Headlam Group (LSE: HEAD) is a big-dividend-paying small-cap that may not be for the faint of heart, but I’m convinced it still has what it takes to deliver titanic returns now and in the years ahead.

Brexit is wreaking no little havoc on trading at the floor coverings specialist right now, prompting it to predict in its recent pre-close update that “the UK market will show further general weakness during 2019.” Despite this, Headlam predicted that group revenues will remain flat this year, and I’m inclined to believe it given its ability to perform in already-tough conditions — it advised in this month’s statement that profits were “marginally ahead” in 2018 despite troubles in its home market.

Headlam may well experience some forecast-denting turbulence this year — a 4% earnings rise is currently anticipated by City brokers — but I believe the chances of this occurring are baked into the firm’s low forward P/E ratio of 9 times. I’m far more attracted by its bulging 6.7% dividend yield, and the brilliant long-term profits opportunities created by its expansion strategy in Europe.

Strike it rich

Bowling alley operator Ten Entertainment Group (LSE: TEN) is another income giant carrying inflation-mashing dividend yields in the near term, in this case a reading of 5.3%.

And just like Headlam, the ten-pin titan can also be picked up for next to nothing, the small-cap also carrying a mega-cheap prospective earnings multiple of 11.4 times. This also doesn’t factor in the resilience of this little-known income hero, in my opinion, the resurgent appetite for bowling in Britain helping it to overcome increasing pressure on consumer spending power as well as the impact of “extreme” summer weather.

Earlier this month Ten Entertainment said that like-for-like sales rose 2.7% in 2018, the seventh successive year of growth. And the business looks good to continue growing profits at a breakneck pace, helped by its ongoing acquisition drive. The City certainly thinks so, with analysts forecasting a 22% earnings rise in 2019.

Don’t miss this dividend star!

Corporate insolvency specialist Begbies Traynor Group (LSE: BEG) may have seen its share price clatter lower in recent months, but I am convinced this represents a prime dip-buying opportunity.

Why? Well, as the British economy slows the number of businesses experiencing financial distress is growing, and this is playing into the likes of Begbies Traynor’s hands. It saw revenues rise 8% in the six months to October, to £28m, and with debt falling the AIM business is in great shape to execute more earnings-enhancing acquisitions, not to mention to keep lifting dividends.

Indeed, City boffins predict a full-year dividend of 2.6p for the period to April 2019, up from 2.4p last year and yielding a formidable 4.5%, aided by an anticipated 9% earnings rise. Combined with a low, low forward P/E ratio of 13.1 times I reckon Begbies Traynor is a great income share to pick up today.

The post These 3 ‘hidden’ dividend stocks yield up to 6.7%. Can you afford to ignore these bargains? 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 floor coverings expert is suffering from the impact of tough trading conditions in the UK, and in its August half-year update advised that like-for-like revenues in its home marketplace tanked 5.2% from January to June. There’s no sign that Headlam’s British territory is about to improve any time soon either.

That said, I am convinced that the small-cap’s push into mainland Europe — a territory that delivered a 1.7% like-for-like revenues improvement in the first-half — should help keep earnings, and thus dividends, rising until the UK improves and then beyond.

The City shares my optimism, and is forecasting profits rises of 1% and 4% in 2018 and 2019 respectively, as well as dividends of 24.9p and 26.5p per share for these periods.

And in my opinion, its mega-low valuation, a forward P/E ratio of 11.1 times, and massive dividend yields of 5.3% for this year and 5.6% for 2019 make Headlam a bargain buy today.

Lighting it up

Investors not favouring Headlam on account of its challenging trading environment may favour buying big-yielder National Grid (LSE: NG) instead.

The capital investment needed to keep the country’s lights on means that profits growth cannot be guaranteed each and every year — to illustrate this, a 3% earnings drop is being predicted for the current year to March 2019.

