No dividend cut in 25 years

But there’s been a lot to admire about the company for a long time. Roland Head pointed out recently that the firm hasn’t cut its dividend since listing on the stock market in 1994. On top of that, the public transport business delivers Go-Ahead consistent cash inflow, and the return-on-equity that operations generate is running around 15%.

The firm gets its cash inflow in a timely manner too. Customers don’t get to use bus and train services until they’ve paid for them. But the sector has its challenges and profits have been erratic over the last few years, which has led to weakness in the share price. Even after today’s 10%-plus rise, at around 2,070p, the stock is well below its peak of three years ago above 2,600p.

And although it hasn’t been cut, the dividend’s been essentially flat for two years and City analysts forecast only very modest upward movement in the current trading year to the end of June and the year ahead. However, the yield is running close to 5% and the forward-looking price-to-earnings ratio for the trading year to June 2020 is around 12.5 after today’s rise.

Full-year expectations improved

The update covers the period from 30 December to 5 June and the company reports it has achieved “high levels” of punctuality across all its divisions. But the news that could be driving the share price spurt today is that the directors have “increased” their full-year expectations in the London and International bus division “due to strong operational performance,” including, they say, in Singapore and Dublin. There’s also been growth in passenger volumes in all the firm’s regional bus businesses, although full-year expectations are unchanged.

In the rail division, the company is about to launch German rail contracts “following a four-year mobilisation period.” Meanwhile, Southeastern is the UK’s best-performing large train franchise, the directors reckon, “with the highest levels of punctuality in its history.” With the GTR franchise, punctuality for the month of April was 89.3%, “after nine consecutive months of year on year improvement.”

Chief executive David Brown explained the company has seen revenue growth in all three of its divisions. I think that’s encouraging because profits could follow, and such progress is likely to feed into a rising dividend. We could see a sustained move up in the share price as well, as long as the firm keeps on making progress.

Last year, around 34% of the firm’s operating profit came from its Regional bus division, 33% from London buses, and 33% from Rail. We’ll find out more about progress with the full-year results due on 5 September. In the meantime, I’m tempted to pick up a few of the shares to collect the dividend.

The post With FTSE 250 Go-Ahead Group’s share price up 10% today, I’d do this appeared first on The Twelfth Magpie.

More reading

• 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?

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.

Share pickers seem to be reluctant to take the plunge because of the weak UK economy and fears that this will rock profits growth at the recruitment giant. I’m afraid this argument doesn’t hold water with me, though, as thanks to the tearaway performance of its foreign operations total profits continue to surge.

Last year, for example, SThree saw gross profits at group level swell 12% even as the bottom line in its UK and Ireland territory fell 5%. Less than 20% of the small-cap’s profits are now derived from home shores and so I’m confident that it can continue to thrive even if Brexit has bad implications for its domestic operations.

City analysts expect the bottom line to keep rising too, creating a dirt-cheap P/E ratio of 9.2 times for fiscal 2019 and expectations of more dividend growth to 15p per share. This results in a jumbo 4.9% yield.

Strike now

Hollywood Bowl Group (LSE: BOWL) isn’t as cheap as SThree. In fact, its forward P/E ratio of 16.6 times sits outside the widely-considered value watermark of 15 times and below. But I would consider this rating to be a very attractive entry point given its hugely exciting growth strategy.

The British tenpin bowling renaissance continues to go from strength to strength and through its busy expansion programme — it’s looking to cut the ribbon on two new centres each year — the leisure giant is setting itself up to capitalise on this trend.

Thanks to a 13% pre-tax profits boost last year, Hollywood Bowl continued to raise the ordinary dividend and to fork out special payouts. City brokers expect more significant bottom-line growth in fiscal 2019 to push the ordinary dividend to 7.6p per share, yielding an inflation-mashing 3.3%, and investors can probably look forward to more delicious supplementary rewards too.

