This old project management saying can equally be applied to investment. If you’re looking for good quality stocks with the potential to deliver steady gains, you probably won’t get them cheap.

Today, I’m looking at two stocks I think have the quality needed to make them profitable buys, despite both having risen by more than 30% over the last year.

This triple bagger could hit the spot

Financial firm Jardine Lloyd Thompson Group (LSE: JLT) may not be a name you’re familiar with. But this FTSE 250 speciality insurance and employee benefits provider has tripled in value since November 2009, while also delivering dividend growth of 65%.

2017 was another year of good progress. The group’s revenue rose by 10% to £1,386m, while underlying pre-tax profit rose 11% to £191.5m. Underlying earnings rose by 14% to 58.5p per share, in line with analysts’ forecasts.

The total dividend for the year was lifted by 5.6% to 34p per share, giving a trailing yield of 2.6% at the last-seen share price of 1,330p.

High margins = high returns

Groups with multiple businesses sometimes depend on one division for most of their profits. That’s not the case here.

Jardine’s insurance businesses delivered an underlying trading profit of £197.9m last year, at a trading margin of 19%. The group’s employee benefits division delivered £50.1m of underlying trading profit, at a margin of 16%.

Although the amounts vary, profit margins across the group’s businesses are fairly high and quite closely matched. This suggests to me that all parts of the business are pulling their weight.

These shares now trade on a 2018 forecast P/E of 19 with a prospective yield of 2.6%. In my view this could be an attractive opportunity if you’re looking for a buy-and-forget dividend stock.

A class-leading performer

Another financial stock I like is IG Group Holdings (LSE: IGG). This FTSE 250 firm is the UK’s largest and oldest CFD trading firm. IG allows investors to trade Contracts for Difference and place spread bets on a wide range of securities and markets.

This has always been a very profitable business. Over the last five years, the group’s operating margin has averaged 43% and its return on capital employed has averaged 32%. The dividend has risen by an average of 7% per year, supported by very strong cash generation.

The risk is that profits could be hit by proposed new regulations which will limit the amount of leverage available to retail customers trading CFDs. This could mean that trading levels are much lower than at present, reducing the revenue earned by companies such as IG.

London-based IG hopes that diversifying overseas and focusing on high value professional investors — who are expected to be unaffected by the new rules — will protect its profits.

The group’s shares have performed strongly over the last year, as investors have accepted the company’s view that any hit on profits will be limited. Earnings per share are expected to fall by 7% in 2018/19, leaving the stock on a forecast P/E of 15.7 with a prospective dividend yield of 4.7%. In my view this could be a good entry point for long-term investors.

The post 2 FTSE 250 dividend stocks I’d buy to beat the FTSE 100 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 owns shares of Jardine Lloyd Thompson. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

A familiar name 

And one of my favourite blue-chips is Prudential (LSE: PRU), which is geographically diversified and offers investors exposure to the massive insurance industry. Life insurance is Prudential’s key focus and concomitant with that is its huge asset management arm, which invests the cash received from life insurance customers with the aim of creating long-term value in order to eventually pay out on policies.

Prudential has large insurance operations in the UK and Asia and operates as an asset manager in these regions as well as in the US. As expected, its UK business is a largely mature one and the recent combination of its domestic life insurance and asset management operations into one company suggests a spin-off could be pursued in the near future.

However, the US business is growing quickly and the long-term potential of its Asian operations is astounding. In the first half of 2017, group operating profit rose 9% year-on-year (y/y) with Asian operations surging ahead 16% and the US business contributing 7% growth.

In Asia the group is benefitting as increasingly wealthy middle-class consumers begin to seek out life insurance and money management expertise. While many Western financial providers are flocking to tap into this wellspring of long-term profits, Prudential has a huge lead due to its well-respected brand names, 90-year history in the region and operations stretching across 14 markets.

With a long history of delivering impressive shareholder returns, a nice 2.4% dividend yield, very good growth prospects and an attractive valuation of 13.3 times forward earnings, I believe now could be a great time to begin a position in Prudential.

