Whether or not you share my bearish opinion, I would encourage you to consider looking closely at these two dividend heroes before the FTSE 100 bank. They even carry bigger forward yields than the 5.6% Lloyds currently offers.

Safe as houses

Despite the stream of cracking trading releases still coming from across the housebuilding spectrum, the Telford Homes (LSE: TEF) share price has failed to gain the traction of its peers.

It’s not a surprise to see the AIM-quoted firm continue to struggle, even though low forward P/E ratio of 8.6 times gives it plenty for bargain hunters to get stuck into. Meanwhile its gigantic 6.1% dividend yield makes it one of the biggest-paying builders out there.

Telford has been the victim of slowing demand more recently, reflecting its strong bias towards the struggling London market. Problems here caused it to shave £10m off its full-year profits forecasts for the period to March 2019 in late February. And it’s possible things could remain difficult through the remainder of the current fiscal year, at least.

Having said that, I would argue long-term investors should consider capitalising on the 40%-plus slide in Telford’s share price over the past 12 months.

In response to its recent troubles, the business has vowed to redouble its efforts in the fast-growing build-to-rent market, a segment which is expected to represent 50% of the company’s development pipeline by the close of the calendar year.

In particular, Telford’s focus on the capital bodes particularly well as rental levels boom. Business campaigning group London First predicts by 2025, some 40% of all households in London will live in the private rented sector, versus 28% as of a few years ago.

Fancy some yields above 7%?

There’s plenty of upside for Telford’s profits to grow once confidence in the London property market improves. But if you’re not convinced, why not take a look at International Personal Finance (LSE: IPF) instead?

Unlike the housebuilding giant, IPF sources no profits from these shores and is, instead, geared primarily towards Central and Eastern European nations such as Poland, Hungary and Czechia. The prospect of runaway economic growth in these emerging nations isn’t the only reason to expect the financial giant’s bottom line to thrive, either, because of the success of its push into the fast-growing digital credit market (credit issued at its IPF Division unit soared 33% in the first quarter).

Currently, IPF sports bigger yields than Telford (and Lloyds for that matter), the business yielding an enormous 7.6% for the current fiscal period. It also trades on a dirt-cheap forward P/E ratio of 5.8 times. For those seeking big dividends on a budget, it’s a pretty terrific stock to buy, in my opinion.

The post 2 dividend stocks that pay MUCH more than FTSE 100 bank Lloyds 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 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.

In poker parlance, it’s not always easy to know when to hold and when to fold.

One FTSE 100 stock I would definitely hold on to is Asia-focused insurance firm Prudential (LSE: PRU). Although the shares are down by more than 20% from their January high of 1,992p, I see no reason to sell.

I’ll explain why I’m keen on Prudential in a moment, but first I want to consider a smaller financial stock where the picture seems less certain.

Regulators are tightening the leash

International Personal Finance (LSE: IPF) is a sub-prime lender operating in markets outside the UK, including Poland, Romania and Mexico. Historically, it’s been a profitable business paying generous dividends. But profits have slipped in recent years, and the dividend hasn’t risen since 2015.

In a trading update today, the company said that new lending rose by 6% during the third quarter, led by a 39% increase in online lending.

That sounds promising. But the firm also warned of regulatory changes that could put pressure on profits. In Romania — which accounts for about 12% of group profits — new rules limiting debt-to-income ratios are expected to reduce sales.

The firm’s management also admitted that a proposed interest rate cap at 18% APR would have “a material adverse effect on our Romanian business.”

Meanwhile, tax changes being proposed in Poland would affect cross-border transactions. The firm says this could increase the entire group’s tax rate from 34% to 42% in 2019. I estimate that would represent an 8% cut to earnings per share.

A 5.7% yield to buy?

IPF shares are down by 5% at the time of writing. The outlook does seem uncertain, but I suspect the business will adapt to these changes and continue to prosper. Indeed, with a forecast P/E of 7 and a prospective yield of 5.7%, this could prove a profitable time to buy.

However, with markets uncertain, I’m more interested in businesses with a consistent track record of growth.

A buy-and-forget stock

IPF isn’t a stock I’d be happy to buy and forget for 10 years. But that’s exactly the approach I’d take if I added Prudential to my portfolio, which I’m tempted to do.

This insurance group is benefiting from the growing wealth of Asia’s middle classes. Although its share price has fallen this year, its profits have been rising. Recent half-year results showed that the Pru’s operating profit rose by 9% to £2,405m during the first half of 2018.

This growth was led by its Asia unit. The value of new business generated by this division rose by 11% to £1,122m, while underlying surplus cash generation climbed 14% to £590m.