The biggest yielder of all

If you’re on the hunt for particularly explosive yields then Go-Ahead Group (LSE: GOG) might be more to your liking.

The Square Mile suggests that the bus-and-rail-service operator will keep the full-year dividend locked at 102.08p per share for another year. The good news is that this projection yields a stunning 5%.

Adding some sheen to the Go-Ahead investment case is its low, low forward P/E ratio of 13 times, a rating that’s far too little in my opinion given the rate at which it has been winning contracts at home and particularly abroad over the past year.

The transport titan has recently added maiden contracts in Australia and Norway, for example, as well as additional accords within the German rail network. And the fruits of its endeavours were shown in half-year financials last week in which it advised that group revenues rose 5% during July-December despite tough conditions in the UK. With its contract pipeline packed with more opportunities I’m tipping it to flip back into strong profits growth soon enough and to get back to lifting dividends too.

The post 3 top (and cheap!) dividend stocks I’d buy right now appeared first on The Twelfth Magpie.

More reading

• 3 quality FTSE 250 stocks to consider with dividend yields above 4.5%
• How are these FTSE 250 growth and dividend stocks so cheap?

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Hollywood Bowl. 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.

With such low interest rates, I have no chance of saving for retirement using cash alone. That’s why the majority of my personal savings are invested in dividend stocks. These provide me with a much higher cash income and the possibility of capital gains.

Today I want to look at one dividend stock from my own portfolio and another that’s on my shopping list.

A tasty long-term buy?

Food producer Greencore Group (LSE: GNC) supplies many big retailers with takeaway sandwiches and ready meals. However, the firm’s performance has disappointed investors this year. A profit warning in March was followed by a surprise decision to sell its US business in October.

This strategic shift made me question my bullish stance on the stock. However, the latest figures from the firm have left me feeling fairly confident about the outlook for shareholders.

If we ignore the group’s US operations, which have now been sold, we see that sales in the UK and Ireland rose by 4.2% to £1,498.5m last year. Adjusted operating profit from these sales rose by 1.7% to £104.6m. Profits rose by less than sales, which means that profit margins fell. In this case, the numbers show a fall in operating margin from 7.2% to 7%.

I can live with this, in these circumstances. The group still generated an impressive 15.6% return on invested capital in the UK last year. Over the next few years, my hope is that a tighter focus on the UK business and plans for debt reduction will improve this figure.

Looking ahead, analysts expect Greencore’s adjusted earnings to rise by 5% to 15.8p per share in 2018/19. The dividend is expected to climb 7.5% to 5.99p.

These forecasts put the stock on a 2018/19 price/earnings ratio of 11 with a dividend yield of 3.4%. At this level, I believe the stock could be a good defensive buy for long-term investors.

A 6% stock I already own

One stock I already own is bus and train operator Go-Ahead Group (LSE: GOG). This company has had a lot of bad press as the operator of the troubled Govia Thameslink Railway (GTR) franchise, which includes Southern Rail.

Happily, the firm seems to be moving on from this troubled period. Management said that GTR delivered an “improved operational performance” during the six months to 28 November.

Go-Ahead has also announced a deal with the Department of Transport that will see the firm continue to run the GTR franchise until its 2021 expiry, in return for £15m of investment in “passenger enhancements”.

Overseas growth

Chief executive David Brown hopes to reduce the group’s dependence on the UK market by expanding internationally. Go-Ahead has already won bus and rail contracts in Germany, Singapore and Norway.

Mr Brown expects free cash flow to improve this year and City analysts believe the group’s dividend will be maintained. Consensus forecasts for the current year put the stock on a price/earnings ratio of 10, with a dividend yield of 6.2%.

I rate the shares as a buy.

The post Forget the cash ISA! I’d buy these FTSE 250 dividend stocks to protect my savings appeared first on The Twelfth Magpie.

More reading

• Here’s why this stunning sub-£2 FTSE 250 stock ‘should’ be trading nearer to £5

Roland Head owns shares of Go-Ahead Group. The Motley Fool UK owns shares of and has recommended Greencore. 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.