A speciality stock 

Another stock in the sector that I believe would make a great addition to many portfolios is Jardine Lloyd Thompson (LSE: JLT). The group is different from Prudential in that rather than writing policies itself, it serves as a consultant and broker for speciality insurance and reinsurance needs for everything from mines to sports events and protecting against political unrest.  

The group’s growth has accelerated in recent years as management has gone about consolidating its position in this highly fractured sector. In the half year to June the group’s speciality insurance business revenues grew 12% y/y at actual exchange rates and 3% on an organic basis. Growing operations in the US, Asia and Latin America more than compensated for staid growth in its European operations.

Looking ahead, I see impressive growth potential for the group as it pushes into these massive new markets and scales up. In its interim management statement released this morning, management reiterated that it expects the US business to turn its maiden profit in 2019 and over the long term I see the potential for this new division to become as important as core European operations currently are.   

These growth prospects together with the stock’s decent 2.5% dividend yield have me very interested in JLT despite a lofty valuation of 22.5 times forward earnings.

The post 2 blue-chip stocks I’d buy for a starter portfolio appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of Jardine Lloyd Thompson. 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.

Insurance companies can be some of the harder stocks for retail investors to figure out with their industry-specific language and reporting measures, exposure to dozens of markets and regions, and volatility tied to interest rate changes and macroeconomic conditions. But for those investors willing to do their homework, I believe speciality insurance broker Jardine Lloyd Thompson (LSE: JLT) may prove an under-valued stock offering a steady dividend and considerable growth potential.

JLT’s core business is serving as a middle-man between insurers and customers seeking speciality insurance policies. The company has made itself a go-to leader in the niche market and in 2016, this segment accounted for 60% of group revenue and is growing at a steady clip of 3-4% per annum.  

On top of the speciality insurance broking business, JLT also serves as a reinsurance broker and provides advice and services for employee benefit plans. This set of offerings makes JLT’s services incredibly sticky, which leads to high levels of recurring revenue, the ability to cross-sell services to clients, and enviable pricing power.

In addition to steady organic growth in core markets slightly ahead of GDP growth as it consolidates the fractured speciality insurance broking market, JLT has very good growth prospects in the US and emerging markets. The company’s new US operations are currently loss-making but as the business scales up and brings on board new customers it is expected to turn a profit by 2019. Elsewhere, fast-growing divisions in Asia and Latin America are already profitable and earn margins in line or above group average.

The company also generates impressive cash flow with operations kicking off £141m last year from £1,261m in revenue. Last year this excess cash flow was mainly returned to shareholders through £18m in share purchases and £66m in dividends that at the current share price represents a very nice 2.7% yield.

While JLT’s shares are slightly expensive at 20 times forward earnings, its solid and growing dividend combined with very good growth prospects have it at the top of my watch list.

Lighting up the market

Another growth share flying under the radar of many retail investors is professional lighting manufacture, designer and supplier FW Thorpe (LSE: TFW), which provides lighting displays for everything from car dealers to train stations and retail stores.

The business has grown nicely in recent years through small bolt-on acquisitions and expansion into new markets across the UK, Europe and Asia. Thanks to organic growth and the weak pound, the company reported a very, very nice 23.8% year-on-year (y/y) rise in H1 sales to £51.2m. Y/y operating profit growth was a bit lower at 19.7%, due to a large order that necessitated extra overtime, but this appears to be a short-term blip and increased orders are, after all, to be welcomed.  

There are still problems with the company’s UAE operations but management is confident that the Australian business is now primed for a period of good growth. Expansion in these markets, together with the constant rollout of new products, bodes well for the company’s future. Unfortunately, its shares are very pricey at 30 times forward earnings. But should that valuation come down, I’d be more interested. 

The post Why Jardine Lloyd Thompson Group plc is an underrated growth and dividend star appeared first on The Twelfth Magpie.