Too cheap to ignore?

Prudential generated a return on equity of 18% last year. This measure of profitability puts it ahead of most UK peers.

The group is also in the process of de-merging its slow-growing, UK-focused asset management business, M&G. My colleague Rupert Hargreaves recently explained why he believes this could lead to a bid for the firm’s Asian business.

With the shares now trading on a 2018 forecast price/earnings ratio of 10.3, and offering a 3.2% yield, I believe Prudential may now be too cheap to ignore.

The post This FTSE 100 dividend stock is down 20% since January. Is it time to load up? appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Prudential. 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 blue-chip index has long proved a happy hunting ground for investors seeking market-busting yields and stocks with impressive records of lifting shareholder reward. Indeed, I spend much of my time discussing some of the best income bets that the Footsie has to offer.

It’s easy to be tempted to narrow your focus on the FTSE 100 given the vast amounts of media and broker coverage that such businesses attract, giving share pickers the best chance of making the right investment decision. But restricting your search to London’s main markets means that a lot of top-class companies slip through the net.

Money master

International Personal Finance (LSE: IPF) is a little-known small cap that could fall into this category.

Sure, the business may have paid a full year dividend of 12.4p per share for three consecutive years, with City analysts predicting an identical payout for 2018 as well. But this dividend still yields a very handsome 5.5%.

What’s more, this forecast payout also looks pretty secure, being covered 2.5 times by predicted earnings (inside the widely-accepted security area of two times and above).

Added to this, a suspected return to profits expansion in 2019 leads to City expectations that it will finally have the strength to lift the dividend again, a 12.6p reward currently anticipated. This yields 5.5% and is covered 2.6 times by anticipated profits.

It’s easy to see earnings, and thus dividend expansion, accelerating beyond next year too, as it embarks on its ambitious growth strategy (issued credit growth in IPF Digital’s new markets climbed 33% from January to June, for example).

Another secret dividend star

I’m convinced that Empiric Student Property (LSE: ESP) should also continue delivering yields above the broader market.

As I noted last time out, the UK’s universities have a reputation for being the best in the world and as a consequence, students from all around the world flock here in massive numbers. And Empiric is expanding its operations to benefit from this rush.

The company operates in almost 30 of the best university locations up and down the country, and in the first fiscal half it boosted the number of assets on its books to 95 following the acquisition of a location in Southampton. As of June, it operated 9,398 beds versus 9,158 in the corresponding 2017 period.

Back in November, Empiric announced its intention to pay reduced dividends as part of a bid to build dividend cover, and advising that it would follow last year’s 5.55p per share reward with a 5p reward in the current period.

It’s worth noting, though, that such a figure still yields a mighty 5.1%. And City projections for an identical payment in 2019 means that the yield remains elevated.

Empiric’s forward P/E ratio of 28.6 times means it is far costlier than International Personal Finance, the latter sporting a corresponding readout of 7.4 times. I am convinced that both are great selections for those looking to generate a fortune by retirement, however.

The post Forget about FTSE 100 dividend stocks! These little-known 5% yields could finance your retirement 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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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.

Some smaller and more specialist financial stocks have been stronger performers, so today I’m looking at two potential dividend buys from this sector.

A mixed picture

Shares of investment manager Charles Stanley Group (LSE: CAY) fell by nearly 5% in early trade on Monday, after the 226-year old City firm reported a 4.4% fall the value of clients’ funds.

The company said that Funds under Management and Administration (FuMA) fell from £24.9bn to £23.8bn during the three months to 31 March. This compares to a fall of 5.1% for the company’s chosen benchmark, the FTSE UK Private Investor Balanced Index.

It looks like the firm’s funds probably beat the market by a small margin, although the overall result was also boosted by £200m of net inflows during the period.

It’s good that the amount of money invested by clients is continuing to rise. But I think the real story here is the changing mix of business carried out by the firm.

Higher margin services

Stockbrokers such as Charles Stanley offer three types of service for private investors:

• Execution only – buys and sells stocks on your instructions only.
• Advisory – provide advice on which stocks and funds to buy and sell
• Discretionary – invest your money for you, e.g. managed funds

According to Charles Stanley, discretionary services carry “higher margins”. The firm is expanding its focus on this area. It says that clients are increasingly switching out of advisory services and into execution only or discretionary products.

City analysts expect this change to help boost profits over the coming year. They’re pencilling in a 49% increase in earnings for the year to 31 March 2019. That leaves the stock on a forecast P/E of 13 with a prospective yield of 3.6%.