They argue that City predictions of sustained earnings rises through to the end of next year, allied with its bulky dividend yields of 5.4% and 5.9% for 2018 and 2019, respectively, make it a brilliant FTSE 100 share to load up on today.

I’m far from convinced. The rising headwinds facing the UK economy as the Brexit saga unfolds are significant. I reckon current forecasts are almost definitely likely to be harshly downgraded in the months ahead, so Lloyds’ low, low forward P/E ratio of 8.3 times holds no sway with me.

What’s more, current dividend targets could also take a whack should the number of PPI misconduct claims continue shooting skywards and heap extra strain on the balance sheet.

Go on…

If you’re looking for terrific cut-price dividend shares, I believe that fellow Footsie-quoted firm Go-Ahead Group (LSE: GOG) is a much better bet.

The bus and railways operator is slightly more expensive than the Black Horse Bank, the FTSE 250 member dealing on a forward P/E ratio of 10.4 times. On the other side of the coin though, Go-Ahead offers a larger dividend yield which sits at 6% for the 12 months to June 2019.

Now Go-Ahead is anticipated to record a painful 28% earnings slide this year, but the longer-term outlook is more solid for the company. It inked two additional bus contracts in Ireland and Germany last year and, thanks to what it describes as “a good pipeline of upcoming opportunities,” it’s expecting its international expansion programme to push total profits generated from overseas markets account for between 15% and 20% of the group total by 2022.

With the company also dedicated to improving and growing its core UK rail and bus services, I reckon the chances of strong and sustained earnings — and thus dividend — expansion beyond the more immediate term look much more secure here than at Lloyds.

A dividend stock worth saluting

I believe fellow Footsie share Admiral Group (LSE: ADM) is also a better income bet than the banking giant.

Like Go-Ahead, it is also costlier than the Lloyds, the business dealing on a forward P/E multiple of 16.8 times. But in my opinion, predictions of solid earnings growth through to the close of next year — rises of 4% and 7% are currently anticipated for 2018 and 2019, respectively — stand on much stronger foundations than the comparable City forecasts for Lloyds.

The outlook for motor insurance premiums looks pretty stable for the next year or so, while Admiral’s European operations are also gaining traction at an impressive rate. Thanks to strength on the continent, the number of international customers on its books rose 17% from January to June, to 1.12m, matching the rate of growth in its core British division.

What’s more, Admiral’s balance sheet is so robust that the insurer has been encouraged to fork out special dividends of late, a strategy that the number crunchers expect to continue for the foreseeable future. Consequently, yields at the firm stand at a huge 5.6% for 2018 and 6.5% for next year, beating Lloyds’ corresponding figures hands down.

And I’m confident that the insurer, like Go-Ahead Group, can continue beating Lloyds in the dividend stakes long into the future.

The post 2 top dividend stocks that pay more than 5.5%-yielder Lloyds Banking Group appeared first on The Twelfth Magpie.

More reading

• Here’s how much second income 100 Admiral shares could deliver in 2026
• How much would you need in a Stocks and Shares ISA to aim for £8,189 a year in dividend income?
• 500 shares of this FTSE 100 company unlock a passive income of…
• Income investors love insurance stocks. Here’s my top pick from the FTSE 100

Royston Wild has no position in any of the shares mentioned. 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.

Shares in the firm — which operates strike-hit Southern Rail — rose by as much as 16% in early trading after the company said that its overall results were “ahead of expectations” for the year ended 30 June.

Revenue was almost unchanged at £3,461.5m, but the group’s underlying operating profit fell by 9.8% to £135.9m. This was caused by a 25% drop in rail profits, which fell to £44.5m as a result of the mid-year expiry of the London Midland franchise. Bus profits edged higher, to £91.4m.

I’ve recently added this stock to my own portfolio, as I was tempted by its 6% dividend yield and modest valuation. So I was keen to see if today’s results confirmed my view that the worst of the firm’s problems are now over.