But as my Foolish colleague Peter Stephens pointed out recently, the FTSE 100 utility looks in great shape to keep delivering solid dividend growth despite this expected hiccup. The diving pound means that yields should remain on quite an impressive upward trajectory in line with its aim of lifting the annual payout “at least in line with the rate of RPI inflation each year for the foreseeable future.”

And over the long term, National Grid’s stranglehold on operating the British electricity network, assisted by its move into power provision on the US Eastern Seaboard, sets the stage for sustained earnings expansion. Indeed, its aim of increasing its asset base both at home and abroad provides an extra reason to expect shareholder returns to keep rising.

National Grid is anticipated to recover from this year’s profits blip with a 3% rise in fiscal 2019, lending further credibility to my argument. And this lays the foundation for City brokers to project a total ordinary dividend of 47.3p per share for this year, up from last year’s 45.93p reward, and another jumbo 48.7p payment next year.

There is some regulatory uncertainty related to National Grid, but I believe these fears are more than baked into its cheap forward earnings multiple of 13.8 times. I actually believe the power play provides plenty of upside at current price levels and this, allied with its mountainous yields of 5.9% for fiscal 2018 and 6.2% for next year, should make it an irresistible selection for those seeking solid, unbroken dividend growth over the next 10 years at least.

The post Two cheap 5%-plus yielders (including this FTSE 100 dividend stock) I’d buy now and hold for 10 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 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.

Britain’s small-cap index is jam-packed with exceptional income shares so I’ve picked out even more for you to consider, placed in no particular order. Count them down; you won’t be disappointed.

6. International Personal Finance

International Personal Finance’s(LSE: IPF) share price has spiked in recent sessions amid news of better-than-expected collections in its European marketplaces in the first six months of 2018, a situation that prompted the doorstep lender to advise that full-year profits would beat all forecasts.

While impressive, it is the huge revenues possibilities over at its Mexican home credit and IPF Digital arms that I am really excited about — the amount of issued credit in these areas rose 13% and 44% respectively during January-June, and demand here looks set to continue booming.

Now City analysts are expecting the dividend to remain on hold at 12.4p per share yet again in 2018. The good news is that this figure still yields 5.2%, however.

To put an even bigger smile on your face, International Personal Finance is expected to bounce back into earnings growth in 2019, meaning that the Square Mile is confident that the firm should lift the dividend to 12.6p. This means that the yield stomps to a staggering 5.3%.

5. 4Imprint Group

The yields at 4Imprint Group (LSE: FOUR) may not be as mesmerising as those of International Personal Finance. But the rate at which dividends are growing (up 111% over the past five years alone) should make income-seekers sit up and take notice.

It’s not likely that dividend expansion is set to slow any time soon either, given the rate at which its cups, bags and other promotional products are being snapped up. Revenues grew 16% and order intake jumped 15% year-on-year during the first four months of 2018, and a strong US economy should help sales to keep spiralling skywards.

Earnings at the firm are expected to continue swelling by double-digit percentages through to the close of 2019, keeping City brokers expectant of further dividend leaps too. Last year’s 58.1 U cents per share reward is expected to skate to 63.5 cents this year and 72 cents next year, resulting in handy-if-unspectacular yields of 2.5% and 2.8% respectively.

4. Bloomsbury Publishing

The publisher of the Harry Potter series of books, Bloomsbury Publishing (LSE: BMY), can always rely on the evergreen popularity of the boy wizard to keep driving dividends higher.

It may be two decades since the Hogwarts hero first hit bookshelves, but his popularity with young and adult readers alike remains undiminished. The franchise ranked amongst Bloomsbury’s hottest sellers in the four months to June, and the publisher continues to capitalise on its broad acclaim by bringing out new editions on a regular basis.

Harry Potter isn’t the only reason to expect profits and dividends to keep growing, however. The small-cap is also in a good place thanks to the vast amounts it is investing in building its position in the academic and professional digital resources sphere.

