Growing fast

Today’s sparkling full-year results from Avingtrans (LSE: AVG) are dominated by the first nine-month contribution from the firm’s gargantuan September 2017 acquisition of Hayward Tyler Group. The enlarged company designs, manufactures and supplies critical components, modules, systems and associated services to the energy, medical and industrial sectors, and sees the expansion as transforming forward prospects.

The directors said last year that the enhanced scale of the business will enable it to “achieve critical mass and make inroads into the Chinese nuclear energy market,” which sounds exciting. It’s all part of the firm’s strategy to “buy and build” in regulated engineering niche markets. The integration of the new business has gone well and “ahead of schedule,” and we can’t really argue with the figures the firm posted today. Revenue blasted up 247% compared to the equivalent period the year before, which delivered a blistering rise in adjusted diluted earnings per share of more than 660%. I reckon Avingtrans will be pleased with its purchase.

However, there’s more to the story than paid-for acquisitive growth. Underlying revenue excluding gains from acquisitions went up nearly 11% too, proving that the firm is also making organic progress. The directors expressed their confidence in the outlook by pushing up the full-year dividend by almost 6%. The shares are perky today, up around 6% as I write, but I think there’s much more to come for investors as the company’s growth strategy unfolds in the years ahead.

Big increase in the dividend

I also like the look of intellectual property (IP) advisory services provider Murgitroyd Group (LSE: MUR). Although last month’s full-year results report showed revenue for the period essentially flat, underlying basic earnings per share shot up 21%. The directors were not shy about matching investor returns with the firm’s performance and they pushed up the total dividend for the year by 24%.  

The firm is another that mentioned macroeconomic and political uncertainties as a factor to worry about in the outlook statement, but insisted that it operates in a market “with good long-term prospects.” The directors believe that the firm’s growth in earnings and the dividend will continue. The dividend is up around 70% over the past five years and if such progress carries on, I reckon it will drive the share price higher too. At today’s share price around 682p, the forward dividend yield for the trading year to May 2020 sits just under 3.5% and I think the payment is worth collecting while we wait for further rises in the shares.

The post 2 potential millionaire-maker shares I’d buy with £2,000 appeared first on The Twelfth Magpie.

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

A protection business

In an increasingly connected world, protecting your intellectual property is more important than ever. For UK investors wanting exposure to this specialist business, choices are limited.

One option is AIM-listed Murgitroyd Group (LSE: MUR). Pre-tax profit at this £50m firm rose by 13% to £1.67m during the six months to 30 November. The group ended the period with an increased net cash balance of £2.6m, and the interim dividend has been lifted 30% to 6.5p per share.

These results look fairly solid to me, but of more interest could be the company’s comments on growth trends in this sector. Official figures show that EU trademark filings rose by 8.9% during the 11 months to 30 November, compared to the previous year. Murgitroyd describes this continued growth as part of “a long-term trend”.

Although Brexit is a potential risk for the group, it already employs qualified attorneys from 14 European countries and has an established presence in both the EU and the UK. The business is also expanding into the US market, where it provides European IP protection services for US companies.

Worth considering

Murgitroyd shares were hit by a profit warning at the start of 2017, but the group appears to have returned to growth since then.

The shares currently trade on a 2017/18 forecast P/E of 17 with a prospective yield of 3.4%. That’s not obviously cheap, but I believe it could represent good value given the underlying growth in demand. In my opinion, this stock could be worth a closer look.

Profit from a recession?

The recent collapse of Carillion highlighted tough trading conditions in the construction and support service sectors. Indeed, there are concerns that the failure of this former FTSE 250 firm could bring forward the failure of a raft of smaller business in these sectors.

Insolvency specialist Begbies Traynor (LSE: BEG) recently reported that the number of support services companies showing “significant” financial distress rose by 43% last year. Numbers in the construction sector rose by 31%, while those in the real estate sector increase by 46%.

I believe that this Manchester-based firm could provide a something of a hedge to the risk of a UK recession. If the number of businesses in financial distress rises, then there’s a good chance of an uptick in demand for insolvency services.

Growth has been limited in recent years, partly due to banks’ reluctance to force companies into insolvency in the period after the financial crisis. However, Begbies’ efforts to cut costs and diversify saw the group return to growth last year.

Analysts expect this progress to have continued during the current financial year, which ends on 30 April. Consensus forecasts suggest that adjusted earnings could rise by 13% to 3.7p per share, with a similar increase expected in 2018/19.

Although the stock’s forecast P/E of 20 means that the shares are no longer obviously cheap, they still offer a useful 3.1% dividend yield. I think there’s a good chance of earnings upgrades over the next year or two, and would certainly continue to hold.

The post 2 small-cap dividend stocks I’m watching closely 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 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.

There isn’t a lot of overlap between stocks that pay a very nice dividend and can also appeal to investors looking for double-digit growth and huge capital appreciation prospects, but that doesn’t mean they don’t exist. In fact, I think one such stock that fits the criteria and is flying under the radar of many investors is off-licence operator Conviviality Retail (LSE: CVR).

