Foxtons

The first of my two British penny stocks to buy right now is Foxtons (LSE: FOXT). This UK business is an estate agency that deals with both lettings and sales. In the past 12 months, the stock price has soared 52% from 43p to 65p.  These solid returns have come as a result of the UK’s ongoing housing boom.

In its latest financial update in early March, the group said trading in the first two months of 2021 was “well ahead” of the prior-year period. It added that the pipeline of sales commissions was more than 30% higher than the same period in 2020. Foxtons posted total revenues of £93.5m for 2020, down from £106.9m in 2019. Not the worst scenario considering the pandemic massively impacted its first-half sales in 2020. The FTSE 250 company is still a big name in estate agency and could have its best chance to regain some former glory by capitalising on current market trends. 

This penny stock is not without controversy though. It has come under fire for its decision to award Nic Budden, its chief executive, a £1m bonus. This decision was widely criticised as it came with the company benefiting from almost £7m of government Covid support, including £4.4m from the furlough scheme. This black mark for the firm has done nothing to enhance its reputation. 

Despite that, I believe this to be a blip on the radar for Foxtons. The potential for growth outweighs the risk for me, so I’ve added it to my shortlist.

N Brown

Another top UK investment right now, I feel, is N Brown Group (LSE: BWNG). It’s an online clothing retailer that focuses on larger-sized and 50+ customers. Penny stock or not, I think this recovery stock is a great bet for me. Its share price is up more than 300% in the past 12 months, from 16p to 67p. 

N Brown’s switch to an online retail-only model in 2018 has greatly reduced leasing costs. And due to the rapid acceleration of online retail in 2020, N Brown was able to capitalise immediately. By removing its bricks-and-mortar business entirely, it can also increase its margins. It has also been helped by Britain’s average waistline getting larger, and its population ageing. I believe that N Brown’s core market is only going to grow.

However, before the pandemic, N Brown posted a 2019 loss of £58m, showing that it has struggled with profitability. And although it appears to be on the rise, that can change overnight in such a fickle industry as fashion retail. The increased competition might simply be too much. I’m certainly taking a risk if I add it to my portfolio.

That’s a risk I believe is worth taking though as, despite recent gains, I think it has more room to grow. With an ever-increasing target market and recent boons in online retail, the sky’s the limit, in my opinion.

The post Are these two UK penny stocks the best shares to buy right now? appeared first on The Twelfth Magpie.

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Jamie Adams holds no position in any stocks mentioned above. 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.

ASOS

Instead, the FTSE 250 group’s share price fell faster than a catwalk model in super-high platforms, after it issued two shock profit warnings last year, in July and December. In April this year, its interims showed a drop of 87% in pre-tax profits to £4m, despite a 14% rise in half yearly sales to £1.3bn.

Warehouse IT issues, active customer growth slowing and a failure of price cuts to boost sales sufficiently all played their part. ASOS has also struggled with customers buying clothes to flaunt on Instagram, then returning them for a refund (yes, some people are that sad). 

However, the ASOS share price rocketed 30% in a single day after October’s finals showed a 13% rise in retail sales to £2.66bn, spearheaded by 15% growth in the UK. Sales also grew strongly in the EU, US and rest of the world. 

Profits before tax jumped by a third to £33.1m, despite “substantial transition and restructuring costs”, while total orders placed rose 14% to 72.3m. ASOS is up nearly 50% in the last month.

CEO Nick Beighton reckons he has “identified the root causes of our operational issues”, and says with 60% of revenues coming from international customers, its strong global logistics platform should take advantage of the growing online fashion market. All of which might convince me if it wasn’t for the fact it trades at 122 times forward earnings.

To be fair, those earnings are predicted to jump 83% in the year to 31 August 2020. That should halve the P/E to around 64.8, although I wouldn’t call that exactly cheap. I’d struggle to recommend it at that price.

N Brown Group

In August last year, I checked out another FTSE 250 digital fashion retailer, Manchester-based N Brown Group (LSE: BWNG), after its share price had dropped 56%. I suggested it might just be a tempting gamble for income seekers, because unlike ASOS and Boohoo, N Brown actually pays a dividend.

The payout is generous too, with a forecast yield of 6.1%, covered three times by earnings. Today, it is generating profits rather than losses, with recent interims showing a pre-tax profit of £18.8m, compared to a loss of £27.1m the year before.