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Ian Pierce has no position in any shares mentioned. The Motley Fool UK owns shares of FW Thorpe and Jardine Lloyd Thompson. 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.

Get real

Two FTSE 250 companies reported today, and met with a very different response from the markets: Capital & Counties Properties (LSE: CAPC) and Jardine Lloyd Thompson Group (LSE: JLT).

Real estate company Capital & Counties Properties boasts two of London’s very best estates: Covent Garden and Earls Court. Yet this hasn’t prevented the company’s share price from performing horribly since Brexit, falling almost 20% over the last month. Commercial property has been one of the hardest hit sectors, witness the run on open-ended funds investing in the sector, as panicky investors rushed for the exits.

Property slump

There were signs of a slowdown in the property sector even before the referendum, but the shock result has magnified uncertainties. Markets were unimpressed by today’s interim results for the six months to 30 June, which showed equity attributable to owners of the parent falling to £2.8bn, down from £2.9bn. EPRA adjusted, diluted net asset value was down 5% to 344p per share, compared with 361p at the end of December. Total property value stood at £3.6bn, down 4% on a like-for-like basis from £3.7bn. The result was a 5% drop in the share price in early trading.

That said, I think there could be an opportunity here, given the share price plunge, and the fact that the group has a strong financial structure, with a low group loan-to-value ratio of 20%, up from 16%, and cash and available facilities of £457m, up from £412m at the start of the period. The business also boasts high liquidity and since I believe London will retain its global allure whatever happens to Brexit negotiations, now could prove a tempting opportunity for long-term investors.

Good enough?

Jardine Lloyd Thompson Group has had a better Brexit, its share price rising almost 10% over the last month, although it has fallen slightly on today’s six-month interim update. The results were hailed as a “good underlying financial performance” with 5% revenue growth to £619.4m.

However, this was overshadowed by a 40% drop in reported profit before tax to £55.2m, which the board blamed on investment in the US and exceptional costs. The 7% drop in underlying profit before tax to £89.2 million reduced to just 2% and £106.4m once that US investment was removed.

Global reach

Jardine Lloyd Thompson provides insurance, reinsurance, employee benefits-related advice and brokerage services, and operates in more than 40 countries around the world, giving it the global exposure that many companies crave in the wake of Brexit uncertainty. With the pound still flailing, the group reported a positive impact from foreign exchange movements. Let’s hope for more to come. Its interim cash dividend rose 4.5% to 11.6p.

Group chief executive Dominic Burke – who openly supported the Leave campaign during the referendum – hailed a high level of new client wins and growing collaboration between its various operations around the world, which is sustaining the momentum despite “challenging” economic and industry conditions. Today’s results still disappointed markets but its future may be clearer once those exceptional costs are out of the way.

The post These 2 companies reporting today are on opposite sides of Brexit appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of Jardine Lloyd Thompson. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Investors will probably need to protect themselves against further volatility in the rest of the year, as uncertainty about global economic growth continues to increase. Weak export data from numerous countries, slowing consumer spending and worldwide financial volatility all point towards slowing growth. And having considered these downside risks, the OECD today lowered its expectation for global growth in 2016 to 3.0%, down from the 3.3% it predicted in November.

Buying low beta shares is one method of reducing the sensitivity of your portfolio to general market volatility. “Beta” is a measure of how sensitive a particular share is to changes in the market as a whole, so low beta shares should provide stability during those turbulent times.

The following three shares have a five-year beta of less than 0.5, which means these shares have historically risen/(fallen) on average by less than 0.5% with every 1% gain/(decline) in the FTSE All-Share Index, the most-inclusive popular UK equity index. To determine whether they are worth investing in, I shall now look at each in greater detail.

Attractive income

GlaxoSmithKline (LSE: GSK) has recently seen big declines in its profits, as the patent expiry of a few blockbuster drugs has exposed the company to intense pressure from generic drug-makers. 2015 marked a new low point for the company, with annual core earnings per share declining for the sixth consecutive year, after falling 15%, to 75.7p in 2015.

