Headlam

I think floor coverings distributor Headlam (LSE: HEAD) might fit the bill of being a cheap UK share. Sure, this is hardly exciting stuff. However, it’s a market leader at what it does and one that seems to be coming through the other end of the Covid-19 storm in good shape.

Today, the company announced it had seen a “strong recovery” in trading. Total revenue of just under £330m over the first six months of 2021 is close to what the company achieved in the same period in 2019. Clearly, it’s also far ahead of last year (£227.2m).

As one might expect, this rebound was good news for underlying pre-tax profit at Headlam. This came in at £16.7m — a huge contrast to the £1.8m loss reported for the first half of 2020.

I reckon this momentum will continue. While activity in the commercial sector remains “subdued“, HEAD has still been trading in line with recently-upgraded expectations in the last few months. It’s also been able to maintain inventory levels despite issues with its supply chain. The resumption of normal dividend payments faster than thought also gives me confidence. 

Sure, Headlam isn’t risk-free. A rebound in Covid-19 infection levels would be less than ideal as the company goes into its traditionally busiest part of the year trading-wise. The share price performance hasn’t been magnificent either. While up 63% over the last year, the stock is still only 10% above where it was five years ago. So, I wouldn’t expect massive gains (like those seen at this FTSE 250 firm) any time soon.

Still, a valuation of 16 times earnings, reducing to 13 next year based on analyst projections make this a potentially good deal for me. 

Ab Dynamics

Another small-cap stock that could prove a good long-term buy for me is automotive testing firm AB Dynamics (LSE: ABDP). That’s despite the company’s share price falling 22% in 2021 so far, including a 6% fall today. 

At least some of this is due to trading still being stodgy in the wake of the pandemic. Recent news that founder Anthony Best has taken retirement hasn’t gone down well either. He does, after all, own over a quarter of the company’s stock and may be inclined to begin selling.

As a holder already, I can’t say I’ve been over the moon about all this. Moreover, this is unlikely to be regarded as a cheap UK share for anyone with a short investing horizon.

However, the fact that this company works with 25 major car manufacturers around the world speaks volumes. I struggle to think why the demand for its services won’t rapidly increase in the years ahead with the advent of autonomous driving. In addition to this, AB is also financially sound. So, not a cheap UK share in the traditional sense, but increasingly good value based on potential growth.

If anything, I think now could be a time for me to top up my holding. 

The post 2 cheap UK shares I’d buy now appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Paul Summers owns shares in AB Dynamics. The Motley Fool UK has recommended AB Dynamics. 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.

Given this performance, you might ask why I don’t simply cut my losses and move on. Perhaps I should. Then again, today’s trading update — covering the period from the start of 2019 to 18 May — was fairly reassuring with management stating it was “confident” full-year figures will be in line with previous expectations.

Like-for-like revenue grew by 6% over this time, helped by increased marketing spend and the launch of 888’s Orbit Casino platform.

The number of new customers also increased 20% year on year, something that newish CEO Itai Pazner believes is “a key indicator” of the company’s growth prospects. Most of the 18% rise in UK like-for-like revenue was attributed to “recreational customers“.  

Broken down, the firm saw 29% and 13% rises in Sport and Casino divisions, respectively. Revenue from Bingo was flat.

The Poker division continues to suffer, posting a 28% decline. Nevertheless, this drop was less than that seen in Q4 of the last financial year which could suggest the worst is now over. It might also explain why 888’s share price, while initially volatile, is now up over 4% as I type.

While it’s important to be wary of confirmation bias, all the reasons I invested in the company in the first place remain. High returns on capital, a huge net cash position, and great dividends (888 is forecast 7.3% yield in 2019).

The possibility of a takeover bid in an industry that’s seen its fair share of consolidation over the last couple of years is also getting more and more likely, in my opinion. 

Trading on 11 times forecast earnings before markets opened this morning, 888 might not be as cheap as some big dividend-yielders out there, but I submit its payouts look more secure. I’ll continue to hold. 

Bouncing back

Another stock I believe could be a great candidate for a ‘buy and hold’ income-focused portfolio is floorcovering distributor Headlam (LSE: HEAD). 