With earnings expected to keep rising City brokers are predicting dividend growth to hit as much as 8p per share in the 12 months to February 2019, from 7.51p last year, and again to 8.4p next year. This means that yields stand at an inflation-topping 3.6% and 3.8% for these respective years.

3. Devro

Sausage-casings manufacturer Devro (LSE: DVO) has been forced to keep the dividend locked at 8.8p per share for what appears to be an age. A lengthy period of earnings fluctuations has seen it lack the confidence (and the balance sheet strength) to hike payouts, but things could be about to change.

City analysts expect the firm to deliver robust profits growth through to the end of next year, meaning that Devro is expected to raise the dividend to 9p this year and again to 9.3p in 2019. Subsequent yields clock in at 4.5% and 4.7%.

There’s a lot of reason for the number crunchers to be optimistic. Devro is a rare firm in that it’s seeing its costs dropping through the floor (down £7m in 2017, beating forecasts), at the same time as its sales are marching on, particularly in hot growth territories like Russia and China. There’s a lot to like about Devro and its self-help strategy right now.

2. MJ Gleeson

News that MJ Gleeson (LSE: GLE) remains on course to supercharge home sales over the next five years has got me very excited.

The urban regeneration specialist sold 1,225 properties in the 12 months to June, up by a fifth (or 20.9% to be exact) from a year earlier. It’s well on track to hit its target of 2,000 homes per year within the next five years, it said, and I wouldn’t bet on it missing expectations as it ramps up production (it aims to be active on 70 sites in the course of fiscal 2019 versus 65 today).

Dividends at the firm have jumped 860% over the past five years as earnings have shot through the roof, culminating in last year’s 24p per share reward. Payout expansion is expected to slow in the medium term, however, to 27.1p in the year just passed and 29p in the current year. But the builder and its meaty forward yield of 3.8% are not to be scoffed at, particularly as cash flows burst through the roof and profits look set to keep growing.

1. Headlam Group

Those hunting for blowout yields now and in the future could do a lot worse than splashing the cash on Headlam Group (LSE: HEAD).

A 26p per share dividend is anticipated for 2018, up from 24.8p last year and yielding 5.6%. The yield for next year moves even higher to 5.9%, thanks to the firm’s estimated 27.4p payment.

The floorcoverings giant has been hit more recently by tough conditions in its UK marketplace in 2018 so far, but its divisions in continental Europe continue to perform well. Like-for-like sales in Europe edged up by 1.8% in the six months to June. And it is a combination of robust economic conditions on the continent, plus the completion of Headlam’s shrewd acquisitions at home and abroad, that make me confident that this is one business that could provide you with a packet to retire on.

The post 6 small-cap dividend stocks that could be millionaire-makers appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?

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.

Concentration of stocks

Only a handful of FTSE 100 companies account for a near-majority of the index’s total dividend payouts, meaning there is a very high concentration of stocks at the top of the market. Meanwhile, the number of small-cap companies paying dividends to their shareholders has been on a steady rise in recent years. Although many of them fly under the City’s and investors’ radars, there’s growing interest in small-cap dividends from income-focused investors.

With this in mind, I’m taking a look at two high-yielding small-cap shares that seem set to continue rewarding their shareholders generously.

Wide economic moat

When it comes to finding reliable dividend stocks, I think one important question to ask is: does the company have a wide economic moat?

Few things are as important to a company as the ability to keep rivals at bay. Companies with wide economic moats usually stay ahead of the competitors over a prolonged period due to sustainable competitive advantages which make it difficult for rivals to wear down their market share. For that reason, companies with wide moats tend to generate steady, dependable profits year-after-year which, in turn, enables them to pay reliable dividends over the long term.

One example of a wide moat company is payments service provider PayPoint (LSE: PAY). With nearly 50,000 PayPoint terminals operating in the UK, Ireland and Romania, the company has a weighty market presence in an industry where scale is paramount.