I’d be happy to buy at this level, although it’s worth remembering that a big market correction could cause investors to withdraw cash and cut the firm’s profits.

This 5% yielder could do better

One downside of investment managers is that their profits are generally linked to stock market performance. That’s not the case for lenders, such as sub-prime specialist International Personal Finance (LSE: IPF).

This company’s focus is on doorstep lending and online loans in countries including Poland, Lithuania, Finland, Spain and Mexico. Shares of this group have risen by almost 20% this year following a strong set of full-year results.

Pre-tax profit rose by £9.6m to £105.6m last year. The accounts show that about 85% of this came from the group’s European operations, with Mexico the other main contributor.

IPF’s profits are supported by a large and mature home credit business, while its online operations are still lossmaking. But performance is improving and I expect this to become a valuable source of profits over the next few years.

Good value?

The current share price of 242p is equivalent to just 1.2 times the group’s net tangible asset value of 197p per share. Measured against earnings, the share price gives a forecast P/E of 8.2. There’s also a prospective dividend yield of 5.2%.

In my view IPF looks attractive at this level. I’d rate the shares as a buy.

The post One 5% yield banking stock I’d buy today appeared first on The Twelfth Magpie.

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Roland Head owns shares of Royal Bank of Scotland Group. The Motley Fool UK has recommended Barclays and HSBC 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.

As well as an increase in investment, the most significant impact on earnings was a negative tax charge of £6.8m, compared to last year’s one-off tax credit of £4.2m. Impellam isn’t the only company to have had to book such a charge thanks to the reduction in the rate of US federal corporation tax from 35% to 21%. This reduction means that Impellam had to write-down the value of deferred tax assets on losses in its US business, primarily an accounting adjustment that should not impact the underlying business or be repeated next year.

Following these results, the global staffing business maintained its full-year dividend per share at 20.5p giving a yield of 4%.

Dirt cheap 

Based on the above numbers alone, I’m in no rush to buy Impellam. However, the company’s valuation tells a different story. 

Indeed, based on figures for 2017, the shares are currently trading at a P/E of 10.6. Next year, when the impact of the US tax reform has filtered through the results, earnings per share are expected to leap to 96p, implying that the shares are currently trading at a forward P/E of just 6.

To me, this valuation looks too cheap to pass up as Impellam is trading at a deep discount to both the broader market and its sector, both of which trade at a multiple of around 14 times forward earnings. What’s more, the company’s dividend is covered more than three times by earnings per share, so there’s plenty of headroom for management to maintain the payout if profits fall, or increase it further in the years ahead.

Worth the risk? 

International Personal Finance (LSE: IPF) has many similar qualities to Impellam. The international sub-prime lender is unloved by the market, but this presents an opportunity for contrarian investors who are willing to take on the risk. 

Based on current City figures, the shares are trading at a forward P/E of just 7.2 and support a dividend yield of 5.5%.

That said, the company does not come without its risks. As my Foolish colleague Kevin Godbold pointed out at the end of October last year, “the firm’s geographic footprint is shaping up as an uncomfortable place to be because regulatory changes and pressures are attacking the business.” Nonetheless, management is working hard to adapt the group to the changes being brought in by regulators. 

At the beginning of March, CEO Gerard Ryan told news agency Reuters that as long as any caps on lending rates are “set at a reasonable level” the company can “operate very effectively within that.” In other words, the group isn’t just going to roll over. It will work with regulators and borrows to continue to offer attractive products that produce profits.

With this being the case, I believe the stock’s current valuation is too low and could offer an attractive return for investors who are willing to take a leap of faith. 

The post Two seriously undervalued dividend shares I’d buy today appeared first on The Twelfth Magpie.

More reading

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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.

The sub-prime lender operates in Poland, the Czech Republic, Estonia, Latvia, Poland, Spain, Mexico and Australia, but is winding down operations in Slovakia and Lithuania. Overall, the firm’s geographic footprint is shaping up as an uncomfortable place to be, because regulatory changes and pressures are attacking the business.

Trouble in Poland

In Poland, for example, which is one of the firm’s largest markets, the government’s council of ministers recently approved a comprehensive set of changes to Polish corporate income tax, which looks set to increase the tax payable by International Personal Finance because of the disallowance of tax deductions for expenses linked to “certain intra-group transactions.” 

The directors reckon they are making the case for “appropriate modification” but they are also looking for ways to change the firm’s operations in Poland to “mitigate the impact of this proposed legislation.” To me, the situation sounds grim. But regulatory issues are biting in Romania as well, and the firm faces “intense” competition in the Czech Republic.