Despite this, the company maintains a strong competitive position in the respiratory, vaccines, HIV and consumer healthcare markets. In addition, it has a strong development pipeline, with up to 20 new treatments seeking regulatory approval by 2020. Glaxo has already launched seven major new drugs in recent months, and looking forward, these new products could potentially bring in more than £4 billion in additional annual sales.

Shares in Glaxo seem a little expensive on an earnings basis, as they trade at 16.9 times its expected 2016 earnings, but they are very attractive from an income standpoint. Glaxo currently yields 5.8%, and analysts expects its forward dividend yield will rise to 6.1% by the following year.

Slowing growth

Pearson‘s (LSE: PSON) shares have been heavily sold off in recent months, as investors have begun to fret about the company’s slowing growth outlook. For 2016, management expects to generate adjusted operating profits of between £580 million and £620 million, which represents a fall of around 13% on its expected 2015 level. Adjusted EPS is expected to decline to between 50p and 55p this year, which gives its shares a forward P/E of 15.2 at the mid-point.

Although, the near term outlook for the company is gloomy, the longer term outlook remains broadly intact. The company’s competitive position is strong, and cyclical factors have been largely to blame for its recent weakness. A fall in US college enrolment had hurt sales and new product launches raised costs, but these impacts should only be temporary. The market for education remains a big growth opportunity.

Recovery forecast

A weaker insurance rating environment is set to cause earnings at Jardine Lloyd Thompson (LSE: JLT) to decline for the first time since 2011. Underlying EPS for the insurance broker is expected to have fallen 11% in 2015, to 51.7p, because of increased investment in its US business and weakness in its UK employee benefits business due to recent government changes to UK pension rules.

However, the company is forecast to make a recovery in the following year, with analysts expecting underlying EPS to rebound by 13%, to 58.3p. This gives shares in Jardine a very reasonable valuation of 13.5 times its expected 2016 earnings. What’s more, its shares have a prospective dividend yield of 4.1%.

The post Protect Your Portfolio With GlaxoSmithKline plc, Pearson plc & Jardine Lloyd Thompson Group plc appeared first on The Twelfth Magpie.

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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of Jardine Lloyd Thompson. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Shares in Drax (LSE: DRX) have risen more than 10% by morning trading, after the power producer reported an 18% rise in EBITDA to £120 million for the first half of 2015. This exceeded analysts’ expectations, as its share of biomass generation rose from 23% last year, to currently 37%. The increase use of biomass has reduced its UK carbon tax liability; and with the increase in carbon prices, the benefit to its bottom line is much more pronounced.

Its electricity supply business, Haven Energy, is also doing well, with revenues having increased 23% to £629 million in the first half. Drax also announced an increase in the interim dividend to 5.1 pence, from 4.7 pence last year.

The value of Drax shares are still 21% lower than a month earlier, following the removal of the Climate Change Levy exemption on renewable energy in this month’s budget. The move had been unexpected, and the investment justification of many renewable projects now look doubtful.

Without a U-turn in government policy, the investment case for buying Drax shares is unappealing. As biomass generation will no longer be exempt from the Climate Change Levy, EBITDA is still expected to fall by £30 million this year and £60 million in the following year.

Jardine Lloyd Thomson

Jardine Lloyd Thompson (LSE: JLT), Europe’s largest insurance broker, reported underlying EPS fell 10% to 30.2 pence in the first half of 2015. Revenue, which only grew 6% to £592 million, failed to offset the increase in operating costs attributed to the expansion of its US specialty business and the shift away from commissions-based employee benefits in the UK.

Because of one-off factors and growth investments, the drop in profitability in this year’s first half should only be temporary. Chief executive Dominic Burke remains confident that organic revenue growth will be in line with last year’s. “As we look forward, the business is well-positioned to deliver sustainable earnings growth”, he said.

Shares in Jardine Lloyd Thompson fell 1.7% to 998 pence.

