE: GTLY) close attention today.

Supported by broker predictions of further earnings growth with rises of 16% and 7% predicted for the years to April 2018 and 2019, dividends are expected to keep growing as well, keeping yields well above the market average.

A 7.1p per share reward is estimated for the current period, up from 6.6p last year and yielding an impressive 4.5%. And the 7.5p dividend anticipated for next year drives the yield to 4.8%.

An added bonus for those considering Gateley is that the business trades on a forward P/E ratio of 14.4 times, comfortably inside the accepted value terrain of 15 times or below.

And this rating is far too cheap in my opinion. Demand for Gateley’s legal and professional services continues to grow at a splendid rate, and the business remains dedicated to building scale to keep business rolling in (its headcount swelled 6.4% year-on-year during July-December to 763).  I reckon the AIM-quoted company is in great shape to deliver solid profits and dividend growth in the years ahead.

The post 2 dividend stocks I’d buy and hold for the next 50 years 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 owns shares of and has recommended Devro. 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.

At the same time, the rise in the FTSE 100 has made it more challenging to obtain high yields in many cases. Add to this a difficult future for the UK economy and the prospects for a high and rising dividend seem relatively low.

Despite this, there are some stocks which could be of interest. Here are two examples which could be worth buying and holding for the long run.

Upbeat performance

Reporting on Monday was national commercial law firm and complementary professional services business Gateley (LSE: GTLY). The company’s trading update showed that it has made good progress in the first six months of the year. Activity levels have been robust, with strong growth in the company’s Corporate and Property service lines helping to generate revenue growth of 10%. Increasing staff numbers and further investment in its growth prospects mean that the business remains confident in its medium term outlook.

With a dividend yield of 4.3%, Gateley offers a real income return at the present time. The company’s bottom line is forecast to rise by 14% this year and by a further 7% next year. This suggests that dividend growth could be brisk. And with a dividend coverage ratio of 1.5, future dividend growth appears to be sustainable. There may also be significant opportunities for further investment in order to allow the business to generate additional earnings growth. Therefore, with inflation set to move higher, the company could be a sound income investment for the long run.

Wide margin of safety

Of course, the FTSE 100’s rise has not meant that all stocks are now trading on excessive valuations. Life insurer Aviva (LSE: AV) may be within 10% of its five-year high, but still has a price-to-earnings (P/E) ratio of just 9.6. Furthermore, with its bottom line due to rise by 5% next year its rating is forecast to fall to only 9.1. This suggests that it offers a wide margin of safety and could deliver high capital growth in the long run.

In terms of its income prospects, Aviva’s dividend yield of 5.1% is surprisingly high. It pays out just under half of profit as a dividend, and looks set to maintain this payout level as a proportion of profit in the long run. This should provide a sustainable level of growth for the business, while also providing its investors with a robust income outlook.

Therefore, with a mix of value, income and capital growth appeal, the stock could be a sound buy for the long run. While it may take time for investor sentiment to improve, the investment case for Aviva appears to be compelling at the present time.

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Peter Stephens owns shares in 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.

Non-executive chairman of the corporate lawyers, Nigel Payne, said the business continues to perform well and is trading in line with management’s expectations. Following a year of “significant expansion and investment,” he said Gateley continues to achieve “solid” organic growth, while remaining focused on making sure that “complementary acquisitions which are earnings accretive to the group” happen.

“Driven by the strength of its service offering, its ability to retain and attract excellent staff and expand on existing client relationships, Gateley remains well placed for the future.  Further new recruits have settled in well across the group including professional staff in Gateley Hamer, Gateley Capitus and across its core national legal divisions,” Payne added.

The statement confirms the terrific momentum seen recently over at Gateley. The Birmingham-based firm announced in July that revenue boomed 15.7% in the 12 months to April, to £77.6m, a result that drove pre-tax profit 18.8% higher to £13.1m. The result reflected the vast sums Gateley is splashing out on organic investment as well as acquisitions.