Clients, ranging from utility and media companies to government organisations, prefer to use a single cash payments solution, and so too do customers, for ease of use and convenience. Moreover, the very high-fixed costs required to set up a competing network throws up significant barriers to entry. That makes it difficult for competitors to break into the market and allows PayPoint to dominate the market.

Shift to online payments

PayPoint’s long-term worry, however, is the shift towards mobile and online payments — fast-growing markets which the company has, so far, struggled to make significant headways into. Revenues for UK cash bill payments & top-ups are plateauing, meaning Paypoint has a need to find new sources of growth.

The company is doing better in the parcel business, with its Collect+ ‘pick up and drop off’ service seeing strong growth. Parcels are also proving to be a valuable complementary service for its core payments business, driving extra footfall into its convenience retailers and generating revenue synergies.

Meanwhile, Paypoint continues to innovate to maintain its competitive advantage. The deployment of its new ‘PayPoint One’ touch-screen retailer terminal continues apace, with the company seeing healthy growth in the average weekly service fee for sites which have adopted the new terminal.

Bottom-line impact

On the downside, the roll-out of PayPoint One, along with other investments in MultiPay and customer service, will add significantly to its cost base, depressing margins and its bottom-line performance in the near term.

However, I reckon this is a classic case of short-term pain for long-term gain. Following a predicted 1% dip in adjusted earnings per share for the current financial year, City analysts forecast earnings to rebound by 6% in the 2019/20 financial year.

And despite big investment costs, free cash flow is expected to remain resilient, enabling the company to maintain its progressive dividend policy and return additional surplus capital via special dividends.

Paypoint has a current dividend yield of 4.8%, but this rises to 8.7% when we include additional dividends for the total  payout in the year. And when you chuck in a forward P/E ratio of 15.4 times into the equation, valuations seem very tempting indeed.

Weak market backdrop

Elsewhere, shares in Headlam Group (LSE: HEAD) have been under the cosh of late due to the soft UK floorcoverings market affecting revenue in both the residential and commercial sectors.

These pressures caused an uncharacteristic revenue slip in the UK for the six months to 30 June, which declined by 0.5% compared with the prior year period. On a like-for-like basis, things looked even worse, with the UK showing a decline in sales of 5.5%.

Still, Headlam managed to weather much of weak UK trading conditions via a well-timed strategic acquisition and management initiatives to prioritise margins. Gross margin across the group improved by 103 basis points to 31.06% in the six-month period, while total revenue increased by 2.6% to £337.2m.

The company, which is Europe’s largest distributor in its sector, has achieved this margin improvement through the streamlining of internal processes and a warehouse reconfiguration to improve capacity and delivery efficiency.

Acquisitions

Despite the soft market, further gains could be on its way as Headlam continues to focus on margins and drive top-line growth via acquisitions.

Shareholders often get nervous when companies rely on acquisitions to deliver growth, because of the impact on financial leverage and the potential pitfalls of mergers. However, Headlam has changed the way it approaches acquisitions, with its new strategy aimed at diversifying and broadening the company’s overall position in the floorcoverings market.

It’s looking to further strengthen its market-leading position by seeking targets that improve its sector presence, bring strategic benefits, or further geographic coverage. Headlam has in place a disciplined approach and has net cash of £35.3m at the end of the last financial year.

Earnings growth

Looking ahead, City analysts expect earnings to hold up well, with adjusted EPS forecasted to climb 2% this year. This should be followed by a further 5% growth in 2019, driving adjusted earnings to 44.6p per share.

What’s more, the combination of steady earnings growth and a healthy balance sheet is expected to drive robust dividend per share growth, predicted to expand to 27.4p by the end of 2019. As such, this suggests Headlam’s dividend yield is expected to rise from 4.2% currently, to as high as 5.9% within the next two years.

The post Searching for dividend income? Then check out these small-cap stocks with 4%+ yields appeared first on The Twelfth Magpie.