Elementis

Elementis (LSE: ELM) reported a 9% decline in pre-tax profits, following the decline in sales to the oil and gas industry. Sales to the oil and gas sector fell 30% from a year ago, as drilling activity was considerably lower with lower oil prices. The specialty chemicals company is trying to diversify by increasing sales to paint and personal care manufacturers, but this will do little to slow the decline in earnings in the medium term.

Shares in Elementis have an attractive prospective dividend yield of 3.9%, but declining earnings and a pricey earnings multiple makes its shares unappealing. Analysts expect underlying EPS will fall 12% to 14.2 pence this year, which gives its shares a forward P/E of 17.9.

SEGRO

Industrial REIT SEGRO (LSE: SGRO) reported an 8.3% rise in net asset value (NAV) to 416 pence, in the first half of 2015. The limited supply in high quality industrial and logistic space in its European markets has helped to boost its property valuations. But, even with higher property prices, rental yields for industrial units are typically much higher than those for commercial and residential properties. Its portfolio of completed properties have an average yield of 6.3%.

The REIT should stand to benefit from its large speculative development pipeline, because development projects typically offer much higher rental yields. Although there is a risk of higher vacancy rates, the average projected rental yield on development costs for its development properties is 8.8%. 

SEGRO is currently trading at a 6% NAV premium, but the combination of high yielding developments and further potential for substantial valuation gains means its premium is well deserved.

The post Should You Buy Drax Group plc, Jardine Lloyd Thompson Group plc, Elementis plc And Segro plc After Today’s Earnings? appeared first on The Twelfth Magpie.

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Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended Elementis. The Motley Fool UK owns shares of Jardine Lloyd Thompson. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

One stock that appears to offer a good mix of both income and growth is fund management company, Henderson (LSE: HGG). Its fortunes are clearly closely correlated to the performance of the wider index, since investors tend to be more willing to invest during settled periods and also when the wider macro outlook is positive. And, while the Greek debt crisis is only just drawing to a conclusion, Henderson is already guiding the market towards impressive growth numbers during the next couple of years.

For example, Henderson is expected to increase its earnings by 6% in the current year, followed by a further rise in its net profit of 16% next year. That’s an impressive rate of growth and puts Henderson on a price to earnings growth (PEG) ratio of just 0.9, which indicates that capital gains are very much on the horizon.

Furthermore, Henderson is expected to yield as much as 4.3% next year which, while impressive, is still some way behind Vodafone’s (LSE: VOD) (NASDAQ: VOD.US) yield of 4.9%. Certainly Vodafone’s financial performance has been poor in recent years, with its focus on the slow-growing Eurozone being a major drag on its profitability. However, Vodafone’s move into a more diversified product offering bodes well for its future growth, as well as its relative stability.

In fact, Vodafone’s move into pay-tv and broadband in the UK, as well as across parts of Europe, should provide the company with a renewed growth platform. This could easily spark investor sentiment and change the view among many investors of Vodafone being a slow-growing, utility-like stock. As such, Vodafone’s share price could continue to gain in popularity and move higher as it has done in the last year, where it has risen by 25%.

Meanwhile, the insurance sector continues to offer huge potential for long term investors. A notable stock within the space is Jardine Lloyd Thompson (LSE: JLT). It has delivered a hugely impressive financial performance over the last five years, with its bottom line increasing in each of these years and averaging growth of 10.6% per annum during the period. And, looking ahead, more growth is on the horizon, with JLT’s bottom line set to be around 14% higher in 2016 than it was in 2014.

Furthermore, JLT is expected to yield 3.1% next year despite paying out just 51% of its profit as a dividend. As such, it could become an excellent dividend stock, with a combination of a rising payout ratio and a growing bottom line making its shareholder payout potential very impressive.

The post Boost Your Returns With Vodafone Group plc, Henderson Group Plc And Jardine Lloyd Thompson Group plc appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of Jardine Lloyd Thompson. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.