Loxam’s approach for Lavendon follows Belgian company TVH Group’s offer of 22 November. It offered 205p per share for Lavendon in an all-cash deal. TVH also stated that it would be its final offer for Lavendon, which reduces the chance of a bidding war. This means that Lavendon’s current share price of 218p may come under pressure in the short run, since Loxam may yet fail to make a bid. In such a scenario, Lavendon’s share price could quickly fall back to 205p.

Not particularly generous

Of course, the 205p per share offer from TVH could be rejected by Lavendon’s shareholders. In fact, it would be unsurprising if this took place, since it does not appear to be a particularly generous offer. Lavendon trades on a price-to-earnings (P/E) ratio of 11.7 even at its current share price of 218p, which means that at the 205p offer level from TVH, Lavendon would have a P/E ratio of 11.

While Lavendon is forecast to raise its bottom line by only 4% this year and by a further 2% next year, it has long term growth potential. It has made strategic investments in recent years which have not yet come to fruition, while operational improvements also have the potential to boost Lavendon’s financial performance. And with 53% of its sales being generated outside of the UK, Lavendon could benefit from weaker sterling over the medium term.

Likely to remain volatile

Evidence of Lavendon’s appeal can be seen in the valuation and performance of rental solutions peer Aggreko (LSE: AGK). It trades on a P/E ratio of 12.5 and yet is expected to report a fall in its earnings of 12% in the current year.

Furthermore, Aggreko’s earnings have fallen in each of the last three years, while Lavendon’s track record is much more positive. It has increased net profit at an annualised rate of 12% during the period. Once its reinvestment kicks in over the medium term, a similarly high growth rate could be on the cards.

In the short run, Lavendon’s share price is likely to remain volatile. If no offer materialises from Loxam then a fall to 205p seems likely. However, 205p per share does not seem to adequately value Lavendon’s future potential and so that bid could be rejected. If it is, then Lavendon has the potential to move significantly higher. As such, it could be a worthwhile purchase for less risk averse, long term investors.

The post Is Lavendon Group plc a buy on takeover bid? appeared first on The Twelfth Magpie.

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

Books beauty

The Harry Potter franchise has become the gift that keeps on giving for Bloomsbury Publishing (LSE: BMY), with the recent launch of a new illustrated range helping to drive book sales. But the boy wizard is not the be-all-and-end-all for the firm — the publisher also boasts a range of top-level titles across the cookery and adult book divisions. And elsewhere, Bloomsbury is expanding in the digital publishing space to deliver long-term growth.

The City expects Bloomsbury to lift an anticipated dividend of 6.3p per share for the year to February 2016 to 6.7p in the current period, creating a chunky yield of 4.5%. And a predicted return to earnings growth in 2018 is expected to produce a 7p payment, yielding a splendid 4.8%.

Flooring it

I reckon that floor coverings specialist Headlam Group (LSE: HEAD) is also a great bet to deliver strong dividend expansion well into the future. Exceptional market share growth in the UK is helping to propel revenues steadily higher — like-for-like sales leapt 6.3% in the first eight weeks of 2016 — while an end to the current cycle of huge capital expenditure also bodes well for income seekers.

The number crunchers expect Headlam to raise last year’s 20.7p per share dividend to 20.9p in 2016, before hiking the payment again next year to 21.7p. Consequently the business boasts smashing yields of 4.2% and 4.3% for these years.

A financial favourite

Thanks to its abundant cash flows, I reckon insurance play Chesnara (LSE: CSN) should also provide excellent dividend growth this year and beyond. The company has made a variety of shrewd acquisitions like that of Waard Group to bolster its continental exposure, and remains on the hunt for further deals in the UK and The Netherlands to drive earnings.

The Square Mile expects Chesnara to raise 2015’s dividend of 18.94p per share to 19.5p in 2016, creating an eye-watering yield of 6.3%. And the yield jumps to 6.5% for next year thanks to projections of a 20p reward.

Reach higher

Thanks to its exceptional record of generating earnings growth, Lavendon Group (LSE: LVD) has long proved a winner for those seeking dividend growth year after year.

Indeed, demand for the firm’s ‘powered access equipment’ — equipment that enables people to work at height —  continues to shoot reliably higher around the globe. Lavendon saw group revenues surge 13% higher during January-March, the business announced today.

The City shares my bullish take, and expects Lavendon Group to raise 2015’s payment of 5.4p per share to 5.7p this year, and again to 6p in 2017. The hardware operator subsequently sports jumbo yields of 4.3% and 4.5% for 2016 and 2017 correspondingly.

The post 4 Small Caps For Explosive Dividends! Bloomsbury Publishing Plc, Headlam Group plc, Chesnara Plc & Lavendon Group plc appeared first on The Twelfth Magpie.

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