Gigantic yields

Last year’s hearty profits boost prompted the company to hike the dividend to 6.6p per share from 5.64p in fiscal 2016.

And with the City expecting further hefty earnings rises (increases of 15% and 7% are estimated for this year and next), chances are that payouts should continue stomping higher. Indeed, current forecasts suggest that a dividend of 7.2p in the year to April 2018 is in the pipeline, while a 7.6p reward is chalked in for 2019.

These figures yield an incredible 4.6% and 4.9% respectively. And with Gateley also carrying a very attractive forward P/E ratio of 14.4 times (not to mention a corresponding PEG multiple bang on the bargain watermark of 1), I reckon those seeking great growth and income shares at a discount need to give the business serious attention.

Recruit another bargain

I also believe SThree (LSE: STHR) is a terrific bet for those looking to make their fortune on a budget.

Earnings are predicted to swell 12% in the year to November 2017, and by a further 10% next year, leaving the recruitment specialist dealing on a forward P/E multiple of 14.5 times (as well as a PEG rating of 1.2).

And looking at the dividends, while a projected payment of 14p per share for fiscal 2017 would be flat from the prior period, this still yields a mighty 4.1%. SThree is expected to get dividends rising again from next year, although an amount of 14.1p expected in 2018 yields the same.

I am convinced SThree is a brilliant bet for those seeking abundant returns for many years to come. Its international expansion programme continues to deliver titanic results, and gross profits rose 5% during June-August, to £73.7m, led by its US unit where profits surged 20% year-on-year.

And with the company having chosen to focus on the fast-growing contract market, I believe it should remain on course to deliver exceptional shareholder returns in the years ahead.

The post 2 small-cap dividend bargains that could make you very 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.

While stock markets are generally efficient, it is always possible to find companies which may offer some surprises. Often, this can be because their forecast growth rate has not yet been priced-in by the market. With the FTSE 100 trading near to an all-time high, this may seem unlikely. However, here are two companies which seem to offer wide margins of safety and significant upside potential.

Discounted valuation

Reporting on Tuesday was workspace provider IWG (LSE: IWG). Its performance in the first quarter of the year was in line with management expectations. It increased revenue by 9.1% at constant exchange rates, although this represented a decline of 1.5% at constant exchange rates. However, it expects an improving trend in sales activity to continue through the year, which means its financial performance should do likewise as the current year progresses.

IWG sees an opportunity to increase the number of new locations this year. Improving trading conditions in the US and major European markets last year have been followed by an improved outlook in the UK and in Asia Pacific. Therefore, its future appears to be positive despite uncertainties in the wider macroeconomic outlook.

Looking ahead, IWG is forecast to post a rise in its bottom line of 21% this year, followed by further growth of 15% next year. Although it has an upbeat outlook, its shares trade on a price-to-earnings growth (PEG) ratio of just one, which indicates that there is a wide margin of safety on offer. This could be due to the uncertain outlook for the global economy. While volatility may be high due to Brexit and wider global challenges, IWG’s low valuation means it could deliver high returns over the medium term.

Rising momentum

The share price performance of legal services business Gateley Holdings (LSE: GTLY) has been exceptional in recent months. It has risen by 23% since the start of the year, and by 61% in the last year. Despite this, it trades on a PEG ratio of only 1.7 owing to its forecast growth rate of 9% in the current year. This would follow a similar rate of growth in each of the last two years, which indicates that the company offers a relatively robust and sustainable growth profile.

In addition to capital growth potential, Gateley Holdings is also an attractive income stock. It currently yields 4.3% from a dividend which represents 71% of earnings. This indicates that dividends may increase at a faster pace than the company’s bottom line over the medium term, which suggests a double-digit dividend growth rate may be on the cards.

With inflation set to rise and the stock market being relatively high at the present time, Gateley Holdings has obvious potential for growth and income investors. Its shares may have risen in price in recent months, but that upward trend may be set to continue in future months.

The post 2 top growth shares you can’t afford to ignore 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?

Peter Stephens 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.