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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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Jack Tang has no position in any of the shares mentioned. The Motley Fool UK owns shares of PayPoint. 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.

And according to a strategy update issued by the firm today, the opportunity to attract new clients is even bigger than the company previously projected. 

Investing for the future

Today’s strategy update notes that “the opportunity to invest in new customer acquisition is materially bigger than previously thought” and, as a result, the company is planning to ramp up its investment in marketing. It intends to invest an additional £12m in growth, as well as its £12m per annum existing investment. Apparently, each pound invested has a lifetime payback in excess of £4, meaning that each year £48m of future value is banked at the current level of investment. 

Unfortunately, even though the higher capital spending is expected to pay off over the long term, it will reduce near-term earnings.

Management believes expenditure will dent earnings in the 2017 financial year to the tune of £3m before “annual generation of future value from £48m to £80m-plus a year.” In my opinion, this trade-off is highly attractive. Majestic is investing for the future, which if management figures are to be believed, should result in tremendous returns for its shareholders over the next three to five years. 

What’s more, investors will be paid to wait for the turnaround. The shares currently support a dividend yield of 1.5%, and the distribution is expected to grow 13% in 2018 and 20% in 2019. 

As the investment in future growth filters through to the bottom line, I believe dividend growth will only accelerate. That’s why I’m considering this dividend-growth stock after today’s news. 

Market-beating income

Another dividend-growth stock that has recently attracted my attention is Headlam (LSE: HEAD). 

Headlam markets and supplies floor covering products, a business that it has fine-tuned over the years. Since 2012, earnings per share have grown at a compound annual rate of 10%, allowing management to adopt a similar rate of dividend growth. 

Over the next two years, City analysts expect this trend to continue. The shares currently support a dividend yield of just under 6%, and the payout is expected to grow between 8% and 5% over this period.

Not only does the stock support a market-beating dividend yield, but it also has a cash-rich, debt-free balance sheet, which should encourage further dividend expansion. 

And as well as its dividend potential, shares in Headlam currently appear undervalued, as investors remain cautious around the outlook for the UK retail industry. The stock currently trades at a forward P/E of 10.1, a valuation that, in my view, more than reflects current retail industry uncertainty and could lead to a substantial re-rating if the firm performs better than expected.

The post Why I’m considering this dividend-growth stock after today’s news appeared first on The Twelfth Magpie.

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

And with the FTSE 250 constructor, like many of its London-quoted peers, having seen its share price dive in 2018 (and touch 16-month troughs just this week) I reckon now is a great time for dip buyers to grab a slice of the action.

Yields rising to 9%

Share pickers have been put off the housebuilders of late after a slew of industry data underlined the moderation in home price growth that really kicked off last year.

Declining property values are no great surprise given the chronic political and economic uncertainty that has put the rampant homes demand of yesteryear to the sword. But on the brighter side, homes demand remains broadly stable and the Bank of England announced last month that mortgage approvals recovered from the three-year troughs plumbed at the turn of the year to record the biggest month-on-month increase since April 2015 in February.

Ultra-attractive interest rates and the government’s Help To Buy scheme are helping to keep homes demand afloat, if nothing else. For the likes of Crest Nicholson, meanwhile, a lack of available properties entering the market is propelling demand for new-build homes ever higher and keeping revenues on a skywards trajectory.

City analysts are predicting that earnings at Crest Nicholson will continue to grow at a much shallower rate compared to the double-digit rises seen before the EU Referendum as slower demand and heavier costs across the construction industry weigh. Advances of 6% and 13% are forecast for the years to October 2018 and 2019 respectively.

Still, these robust figures are enough to underpin predictions of further dividend growth. And so the payout of 33p per share of fiscal 2017 is expected to rise to 35.7p this year and to 40.3p in the following period, resulting in large yields of 8% and 8.9% respectively.

And a mega-low forward P/E ratio of 6 times seals Crest Nicholson’s appealing investment case, in my opinion.