Dividend changes

Go-Ahead will pay an unchanged dividend of 102.8p for last year. But the company is changing its payout policy from this year onwards. Instead of a progressive policy, where the board aims to deliver a flat or increased payout every year, the group will pay out 50%-75% of earnings each year to shareholders.

The advantage of this approach is that it should be predictable and affordable, even if profits fall. However, a change like this is often a crafty way of announcing a dividend cut. Is that true here?

Analysts’ consensus forecasts are for earnings of 159p per share in 2018/19. If this view holds, then we should expect a dividend of between 80p and 119p this year. I suspect management will target a similar payout to the 2017/18 distribution of 102.8p per share, to avoid a cut.

Are things getting better?

Chief executive David Brown says that he expects “a robust performance” this year, despite pressures on profits from London bus and rail operations. I don’t expect rapid profit growth, but I do think the outlook should gradually improve.

Trading on 10 times 2019 forecast earnings, with an estimated forecast yield of 6%, I continue to see Go-Ahead as a good value buy.

A proven performer

Go-Ahead remains a turnaround stock, with certain risks. If you prefer to invest in companies with a track record of market-beating performance, you may want to consider transport firm Dart Group (LSE: DTG), which operates the Jet 2 holiday business.

Dart shares rose by 5% this morning after the company said that travel bookings were growing “slightly ahead of our 25% summer 2018 seat capacity increase”. What this means is that despite adding a range of new services this year, the firm’s flights are more fully-booked than they were last year.

The company also said that a greater number of customers were choosing more profitable package holiday deals, rather than flight-only tickets.

This could run and run

Analysts upgraded their profit forecasts for Dart after the group’s full-year results were published in July. Management confirmed today that it remains confident of meeting these increased expectations.

These shares have doubled over the last year. But strong earnings growth means that Dart stock still looks affordable to me, on 10 times forecast earnings. My buy rating remains unchanged.

The post Why I’d keep buying this FTSE 250 6% yielder and this double-bagger after today’s news appeared first on The Twelfth Magpie.

More reading

• 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?

Roland Head owns shares of Go-Ahead Group. 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.

As I mentioned previously, the acquisition of Northern & Shell’s Express and Star titles should prove a game-changer for the Docklands-based company. Just last month the firm — which was known as Trinity Mirror until the aforementioned acquisition — said that the purchase should support an 11% improvement in like-for-like revenues in the 26 weeks to July 1. Digital revenues at the Express and Star exploded 25% in the first fiscal half, it added.

Without the contribution of its newly-acquired titles sales, at Reach would have ducked 8%, it was noted.

The positive contribution of these digital operations is not the only cause for celebration, however. An improvement in national print advertising budgets has helped drive turnover in the past couple of months. What’s more, the publisher can also look to the significant cost synergies delivered by the tie-up with Northern & Shell’s old titles.

Yields leap to almost 9%

The pressures in the ad market are expected to cause earnings at Reach to flatline in 2018. But the City’s broker army does not expect this to prove a barrier to further strong dividend growth, so strong are the company’s cash flows.

Thus current forecasts point to a 6.1p per share dividend this year, up from 5.8p in the prior period and yielding a brilliant 8.5%.

The good news doesn’t stop here either. With profits expected to pound 10% higher in 2019, the full-year reward is predicted to rise to 6.4p. This means that the dividend rings in at an even more impressive 8.9%.

Usually companies with big dividend yields and dirt-cheap earnings multiples (in the case of Reach, it has a forward P/E ratio of 2 times) are considered no-go areas for investors.

As my colleague Roland Head previously pointed out, the discrepancy in this case can be caused by fears over the size of the firm’s pension deficit. However, predicted dividends over at Reach are protected between 5.9 times and 6.2 times by anticipated earnings through to the close of next year, leaving plenty of room for current projections to be met.