Over the past two years the company has recorded year-on-year (y/y) earnings increases of 22% and 49% and its share price has risen over 75% in just the past year. Yet despite this rapid share price growth the company still kicks off a very attractive 3.2% annual dividend yield.

The key to success on each of these fronts has been acquiring rivals, reorganising back office functions and steady like-for-like (LFL) growth due to changing consumer habits. On the acquisition front Conviviality has made two large acquisitions in recent years that have made it the UK’s largest independent wholesaler of alcohol to on-trade customers such as pubs, restaurants and hotels.

This has given the group greater pricing power and also cut overlapping costs, which has led to higher margins and cash flow. In addition to growth in the wholesale trade, the group’s owned and franchised off-licences like Bargain Booze have been performing very well due to consumers increasingly shopping at small, local outlets rather than out-of-town big-box stores. In the year to April these two divisions posted underlying acquisition-adjusted y/y sales increases of 6.4% and 6.1% respectively.  

Including the positive effects of acquisitions, the group’s revenue for the year rose 85% y/y to £1,560m while improved margins led to EBITDA more than doubling to £60.9m. And with net debt of just £95.7m at year-end and free cashflow quadrupling, management was able to increase full-year dividends by 33% to 12.6p.

Looking ahead, the positive benefits of increased scale should allow Conviviality to increase the number of items it offers to wholesale customers, improve its bargaining power with suppliers and customers alike and expand into new markets. While the company’s shares are looking a little pricey at 17.2 times forward earnings, Conviviality is one dividend growth star I’m definitely interested in.

A small-cap turnaround opportunity 

A smaller and riskier option that could also appeal to both types of investors is £50m market cap European patent attorney Murgitroyd (LSE: MUR), which offers a 3.2% yield and has recently returned to earnings growth.

The company was hit in H1 by falling profits due to complications from an acquisition that resulted in significant increases in business development and IT costs. However, the group believes these will be one-offs and the fact that H2 saw the company return to year-on-year pre-tax profit growth suggests this may be the case, although it’s still too early to be completely certain.

Over the medium term, the group’s growth prospects appear quite appealing as it expands the number of services offered to corporate customers filing EU patent applications. Furthermore, with both the European Patent Office and EU Intellectual Property Office seeing respectable single-digit growth in the absolute number of applications in 2016, Murgitroyd is benefitting from steady overall market growth.

With profitable operations, cash on hand, its shares valued at 16 times forward earnings and well-covered dividend payouts, I believe Murgitroyd could prove an interesting dividend growth stock if it can sort out its internal issues.

The post 2 under-the-radar dividend growth stocks 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 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.

Today I’m going to look at a property company which ought to be relatively safe from such risks. Assura (LSE: AGR) is a healthcare real estate investment trust (REIT) which specialises in building and letting GP clinics in the UK.

The value of the group’s portfolio increased by 21.2% to £1.3bn last year. Its rent roll rose by 16.6% to £74.4m. Adjusted earnings rose by 20% to 2.4p, providing full cover for the dividend, which rose by 9.8% to 2.25p. That’s equivalent to a yield of 3.8% at the current share price.

You might think that this dividend is over-generous, given that it represents nearly all the group’s earnings. But Assura’s tax status as a REIT means that it’s obliged to pay out most of its profits in the form of dividends each year. These figures look OK to me.

What could go wrong?

Assura’s portfolio of GP surgeries should prove to be a very stable and reliable source of rental income. But I do have a couple of reservations. The first is that its shares currently trade at a 20% premium to their net asset value. If property values were to fall, the group’s share price could also slump.

A second risk is that it is targeting a relatively high level of gearing. The group’s loan-to-value ratio was 37% at the end of March, but its target range is 40%-50%. I’d prefer to see LTV remain below 40%, but I do recognise the stability and long-term visibility of the group’s income stream.

On balance, I think that Assura is an attractive business but that the valuation is relatively full. If I bought today, I’d look to average down on future dips.

This small-cap could be a bargain

Intellectual property protection and patent law are vital to many businesses. Asserting these rights requires specialised legal help.

That’s where patent attorney Murgitroyd Group (LSE: MUR) comes into play. This £37m AIM-listed firm provides intellectual property services across a range of business sectors in Europe. It is also working to build its business in the US, providing services to American companies filing patent applications in Europe.

It was forced to issue a profit warning in January, advising investors that interim earnings would be lower than expected. The group’s shares fell by 21% on the day and have yet to recover. But the group’s latest trading statement in April advised that “the underlying trading result for the third quarter was … ahead of revised internal forecasts for the period”.

January’s fall has left the stock trading on a forecast P/E of 13, with a prospective dividend yield of 4.1% for the current year. Murgitroyd had no debt at the end of November, and the group’s earnings are expected to rise by 10% in 2017/18.

A further trading update is expected in June, following the 31 May year end. But I believe the shares offer good value at current levels. I’ve bought some for my own portfolio.

The post Why these little-known dividend stocks could be the best way to fund your retirement appeared first on The Twelfth Magpie.

More reading

• 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?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?

Roland Head owns shares of Murgitroyd. 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.