Since tipping the company back in February, the stock has done very nicely indeed. It’s risen 20% in value and provided another example of how buying stock in quality companies when they’re unloved can, though certainly not always, pay off. 

In spite of this (and particularly after last month’s trading update), I still think the small-cap’s current valuation of a little less than 13 times earnings remains reasonable. 

Total like-for-like revenue increased 3.5% over the first four months of 2019 compared to the previous year. As 3.1% rise in the UK was attributed to a particularly strong performance in the commercial sector. Ongoing strength in the residential sector also led to a 5.8% increase in Europe. 

Headlam described these numbers as “pleasing” and made no change to its expectations for the full year, even though the second half is “traditionally stronger.” It’s next scheduled to update the market on 24 July. 

With a market leading position and a new regional distribution centre due to be operational next year, I’m optimistic on this reassuringly dull company’s long-term prospects. A forecast 5.2% yield, covered by earnings, is also very attractive.

The post These 2 small-cap dividend stocks still look like great buys to me appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Paul Summers owns shares in 888 Holdings. 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.

Nevertheless, having the courage to buy what others are selling has at least the potential to be very profitable over the long term. In addition to benefiting from a reversal in a company’s share price, contrarians may also receive dividends that can be reinvested into buying more shares along the way, further improving their gains.

With this in mind, here are three possible recovery plays that, in addition to being relatively cheap to buy, also offer decent payouts.

Get paid to wait

Floorcovering product supplier Headlam (LSE: HEAD) is first up.

Thanks to concerns over declining pre-tax profit from to a weakening residential market and higher costs (not to mention the debacle at peer Carpetright), the company continues to be out of favour with the market. 

The shares are down a third in value from where they were back in 2017 and now trade on a price-to-earnings (P/E) ratio of just under 11. That’s beginning to look reasonable, particularly given the sizeable dividend on offer. 

Assuming it returns the predicted 24.9p per share in 2019, Headlam yields 6% at its current share price, covered 1.5 times by profits. As a comparison, the best cash ISA offers just 1.45%.

While margins aren’t exactly huge in this line of work, the company generates pretty decent returns on the money it invests. At the time of its last interim results, there was also £16m in net cash on the balance sheet. Full-year numbers are out on 6 March.

Next up is investment manager Polar Capital Holdings (LSE: POLR). After a pretty awful second half of 2018 during which investors pulled their money from its funds, the shares now appear to be stabilising. And given that they still trade on just above 10 times earnings, I think there’s decent money to be made in time.

Like Headlam, Polar Capital has a good balance sheet with the equivalent of over 20% of its market cap in cash. Right now, analysts are penciling in a total dividend of 32p per share for the 2018/19 financial year (ending 31 March). That leaves the shares yielding almost 6.5% at the current share price.

Of course, Polar could experience more volatility in the months ahead, particularly if Brexit negotiations fail and no deal is agreed. As such, a bit of pound-cost averaging may be prudent here.

Freight management services provider Xpediator (LSE: XPD) is the final stock on my list. Again, the company’s value has been hit hard in recent times, down 45% from the high of 85p hit last July. Based on last Monday’s trading update, this could be a great opportunity to build a position. 

Total revenues rocketed 54% to £179m over 2018 with over 14,000 customers now on the small-cap’s books. Two recent acquisitions appear to be bedding in well with more likely to follow.

For those concerned by the impact of Brexit, Xpediator stated that it had been “working closely with leading transport associations and port authorities to plan ahead” and boasts that its status as an Authorised Economic Operator will allow it to support companies looking for solutions to get their products to where they need to be. 

Available for just over nine times forecast 2019 earnings, it is set to yield almost 4% at the current share price. These payouts look secure and, importantly, are growing rapidly. 

The post 3 cheap contrarian stocks that pay great dividends appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Paul Summers 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.

Based on recent numbers, there could be more upside ahead.

July’s results for the 12 months to the end of March revealed a “fifth consecutive year of strong growth” with revenue jumping 29% to £424.8m. Underlying pre-tax profit also rose 39% to a little under £41m. All this came despite the sharp increase in expenditure (from £2.5m to £11.2m) as a result of European acquisitions Ceramiche Serra and Kerben Grupo. Another acquisition — Saloni — was announced earlier this month.