Throw Reach’s undemanding valuations, massive dividend yields and recovering revenues into the mix, and I reckon the company is a pretty compelling selection for income chasers today.

The 6%+  yielder

I also reckon Go-Ahead Group (LSE: GOG) should be attracting the glances of dividend investors today.

The number crunchers are predicting that the FTSE 250 business will pay a 120.3p per share dividend in the year to July 2019, matching the anticipated reward for the prior year. This figure yields a huge 6.6%.

While the market is expecting the company to endure a 20% earnings slip in the current year, I reckon this could be due for upgrades when the firm releases full-year financials on September 6. In May it advised that profits should exceed prior expectations when it reports for fiscal 2019, driven by efficiency improvements.

While there is some uncertainty facing its UK rail operations in the medium term, this is baked into Go-Ahead’s low forward P/E ratio of 9.9 times. Besides, I reckon the prospect of surging international contracts in the years to come makes the transport titan a compelling selection today.

The post This 8%+ yielder could supercharge your retirement income appeared first on The Twelfth Magpie.

More reading

• 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 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.

I first suggest this stock as a turnaround buy back in January and then again in March when news broke of the group’s decision to buy out Novartis from the pair’s consumer healthcare joint venture for $13bn.

At that time the stock was trading on around 12 times 2018 forecast earnings and offering a 6% yield. The group’s rising share price has upped this price tag. Glaxo shares now trade on 14 times 2018 forecast earnings, with a 5.3% yield.

For comparison, the FTSE 100 currently trades on a P/E of 13.5 with a dividend yield of 3.8%. So Glaxo looks still reasonably priced compared to the index. And the group may also have some tricks up its sleeve.

Staying together could be profitable

A number of prominent investors including Neil Woodford have called for the group to break itself up into two or three smaller and more focused businesses. I have some sympathy with this view, but it seems that chief executive Emma Walmsley isn’t keen.

Ms Walmsley appears determined to keep the group together and improve its performance by bulking up in key areas of strength. The acquisition of the remaining share of the Consumer Healthcare joint venture is an example of this.

This decision isn’t without risk. Much of the $13bn recently paid to Novartis for its share of the consumer healthcare business was funded with debt. But the operating margin from selling products such as Panadol and Sensodyne is expected to rise from 17.7% in 2017 to “mid-20s percentages” by 2022.

I estimate that achieving this alone could add about £550m to Glaxo’s 2017 operating profit of £4.1bn, even before any sales growth is considered.

I still see value

At Glaxo’s current valuation, I believe the shares still offer decent value for long-term income investors. Although this group has underperformed the market over the last five years, profits seem to have stabilised and free cash flow is improving. This should support both the dividend and some level of debt reduction.

For income investors, I believe Glaxo’s 5.3% yield represents a decent buy.

This 6% yielder could motor ahead

Public transport operators are not exactly the flavour of the month at the moment. Many rail commuters will know why. But my pick from this sector, FTSE 250 firm Go-Ahead Group (LSE: GOG), looks like a potential value buy to me.

As with Glaxo, Go-Ahead’s share price has motored ahead this year. The stock is now worth about 10% more than at the start of January.

What’s changed?

The group’s troubled Southern Rail franchise has gathered a lot of headlines. But the reality is that the financial results of the rail division were ahead of expectations during the six months to 31 December. The group’s bus operations are also performing well and a number of new overseas contracts are in the pipeline.

Revenue rose by 6.6% to £1,829.4m during the half-year, while operating profit climbed 19% to £86.9m. The group’s third-quarter trading statement shows that this performance has continued, with profit guidance left unchanged for buses and upgraded for rail.

A cash machine

The company seems to be leaving last year’s problems behind. And its financial performance is improving. Cash generation has always been a core attraction here and this is starting to recover, after a difficult period in 2016/17.

I estimate that Go-Ahead’s forecast dividend of 102p per share should be covered by free cash flow this year. With a 2017/18 price/earnings ratio of 8.9 and a forecast dividend yield of 6.1%, this stock is on my buy list at the moment.