More gigantic yields

I feel those on the lookout for dirt-cheap dividend stocks also need to give Headlam Group (LSE: HEAD) a close look today.

Supported by an expected 6% earnings rise in 2018, the floor coverings giant is expected to raise the dividend to 27.1p per share from 24.8p last year, thus creating a mammoth 6.4% yield.

Moreover, the 4% profits advance forecast for next year leads to predictions of a 28.4p dividend, which in turn nudges the yield to 6.7%.

Despite its bright earnings outlook however, Headlam can be picked up on a forward P/E ratio of just 9.6 times. This is much too cheap given the waves it continues to make across Europe.

The small-cap saw like-for-like revenues in Europe rise 4.2% last year, speeding up from the 3.1% advance reported in 2016. And Headlam is still active on the M&A stage to continue grabbing custom on foreign shores, the business having made three acquisitions last year and more recently Netherlands-based Dersimo earlier in March. There’s plenty for growth and income seekers to get stuck into here.

The post One 8% yield and one 6% yield I’d buy and hold forever appeared first on The Twelfth Magpie.

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• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?

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 firm saw weaker demand in its markets from July through to October 2017 but trading performance picked up during November and December. For the whole year, revenue at constant currency rates improved by 1.2% compared to the previous year. The directors expect profit before tax for the full year to be “comfortably in line” with market expectations of an uplift of 6% over 2016.

More to come?

Stellar returns can be found by investing in the most mundane of businesses. Floorcoverings may not be as exciting as tech, pharmaceuticals or commodities, but the returns in your portfolio from investing in a firm such as Headlam can certainly be satisfying. However, I’d always approach an investment in Headlam with caution because of the inherent cyclicality in its business model.

Right now though, quality, momentum and value indicators all look good suggesting the long run up isn’t yet over. Today’s share price around 574p leads to a forward price-to-earnings (P/E) ratio just over 12 for 2019 and the forward dividend yield is around 4.9%. City analysts following the firm expect earnings to grow 11% this year and 3% during 2019. To me, Headlam looks tempting.

Meanwhile, Workspace Group (LSE: WKP) has been even kinder to its investors, delivering a 330% share price gain over six years and a 110% rise in the dividend. The firm operates as a Real Estate Investment Trust (REIT) providing flexible work spaces in London locations and owning or managing around 3.6m square feet of business space across 66 London properties.

In the right place at the right time?

Today’s third quarter business update trumpets the headline: “Well positioned for continued growth with strong demand for our flexible offer.” The firm talks of strong demand in October and November with a seasonal fall in enquiries during December, which was “more marked this year.” Should we worry that a weaker December may presage more enduring trading softness during 2018? Chief Executive Jamie Hopkins reassures saying enquiries “have picked up again in the first two weeks of 2018.”

The firm is in full swing with an extensive refurbishment and redevelopment programme and Mr Hopkins believes that the firm’s marketing expertise and ownership of the right real estate positions Workspace “to take advantage of the growing interest from all kinds of businesses in our inspiring, well-connected spaces.”

There’s still good value apparent with the price-to-tangible-asset value sitting close to 0.95. Today’s 977p share price also leads to a forward P/E ratio around 21 for the year to March 2020 and the forward dividend yield is around 3.5%. Again, I’d approach Workspace with caution because of the cyclicality in the sector, but both these firms display ongoing operational momentum, which looks set to translate into ongoing momentum for the share prices and the dividend yields, perhaps for some time to come.

The post 2 top dividend and momentum stocks for 2018 appeared first on The Twelfth Magpie.

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• 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?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?

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.

I believe that the best income stocks have three key traits: 1) a market-beating dividend yield that’s well covered by earnings per share; 2) a relatively clean balance sheet and; 3) a record of increasing shareholder payouts. 

Record of dividend growth

Dixons Carphone (LSE: DC) appears to meet all of these criteria. Right now, the shares support a dividend yield of 5.4%, and the payout is covered more than twice by earnings per share. As well as this attractive income stream, the stock also trades at a lowly forward earnings multiple of only 7.6. 