With executive chairman Geoff Wilding stating that the company had already experienced “a very good start to the year,” it’s likely that relatively new holders of Victoria’s stock could still make decent money. According to Wilding, there remains “an enormous market opportunity” for the company in the both the UK and abroad. 

Whether all this is sufficient to bump the stock to the top of wishlists, however, is debatable.  

On almost 18 times earnings for the current year, Victoria isn’t ridiculously overpriced but it’s certainly not cheap for the sector in which it operates. Befitting its growth credentials, there’s no dividend to speak of and, at £258.7m back in March, there’s a whole lot more debt on the balance sheet now than there used to be (although the company was keen to state that this is less than 2.7 times annualised EBITDA).

If either the valuation or the lack of income bothers you, there’s another option.

Heading the other way…

While unlikely to give you the sort of returns previously generated by Victoria, I think mid-cap peer Headlam (LSE: HEAD) could still be a decent long-term investment. That’s if you’re prepared to look beyond the recent slump in its share price and a cautious near-term trading outlook.

True, today’s interim results for the six months to 30 June certainly weren’t warmly received by the market. It’s not hard to see why.

Total revenue rose by just 1% to £337.5m. In the UK, like-for-like revenue growth declined 5.2% — a concerning result considering that the firm still derives the vast proportion of its business from these shores.

Although underlying pre-tax profit of £17.7m was supported by new acquisitions, Headlam believes that “softness in the UK market” will continue for the rest of 2018. As a result, CEO Steve Wilson speculated that full-year numbers will now be “towards the lower end of current market expectations” (albeit an improvement on 2017). Price increases — scheduled for the beginning of September as a result of a rise in the cost of raw materials — are unlikely to help matters. 

Trading on 10 times forecast earnings, it seems logical that Headlam will appeal to value-focused investors. With a total payout of 26p per share expected by analysts before today — equating to a cracking 5.8% yield — you could argue that any prospective purchasers will also be adequately compensated should the shares fall further. A net cash balance of £16m at the end of June is another positive.

The question, however, is whether you trust yourself not to panic before things recover.

The post This ‘boring’ growth stock has turned £1,000 into almost £50,000 in just 5 years appeared first on The Twelfth Magpie.

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• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Paul Summers 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.

But this approach can be risky — yields of more than about 6% often indicate that problems may lie ahead. Today I’m looking at two dividend stocks with attractive yields that are well supported by earnings. Does either of these companies deserve my buy rating?

Recent falls could make this a buy

Shares in floorcovering distributor Headlam Group (LSE: HEAD) fell by 7% in early trade this morning. A solid set of 2017 results were overshadowed by news that January trading fell below expectations.

This group buys products such as carpets, tiles and laminates from suppliers in 16 countries, and sells through a network of 63 fully-owned distribution businesses in the UK and Europe.

Like-for-like sales fell by 5.9% in January, thanks to a weaker performance in the residential sector and “a reduction in orders from one of our larger customers”. This trend continued in February when is sales performance was said to be “similar” to January.

Despite this, the company has left its 2018 guidance unchanged. It’s still early in the year and management believes that its strategy of improving profitability and making selective acquisitions means forecasts for this year are still valid.

My view

Headlam’s sales rose by 2% to £707.8m last year, while underlying pre-tax profit rose 7.3% to £43.1m. The board took advantage of improved cash generation to increase the dividend by 10% to 24.8p, giving a trailing yield of more than 5%.

The firm’s focus on increasing its profit margins seems to be paying off, but it’s worth noting that like-for-like sales in the UK only rose by 0.5% last year.

Although the group also operates in Europe, the UK accounted for 97% of operating profit last year, so falling sales here are a concern.

Analysts expect the group’s adjusted earnings to rise by around 15% to 45.1p per share this year. This puts the stock on a forecast P/E of 11 with a prospective dividend yield of 5.5%. I suspect these forecasts will be cut following today’s results so I’d probably rate the shares as a hold until the outlook becomes clearer.

A cash machine with a 6.8% yield

Sofa and carpets retailer SCS Group (LSE: SCS) is a well-known sight on retail parks across the UK. It’s a cyclical business that’s dependent on consumer spending and affordable credit for growth.