The post Why the GSK share price should smash the FTSE 100 this year appeared first on The Twelfth Magpie.

More reading

• 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?

Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.

Springfield Properties (LSE: SPR) is one such share I reckon share pickers are far too pessimistic about as I write today.

The Scottish company, which was only admitted to AIM trading in October, is expected to print earnings of 9.1p per share for the year to May. And City analysts are expecting it to build on this with rises of 16% and 11% in fiscal 2019 and 2020 respectively.

And I believe Springfield — which specialises in housing north of the border — has what it takes to make good on these forecasts. Its latest financial release showed revenues leaping 11% during the six months to November, to £54.8m, a result that powered pre-tax profit 20% higher to £3.1m.

What’s more, the company continued to invest in its land bank to keep revenues rising, lifting it to 10,605 plots in the period from 9,195 plots six months earlier, and the number of active sites to 29 from 25 in May, to help it remedy Scotland’s chronic homes shortfall.

Make no mistake, supply is likely to continue outstripping demand in the homes market for some time yet, a scenario that should keep propelling profits and dividends higher at Springfield as it steps up its building plans.

Looking more closely at dividends, with the company also taking bites out of its debt pile (net debt fell to £13.7m as of November from £31.1m a year earlier), the predicted payout of 3.7p per share for the current year is expected to shoot to 4.3p in fiscal 2019 and to 5p next year. These projections of significant dividend growth drive a handy 3.1% yield in fiscal 2018 to 3.6% next year and 4.2% in the following period.

With anticipated payments covered by earnings estimates by around 2.5 times through to the close of next year, comfortably inside the accepted security terrain of 2 times or above, I reckon Springfield is a great bet to make good on these estimates too.

The 5% yielder

Go-Ahead Group (LSE: GOG) is another income share investors need to consider today even if it is not expected to deliver the same sort of earnings performance as the homebuilder, at least not in the medium term.

City brokers are predicting earnings dips of 16% and 11% for the years ending June 2018 and 2019 respectively, these numbers reflecting the difficulties the Go-Ahead is facing in both the rail and bus markets. However, thanks to its strong balance sheet, the FTSE 250 business is expected to still keep dividends on hold at 102.08p per share through the next two years, cementing the yield at a terrific 5.4%.

Now Go-Ahead still has some way to go before its turnaround strategy can be considered a success. But in my opinion this is more than reflected in the transport giant’s low forward P/E multiple of 10.3 times.

The post 2 dividend stocks that are absurdly cheap right now appeared first on The Twelfth Magpie.

More reading

• 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 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.

A compelling valuation

However, even at recent share price levels, the valuation looks compelling. The forward price-to-earnings (P/E) rating for the trading year to April 2020 runs close to nine and the forward dividend yield is a chunky-looking 5.8%. After slipping by around 12% in the current year to the end of April, earnings look set to come in more or less flat the following year. City analysts predict a 3% increase in earnings for the year to April 2020 that should cover the dividend payment just under twice.

In the recent statement, the company told us that although adverse weather had affected like-for-like sales during the year, trading over the Easter period was “strong”. Like-for-like sales over the Easter weekend were 2.8% higher than the Easter period last year, “helped by strong sporting fixtures, especially football and boxing.” The trading environment remains challenging, but the directors think that a £10m investment made during the second half of the year “to strengthen our value for money, customer service and quality” is starting to boost trading.

Opening new pubs

The company opened nine new pubs during the year, which is welcome news after we’ve become used to so many pubs closing down in recent years. I think ongoing expansion like that demonstrates that the business formula is working. Meanwhile, the firm expects to achieve cost savings between £40m and £45m and to receive around £120m on the disposal of three high-value leasehold pubs. Such ongoing nipping and tucking should help the firm sustain its dividend in the years to come. The directors are optimistic saying, “we remain well placed to withstand the external market challenges and deliver long-term value to our shareholders.”