Earnings look set to fall off a cliff this year, down almost 70%, with a small rebound of 6% or so next year, but we could argue that the news is in the price. At today’s share price around 198p, the forward price-to-earnings (P/E) ratio sits at just over 6 for 2018 and the forward dividend yield at more than 6%. The stock looks cheap, but I think it needs to be and I’m not tempted. Instead, I’d rather look at outperforming stock The Sage Group (LSE: SGE), which has been delighting investors for some time.

Steady performance

Sage has a long record of earnings and dividend growth, and the share price is more than 380% higher than it was nine years ago. The firm’s integrated accounting, payroll and payments solutions continue to find demand from businesses of all shapes and sizes around the world and City analysts think earnings will lift another 7% for the year to September 2018. And that’s what we’ve become used to, earnings grinding upwards, not spectacularly, but inexorably.

I keep thinking that Sage is bound to slip up at some point, but there’s no sign of that happening and in the most recent update during July the directors talked about ongoing operational momentum. Meanwhile, today’s share price around 730p throws out a forward P/E ratio just over 22 for the year to September 2018 and the forward dividend yield runs at almost 2.4%. Those forward earnings should cover the payment nearly twice.

It seems that many have noticed Sage’s performance because the valuation looks quite full. Nevertheless, I think the firm runs a quality business with defensive characteristics. Once hooked into using the firm’s products, customers face significant costs and operational disruption if they decide to switch to another supplier and I think that tends to make Sage’s customers loyal, which leads to steady incoming cash flow. I’d rather take my chances with Sage than with International Personal Finance.

The post One FTSE 100 stock I’d buy over this dirt-cheap dividend payer appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any of the companies mentioned. The Motley Fool UK has recommended Sage 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.

It’s been a great year for shareholders of steel producer and miner Evraz (LSE: EVR) as rising commodity prices have seen its share price rise by more than 50% and balance sheet strengthen enough to support the reinstatement of dividends.

And even after this stellar rise, the company’s renewed dividend still yields a whopping 7.28% while it trades at under eight times forward earnings. The company’s Q3 production report released this morning suggests the recovery is continuing apace.

Quarter-on-quarter prices received for its products were up almost across the board in its US, Ukrainian, Russian and Kazakh operations. The group as a whole also saw crude steel output rise 5.9% during the period and steel product output increase 4.4%. Higher prices combined with higher production levels suggest its financial health will have continued to improve in the quarter.

In the half year to June, these same positive trends saw revenue rise 44.1% year-on-year (y/y) to $5,106m, EBITDA nearly double to $1,152m and net debt fall 10% to $4,284m. Debt reduction is still a critical target for management and with cash flow picking up significantly, there should be further good news on this front in H2.

The company’s interim dividend of $30c per share totalled $429m, which was covered nicely by free cash flow of $549m. Looking forward, the firm is still reliant on the Chinese government consolidating domestic steel production and housing construction in that country remaining high. However, for risk-tolerant investors who are bullish on these twin trends, Evraz could be a fairly cheap and high-income stock to take a closer look at.

Regulatory run-ins prove costly 

Another company in the same vein is sub-prime lender International Personal Finance (LSE: IPF), which offers a 6.5% dividend yield and is trading at under six times trailing earnings. The business has been hit hard in recent quarters by regulatory overhauls in Poland, its largest market, and a few other European countries that have caused it to wind down home credit operations in Slovakia and Lithuania altogether.

While it awaits word on further fee caps on consumer loans proposed by the Polish government, the overall group is still performing decently. In H1, revenue rose 2.6% y/y in constant currency terms to £400m while the weak pound sent pre-tax profits up £10m to £43m.

However, stripping out the effects of currency movements makes underlying performance significantly worse. In its core Northern European market, underlying profits fell by £7.4m and customer numbers shrank by 13.3%, due largely to the Czech Republic.

The company is targeting growth regions such as Mexico and rolling out online lending platforms across the group. However, with regulators in several countries moving to cap fees on personal loans and proposed tax changes in Poland potentially costing it tens of millions of pounds, I’ll be steering clear of IPF at this point in time.

The post 2 bargain basement stocks yielding 6%+ 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?

Ian Pierce 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.

According to the enterprise, the main impact of the tax legislation changes “would be an increase in tax payable arising from disallowance of tax deductions for expenses linked to certain intra-group transactions.” Using this tactic has been a lucrative tax shield for the group, considering the sizeable expected costs for 2016. What’s more, the changes will cost the firm a “one-time accounting charge in 2017 of up to £30m arising from the write-down of a deferred tax asset.” 