When times are good — as they have been — SCS performs very well. The group’s net profit has risen from £2.6m in 2013 to £9.4m in 2017. Trading so far this year has been solid.

In January, the firm reported like-for-like order growth of 2.2% for the six months to 27 January. However, analysts expect profit growth to be broadly flat this year, suggesting that profit margins may be coming under pressure.

The stock’s valuation is undemanding, on just 9.5 times forecast earnings. Profits have been backed up by strong cash generation in recent years, and a dividend of 14.9p per share is forecast for this year, giving a prospective yield of 6.7%.

If you believe the UK economy is likely to remain healthy, SCS could be a rewarding buy.

The post Two ways to invest in dividends with only £2,000 appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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.

Go one step further

But savvy income-focused investors go one step further. They seek out companies whose shareholder payouts rise year-on-year, and reinvest those proceeds to unleash the full power of compounding – what’s known as the snowball effect.

It’s true that the vast majority of dividend hunters are primarily focused on the perceived safety of the large multi-nationals listed on London’s top tier FTSE 100 index, but I reckon these investors could be missing out on possible bargains among the companies lower down the pecking order of market capitalisation.

While some of the more popular large-cap income stocks can sometimes command a premium valuation, their smaller counterparts are often found to be trading at far more attractive prices. I believe Headlam Group (LSE: HEAD) falls into this category quite nicely. Despite being Europe’s largest distributor of floor coverings, with a market capitalisation of £490m, the Birmingham-based group isn’t large enough to be included in the FTSE 100 or mid-cap FTSE 250 indices, but I believe it could be just a matter of time.

Shrewd acquisition

At the end of 2017 the group announced the acquisition of Domus, the UK’s leading specification consultant and supplier of hard surfaces for premium construction and refurbishment projects, in a deal potentially worth more than £35m. I believe the acquisition will help diversify and broaden Headlam’s overall position in the floor coverings market as it gives it an entry into ceramics and an increased weighting in engineered wood, LVT and laminate, incorporating product lines that continue to achieve ongoing growth in the market.

The acquisition should also significantly increase the group’s presence in the commercial specification market and bring in considerable expertise, providing a platform to pursue further domestic and international growth opportunities. With this in mind I think Headlam’s shares are a steal at just 13 times forward earnings, with a rising dividend that currently yields no less than 4.7%.

Irresistible

Another high-yielding small-cap that looks attractively priced at the moment is Wincanton (LSE: WIN). The Wiltshire-based logistics firm is the UK and Ireland’s leading provider of supply chain solutions, operating from over 200 locations right across the British Isles.

The group’s share price breached 300p last summer, reflecting stellar growth over the last few years, but a sharp pull-back in recent months seems to have presented a buying opportunity for income-focused investors with one eye on capital growth.

Since being reinstated back in 2016, Wincanton’s dividend payouts have risen sharply, with analysts forecasting further increases this year and next, leaving the shares offering a solid yield of 4.6%. Furthermore, a bargain basement valuation of just seven times earnings for the current year to the end of March makes the shares even more irresistible.

The post 2 overlooked dividend stocks I’d buy in February appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Bilaal Mohamed 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.

With that in mind, here are two dividend stocks which trade on attractive valuations. They could be worth buying and holding for the long term.

Mixed performance

Reporting on Thursday was Europe’s largest distributor of floorcoverings Headlam (LSE: HEAD). The first 10 months of its financial year were tough, with its markets being especially challenging since its half-year update. However, the company has still been able to post total revenue growth of 2.7% in the current financial year. In the UK and Continental Europe its like-for-like (LFL) revenue growth was 0.7% and 4.5% respectively.

While revenue for the full year is expected to be marginally lower than previous guidance, the company has worked hard on boosting its margins through increased efficiencies. This means that profitability for the full year is set to be in line with expectations. As such, the company’s shares moved slightly higher following the update.

With a dividend yield of 5.4%, Headlam appears to have income appeal for the long term. Its shareholder payouts are covered 1.4 times by profit and this means that they could rise in line with profitability over the medium term without hurting the company’s financial standing. Since earnings are due to grow by 4%-5% per annum in 2017 and in 2018, the stock could deliver inflation-beating dividend growth over the medium term.