With regards to Dixons’ balance sheet, at the end of its last fiscal year, gross gearing (total debt to equity) was 16%, and net gearing (net debt to equity) was only 6.6%. For the fiscal year ending 29 April 2017, the firm generated free cash flow (cash from operations minus capital spending) before dividends of £120m, which easily covered the total dividend distribution of £115m. 

Lastly, the company has an impressive record of dividend growth. Since 2013 the payout has grown at a rate of around 17.6% per year, from 5p per share in 2013 to 11.3p for fiscal 2017. So overall, it looks to me as if Dixons meets all of my income stock requirements. 

Cash-rich balance sheet

Headlam (LSE: HEAD) is engaged in the marketing, supply and distribution of a range of floor covering products, which is hardly the most exciting business, but it pays well. Management has historically returned most of this income to investors, and it does not look as if this trend will change anytime soon. 

Right now the shares support a dividend yield of 5.1%. The payout is covered 1.7 times by earnings per share. Further, Headlam’s balance sheet is exceptionally robust with net cash of £53m at the end of 2016. According to the firm’s figures, the total dividend only costs £23m a year, so even if revenues dropped to zero tomorrow, there would still be scope to maintain the payout for the next two years. 

Over the past seven years, the group has hiked its dividend by just under 10% per annum from 14.2p in 2011 to 23.4p for 2017. Once again, Headlam ticks all of the boxes in my simple top dividend stocks screen. 

Banking income

Shares in Secure Trust Bank (LSE: STB) have fallen by around 20% year-to-date thanks to concerns about the sustainability of its growth as the UK leaves the EU. While the market is worried about the firm’s outlook, analysts do not appear to hold the same view with earnings growth of around 30% per annum pencilled in for 2017 and 2018. 

As well as this earnings growth, the shares support a dividend yield of 4.8%. The payout is covered around 1.5 times by earnings per share. On the balance sheet front, at the end of June, Secure Trust reported a common equity tier 1 ratio of 15.3%, a ratio that’s stronger than that of larger peers such as Lloyds and RBS. 

So Secure Trust offers an attractive, well-covered dividend yield and has a strong balance sheet but what about dividend growth? Well, since 2012 the bank’s dividend has grown from 57p per share to 79p (estimated for full-year 2017). And considering analysts’ expectations for growth in the years ahead, I believe that this expansion is set to continue. 

The post Why I believe these 3 dividend stocks can fund your nest egg appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

I am less optimistic over the investment profile of Telit Communications (LSE: TCM), however, even if latest trading details released on Friday stopped the recent stream of disastrous market updates.

The AIM-quoted firm announced that revenues clocked in at $255m between January and September, and that it remains on course to hit the downgraded targets laid out in November. Telit cut its earnings targets then due to greater-than-expected “pressure on gross profit margins stemming from the transition from 2G and CDMA products.” These technologies have larger margins than the newer LTE products.

Today the business also affirmed hopes that sales should detonate sooner rather than later, the internet of things enabler saying that US certifications last year should underpin “double-digit revenue growth” in 2018. And in other news, the tech colossus said that cost-cutting initiatives should reduce cash operating expenses by $10m next year, down 7% from this year’s anticipated levels.

Dividends set to dive

Now Telit has record blistering profits growth over the past five years but, in acknowledgement of the company’s current margin problems, the City is expecting earnings to skid 52% lower in 2017.

The prospect of diving profits is expected to weigh on dividends also. Last year’s payment of 7.4 US cents per share is expected to skid to 3.1 cents in 2017, resulting in a yield of just 1.4%.

On the plus side, the Square Mile is anticipating that earnings will bounce 67% in 2018, and that this will drive the dividend to 7.4 cents and therefore the yield to a much-improved 3.4%.