Meanwhile, the shares of bus and rail operator Go-Ahead Group (LSE: GOG) have been perky lately, up around 43% since February. A better-than-expected half-year report kicked off the move higher with the directors telling us that their full-year expectations had increased “due to one-off rail benefits” and in-line trading in the firm’s bus contracts.

A strong bid pipeline

Go-Ahead is getting ready to start a Dublin bus contract and three German rail contracts in 2018 and 2019 respectively and has a “strong” bid pipeline “in our target international markets” over the next few years. Nevertheless, City analysts following it expect earnings to shrink 11% during the year to June 2019 with the dividend being held firm at the previous year’s level.

Even after the recent rise in the stock, the valuation looks attractive with the forward dividend yield running above 5% for the year to June 2019. I think both these FTSE 250 big-yielders are worth your further research time right now.

The post 2 stocks yielding 5%+ in the FTSE 250 I’d buy with £2,000  appeared first on The Twelfth Magpie.

More reading

• 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?

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.

Shares in the bus and rail operator are still worth 35% less than they were one year ago, but these half-year results suggest that the company may have turned the corner. Today I’ll explain why I believe Go-Ahead could be a great recovery buy for income investors.

But before that, I’m going to take a look at another out-of-favour FTSE 250 stock with a tempting 7.5% yield.

A fine pedigree

Pub chain and brewer Marston’s (LSE: MARS) took a bold step when it acquired rival Charles Wells in 2017. But the deal seems to have worked out well so far. Charles Wells brewing portfolio has added names such as Courage and Bombardier to Marston’s brands like Pedigree and Hobgoblin.

Acquiring the smaller firm’s pub estate has also increased Marston’s presence in London and the South East, two important markets.

Like other pub groups, this firm has already endured a difficult few years of reshaping and updating its pub estate. This process is now starting to deliver results, with growth in sales and underlying earnings during the 16 weeks to 20 January.

Like-for-like sales rose by 2.6% in Taverns and by 1.1% at Destination and Premium locations, excluding the impact of two snowy weeks during the period.

What could go wrong?

One headwind at the moment is the restaurant sector, which is struggling with overcapacity and discounting heavily. If consumer spending weakens, pubs could be forced to cut their own prices in order to attract customers.

As things stand, Marston’s earnings are expected to remain flat at 14.2p per share this year. A dividend of 7.7p per share is expected by brokers, giving a forecast P/E of 7.2 and a prospective yield of 7.5%. These shares are on my watch list.

A ticket to ride

Public transport is one of several stock market sectors suffering from political uncertainty at the moment. Personally, I don’t think investors need to worry about rail renationalisation, as I explained recently.

However, falling profits are a potential concern. Luckily the half-year figures from Go-Ahead suggest to me that it’s now on the right track.

Revenue rose by 6.6% to £1,829.4m during the six months to 30 December, while pre-tax profit rose by 19% to £79.7m. Earnings per share rose by 7.3% to 115.5p, providing good cover for an unchanged interim dividend of 30.2p per share.

The group’s cash generation also improved. Free cash flow turned positive and rose to £94.6m, enabling the firm to reduce adjusted net debt by 32% to £254m. This leaves borrowings at just 1.03 times earnings before interest, tax, depreciation and amortisation (EBITDA) — a very comfortable level.

However, you might want to note that despite this strong cash performance, the dividend has been left unchanged. This might be because today’s results were boosted by a one-off sale of surplus assets following the loss of the London Midland rail franchise.

Analysts are still forecasting a 5% fall in profit next year. But despite this risk, I believe Go-Ahead shares offer good value at current levels. After today’s gains, the stock trades on a forecast P/E of 8.5 with a yield of 6.7%. I’d rate this as a buy for income.

The post Two 7.5% yielders I’d buy with £2,000 today appeared first on The Twelfth Magpie.

More reading

• 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?

Roland Head 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.