Improving outlook

Investing in a mining company may not seem like such a great move for a dividend investor. After all, commodity prices can be volatile and this can affect the payment of dividends in the medium term. However, Rio Tinto (LSE: RIO) could be an exception to that argument. The company is making excellent progress with its strategy and looks set to deliver improved financial performance in the current year.

In fact, the company is due to pay out 206p per share in dividends in the current year. This puts it on a dividend yield of 6% at the present time. This is twice the rate of inflation and with dividends being covered 1.7 times by profit, they do not appear to be overly generous. In fact, they could be sustainable at their current level if the company is able to generate further improvements to profitability in future.

Certainly, commodity prices can change quickly. However, with a price-to-earnings (P/E) ratio of just 9.6, investors seem to have priced-in a wide margin of safety. This suggests that Rio Tinto could offer good value for money as well as a high, sustainable dividend yield and further earnings growth potential in the long run.

The post 2 bargain dividend stocks I’d buy and hold for 25 years appeared first on The Twelfth Magpie.

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Peter Stephens owns shares in Headlam and Rio Tinto. 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.

On its own, a company’s share price doesn’t really mean much, and as we already know, cheap doesn’t necessarily mean good value. However, today I’ve unearthed two small-cap stocks that not only trade at a low price, but I believe also represent great value given their long-term prospects.

Market-leading recruiter

Robert Walters (LSE: RWA) is one of the world’s leading professional recruitment consultancies, specialising in the placement of permanent, contract, and temporary positions, across all levels of seniority. Established in 1985, the £430m group recruits across the accounting, finance, banking, IT, human resources, legal, sales and marketing, supply chain, procurement, engineering and support fields.

Last week the London-based firm raised its full-year profit forecast for a second time after delivering another quarter of record results. In a trading update for the third quarter ended 30 September, the group delivered a 22% increase in net fee income to £90.7m, with all geographical regions contributing to the strong growth.

Ahead of expectations

Here in the UK, net fee income rose to £26.9m, a 15% improvement year-on-year, with St Albans and Manchester the standout performers. In London, activity levels were highest across technology and legal recruitment. As a result, management is now confident that pre-tax profits for the full year will be ahead of market expectations.

At almost £6, Robert Walters’ shares are trading close to all-time highs, and 46% up on my original buy recommendation in June. But at 18 times forward earnings, I still believe the shares offer further growth over the medium and longer term.

Europe’s largest distributor

Meanwhile, another low-priced small-cap stock that’s recently hit all-time highs is Headlam Group (LSE: HEAD). As Europe’s largest distributor of floorcoverings, the business is engaged with suppliers across 16 countries whose products cover a significant proportion of the floorcoverings market (including carpet, residential vinyl, wood, laminate, luxury vinyl tile, underlay and commercial flooring).

The Birmingham-based group still generates the vast majority of its revenues here in the UK. And earlier in the year it implemented price increases to mirror rising costs levied by suppliers as a consequence of the weakness of sterling and the upward movement in raw material prices. But I’m not overly concerned, as the demand for floor coverings tends to be inelastic to price increases, and the business should continue to deliver steady growth regardless.

Despite reaching all-time highs earlier in the year, I still rate the shares a ‘buy’ as they are trading on a not-too-demanding earnings multiple of 15 for the current year to December, and offering an attractive yield in excess of 4%.

The post 2 great stocks under £10 appeared first on The Twelfth Magpie.

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• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Bilaal Mohamed 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.

The floor coverings giant has grown earnings by double-digit percentages during the past three years. And the City expects earnings to keep on chugging higher in the near term and beyond, more on which I will be going into detail a bit later.

Of course there are also lots of other shares out there that, in theory, promise terrific earnings expansion in the years ahead, but that face plenty of obstacles to reach that point. And SRT Marine Systems (LSE: SRT) is one such stock.

In choppy waters

SRT — which develops, manufactures and supplies maritime vessel tracking technology — was last down 9% in Tuesday trading following the release of less-than-assured trading details.

The Bath-based company advised that revenues crept 10% higher during the six months to September, but pre-tax losses widened to £1.7m from £1.2m a year earlier.

Its OEM & Module division grew at 12% during the first half, while its em-trak business expanded by 60% year-on-year. Yet although performances in these businesses exceeded expectations, the firm noted that the absence of any material project milestones meant that no project revenues were recognised.