I believe that this tax law change is a game-changing development for IPF. To put the expected costs into some perspective, for the first half of 2017 the company reported a net profit of £22.4m. Assuming a charge of £6m a half — at the low end of management’s expectations — full-year net profit could now fall 38% if the policy makes it into law. 

Multiple problems 

The Polish tax law change is just the latest in what has a been a never-ending stream of bad news for IPF. Over the past five years, the company has struggled to grow as policymakers have clamped down on doorstep lending and consumers have defaulted. As a result, costs are rising and so are loan impairments. 

At the beginning of March, the firm reported a fall in customer numbers and a decline in pre-tax profit for 2016, to £92.6m from £116.1m the year before. Customer numbers fell 2% to 2.5m from 2.6m in 2015, impairments were 26.8%, compared to 2015’s figure of 25.6% and IPF reported a cost-to-income ratio of 43.6% in 2016 versus 41.2% in 2015.

And if the Polish corporate tax bill goes through, it looks as if IPF is going to struggle even more. City analysts had been expecting the company to report a net profit of £75m for 2018 and earnings per share of 32.3p. According to my figures, if the tax changes come into force, the company will earn 27p per share in 2018. 

Undervalued 

Even though IPF’s earnings are set to slump in 2018 in the worst case, at 188p they look undervalued. Indeed, based on my earnings estimate above, the shares are now trading at a 2018 P/E of 7, almost bargain territory. 

That being said, I should point out that these figures are only estimates, both on my part and from the company. The final changes and earnings figures could be much worse, or even better. 

The bottom line 

IPF has had to grapple with plenty of problems over the past few years, but the company has soldiered on, and after today’s slump, shares in the lender look cheap compared to estimated forward earnings. Overall, this might be a turnaround situation worth buying-into for the risk-tolerant investor. 

The post Should you ‘catch the falling knife’ after this turnaround stock dropped 15% today? 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.

Industry bible Property Week reported on Friday that the Department for Communities and Local Government (DCLG) has employed the London School of Economics to help in its review of the programme. Measures rumoured to be up for consideration include restricting eligibility to first-time buyers and properties under a certain selling price, right through to axing the scheme in its entirety.

The purchasing scheme has been a critical lynchpin in driving house-buyer demand for some years and is responsible for 38% of all completions right now, according to broker Liberum Capital.

However, a statement from the DCLG suggests to me that last week’s hurried sale of housing stocks could be a knee-jerk reaction.

A department spokesman commented in response to the report that “we have committed £8.6bn for the scheme to 2021, ensuring it continues to support homebuyers and stimulate housing supply.” He added that “we also recognise the need to create certainty for prospective homeowners and developers beyond 2021, so will work with the sector to consider the future of the scheme.”

Besides, even if Help To Buy were to find itself on the chopping block, there is no guarantee that the removal of this sweetener would actually prompt a collapse in homes demand.

Stunning value, stunning yield

Berkeley Group (LSE: BKG) is one such stock that found itself on the defensive at times on Friday, although it recovered to finish fractionally higher on the day.

The Cobham-based builder remains on a broad uptrend, the stock hitting 18-month peaks above £35.30 per share late last week. But the company still offers pretty good value for money based on current City forecasts.

Despite predictions of a 1% earnings dip in the year to April 2018, Berkeley still trades on a bargain-basement forward P/E ratio of 7.7 times, a figure that I reckon more than bakes-in any threats facing the housing market.

And the company also offers plenty for income chasers to get excited about, a predicted 194.3p per share dividend chucking out a staggering 5.5% yield.

Cheap and cheerful

Credit provider International Personal Finance (LSE: IPF) is another share yield-hungry investors need to check out.

Like Berkeley, the Leeds-based leviathan is expected to endure some earnings pressure in the near-term, a 6% dip currently predicted by City analysts. Still, this is not expected to hamper the company’s ability to hike the dividend to 12.9p per share, resulting in a mammoth 6.3% yield.

Moreover, current earnings predictions also leave International Personal Finance changing hands on a mega-low prospective P/E multiple of 6.9 times.

The business saw revenue climb 3% between January and June, to £400.8m, it announced in July, while the amount of credit it issued advanced 10% from the corresponding 2016 period. This drove pre-tax profit 30% higher to £43m.

Sure, it still faces some uncertainty owing to possible regulatory changes in Eastern Europe. But I reckon the progress the company is making in Mexico and more broadly at its IPF Digital division both provide plenty of reason for optimism. And the company is rapidly expanding all over the world to keep revenues heading skywards – it shelled out £8.7m in the first half to build its new markets of Poland, Spain and Australia as well as Mexico.

The post These shares yield more than 5.5%. And value hunters should love them 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 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.