But in my opinion there is still too much adverse noise facing Telit right now to justify investment. Of more immediate concern is the state of the firm’s balance sheet, particularly after it warned today that it is in advanced discussions with a lender so as not to breach its debt covenants in the coming weeks.

With the Financial Conduct Authority also having launched “preliminary enquiries” into the firm last month following the much-publicised boardroom intrigue, and the business also carrying a slightly-expensive forward P/E ratio of 17.4 times, I see little reason to buy today.

Monster yields

At the opposite end of the scale, City analysts are quite chipper over Headlam’s earnings outlook in the near term and beyond.

During 2017 the Birmingham business is predicted to churn out a 6% earnings improvement, keeping its recent record of robust growth going. And in 2018, forecasts suggest that a return to double-digit growth is just around the corner, an 11% improvement currently suggested.

These predictions make Headlam a snip, its forward P/E ratio of 12.9 times falling well below the widely-accepted value watermark of 15 times.

And as I said earlier, the flooring giant also offers lots for dividend chasers to get their teeth into. Headlam has lifted the ordinary full-year dividend at a compound annual growth rate of 8.7% over the past five years whilst it has also furnished investors with special dividends in that time.

Last year’s 22.55p per share ordinary dividend is predicted to rise to 24.7p in the outgoing period, and again to 26.8p in 2018. As a consequence Headlam boasts gigantic yields of 4.7% for this year and 5.1% for next year.

The post 1 growth and dividend share you might regret not buying 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.

As a REIT, the company must pay out 90% of its rental income as dividends, for which the company is given highly beneficial tax status. At present this dividend yields 4.09% annually.

Now, there are plenty of other property firms out there that also pay substantial dividends but a few things about Hansteen in particular have excited my interest. The first is that the firm’s co-founders are still joint CEOs and have proven adept at riding out the cyclical nature of the property sector with aplomb since founding the firm in 2005 and its predecessor in 1989.

This long experience in the industry lends the pair the trust of investors when they make ambitious calls, such as the recent sale of the entirety of the firm’s Dutch and German assets for €1.28bn to concentrate on its UK portfolio. Management decided that with occupancy and rent rates high, this was a good time to realise its investment and return a great deal of the proceeds to shareholders.

This return will take place through a £580m tender offer, whereby shareholders can sell up to one in two of their shares back to the company at 140p each. The rest of the proceeds will be used to pay down debt and provide the capital for further asset purchases in the UK.

As management sees UK property prices as elevated, these purchases will probably be small bolt-on acquisitions to its already sizeable portfolio of industrial properties. The value of these properties has risen nicely in recent years due to increased demand for e-commerce-related storage and shipping facilities, so valuation uplift potential looks solid, even with Brexit looming over other parts of the property sector.

With an already impressive dividend yield set to increase as the company buys back shares, I reckon Hansteen could be an interesting choice for yield-starved investors.

Building growth from the ground up 

Another Woodford holding on my radar is flooring distributor Headlam Group (LSE: HEAD). The company’s stock currently offers investors a 3.94% yielding dividend that has been growing steadily in recent years.

Growing dividends have been fuelled by rising earnings due to both organic growth and bolt-on acquisitions. In the half year to June, like-for-like sales (LFL) rose 2.1% in the UK and 3% in Europe, while overall group growth was 4% thanks to two bolt-on acquisitions and the weak pound.

Looking forward, there is still plenty of expansion potential as it moves into new territories in the UK and Europe, which currently accounts for only 14.1% of the group’s £340m of H1 sales. Also attractive is the company’s rising cash flow as the benefits of scale increase margins. In H1, operations generated £17.1m in cash that helped boost its net cash position to £49.8m.  

With lots of cash on hand, rising margins and impressive growth potential I reckon Headlam may prove an attractive income and growth option in the coming years.

The post 2 Neil Woodford dividend stocks I’d buy today appeared first on The Twelfth Magpie.

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• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has recommended Hansteen Holdings. 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.