Although the City expects SRT to snap back from a 19% earnings decline in the year ending March 2018 with a 120% rise next year, a forward P/E rating of 41.1 times (sailing way above the broadly-considered value watermark of 15 times) would discourage me from piling in right now.

SRT was whacked at the end of the summer by news that a contract to supply an MDM national maritime domain surveillance system in South East Asia had been pushed back “due to internal project review and budget issues in their current fiscal year” with the end customer.

This resulted in an impairment charge of £1.5m for the current year and, while it is hoped that the deal will be resurrected when the client’s new fiscal year starts next March, this can hardly be considered a given.

I for one will be sitting on the sidelines for the time being, particularly as SRT’s elevated multiple could lead to further selling should the contract delay fail to resolve itself any time soon.

Step on it

However, and as I have already mentioned, I reckon Headlam is a terrific stock for those seeking robust earnings expansion.

The company continues to enjoy solid demand for its floor coverings from across Europe, and like-for-like sales in the UK and Continental Europe rose 2.1% and 3% during January to June. And the Birmingham firm is working hard to keep sales on an upward slant by bolstering its distribution network and expanding the group through shrewd bolt-on acquisitions — it made two more during the first half of 2017.

City analysts expect Headlam to deliver earnings growth of 5% and 3% in 2017 and 2018 respectively, leaving the business dealing on a prospective P/E ratio of just 14.7 times. When you also throw in giant dividend yields of 4.4% for this year and 5.3% for 2018, I reckon the business is worthy of serious attention right now.

The post One small-cap growth stock that could make you stupidly rich appeared first on The Twelfth Magpie.

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• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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.

This does not surprise me however, given the mighty share price rises of recent months. Headlam has gained almost a third in value since the turn of the year, and it is not difficult to see why as demand for its goods explodes across Europe.

The floor coverings specialist advised today that revenue for the first four months of 2017 came in at £221.2m, up 2.2% from the corresponding period of 2016.

Headlam saw sales continue to grow both at home and abroad. In the UK like-for-like revenues rose 1.9%, an impressive performance given the strong comparatives of January-April last year (sales moved 4% higher back then).

The Birmingham firm’s domestic division — responsible for almost nine-tenths of total sales — saw sales continue to pound higher from both the residential and commercial sectors. Sales to these sub-segments rose 2% and 1.6% respectively.

Meanwhile on the continent, Headlam saw underlying sales rise 14% in the four month period, with strong residential growth offsetting a fall in commercial sales.

Walking on sunshine

I am convinced a robust construction sector on both sides of the Channel should keep Headlam’s top line ticking higher. And the company’s ability to keep revenues rising despite price hikes to mitigate the falling pound underpins my optimistic take.

The City certainly believes Headlam has the tools to keep earnings moving higher, and a predicted 14% rise would keep its long record of double-digit rises in business.

And this bubbly bottom-line picture is expected to keep dividends growing at a terrific rate too. The number crunchers predict a reward of 29.2p per share in 2017, up from 22.55p last year and yielding a market-beating 4.6%.

Looking further out, an anticipated 32.6p per share dividend for next year yields an astonishing 5.1%.

Box up a beauty

Expectations of further earnings growth at Tritax Big Box (LSE: BBOX) are expected to lead to increasingly-chunky dividends here too.

The real estate investment trust (or REIT), like its industry peers, is required to return 90% of all earnings to shareholders in the form of dividends. And with the bottom line expected to swell an extra 9% in 2017, a dividend of 6.4p per share is predicted, up from 6.16p last year. This figure yields a blockbuster 4.4%.

The good news does not stop here, either, with estimates of a 6.6p payout in 2018 (supported by an anticipated 4% earnings advance) nudging the yield to 4.5%. And I expect dividends to continue flowing higher in line with earnings.

Tritax Big Box’s focus on warehouses and distribution centres puts it in the box seat to ride the e-commerce juggernaut, while its hunger for acquisitions should also keep delivering delicious shareholder rewards (just this month Tritax shelled out £20.9m for a distribution base in Doncaster run by consumer goods giant Unilever).

The post These 2 dividend stars could make you rich! appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. 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.