Management pinned the 5.4% drop in revenue to £432.9m on the managed decline of the legacy offline business, and the decision to close the group’s final 20 stores. Net debt increased 14.5% to £481.6m, which is higher than its £354m market cap.

N Brown is a specialist player, targeting giant-sized niches such as women over 50, the plus-size market and ‘big and tall’ men, in contrast to youth-focused online fashion rivals. Its brands Simply Be, JD Williams and Jacamo should theoretically enjoy greater customer loyalty if they get it right.

I’m still going to pass, though. N Brown’s high dividend does not fully compensate for its high valuation and high debt. A key reason for debt is that its financial services arm allows customers to buy on credit, but impairments could rise if the economy continues to slow.

The post This FTSE 250 stock is up almost 50% in a month. Here’s what I’d do next appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended ASOS. The Motley Fool UK has recommended boohoo 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.

Why? Well, the murky outlook for the UK retail sector as the Brexit problem drains consumer spending power and shopper confidence, that’s why. Latest data from the British Retail Consortium illustrated these conditions perfectly as it announced total non-food sales in the three months to April fell 0.2%, flipping from the 12-month average increase of 0.2%.

Sales stresses to persist?

So what can we deduce from N Brown’s final results unpackaged in late April? Adjusted pre-tax profit for the 12 months to February came in better than expected at £83.6m, up from £81.6m in fiscal 2018 and this defied expectations that it’d slip year-on-year to around £80m, prompting that aforementioned share price spurt.

However, in my humble opinion this was certainly no reason to break out the bubbly. I’m far more concerned by news that product sales fell 5.6% in the period, a result that caused revenues at group level to drop 0.8%. It was only another strong sales performance from its financial services arm which stopped the retailer’s top line from plummeting.

That said, I expect the resilience of its credit division to provide just a temporary sticking plaster as a tough economic environment and intense competition amid Britain’s clothiers dials up the pressure for N Brown’s core operations.

City analysts expect the Jacamo and Simply Be owner to pay another 7.1p per share dividend for the year to February 2020, a forecast that creates a chunky 5% yield. This predicted payout doesn’t move me, though, given that the number crunchers are expecting earnings to keep sinking (a 2% drop is currently tipped for this year).

So forget about the big yield and cheap valuation, illustrated by N Brown’s forward P/E ratio of 6.7 times. It’s a company whose share price is in danger of moving sharply lower again and it should be avoided, in my opinion.  

Lucky red

I’d much rather use any cash earmarked for this business and plough it into Redrow (LSE: RDW).

The homebuilder also carries a 5% dividend yield for the current fiscal year to June, underpinned by City predictions of more earnings growth (of 4%, to be exact), and if recent evidence on the health of the housing market last week is anything to go by, the FTSE 250 firm appears in great shape to keep thriving beyond the immediate future.

As well as Barratt putting out another great set of trading numbers, data from Halifax showed property prices jumped 5% year-on-year in the three months to April, the strongest rate of growth since February 2017. These developments follow on from Redrow’s brilliant interims of February in which it advised of record revenues and profits, and so it comes as no surprise I’m expecting another blowout release when numbers for the full fiscal year come out.

Oh, and right now Redrow provides better value than N Brown too, illustrated by its prospective P/E ratio of 6.5 times. So give the clothes retailer a miss and buy into the builder, I say, a company I expect to keep paying big dividends for many years ahead.

The post Should you buy these 5%-yielding bargains, or avoid them like the plague? appeared first on The Twelfth Magpie.

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Royston Wild owns shares of Barratt Developments. The Motley Fool UK has recommended Redrow. 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.

No sector has been struck more ferociously than the retail segment, a theme I covered in some depth when looking at some of the FTSE 100’s biggest players.

Sales sliding

Retailers of all shapes and sizes have been shocking the markets in recent weeks. Bonmarche (LSE: BON) showed that not even the niche or value retailers are safe from the storm currently battering the high street. The business last week advised “the current trading conditions are unprecedented in our experience and are significantly worse even than during the recession of 2008/9.”

The retailer, which specialises in fashions for more mature customers, cut its full-year profits forecasts because of “extremely poor” trading before Black Friday and disappointing sales since the retail event. Bonmarche’s share price fell to fresh record lows in response and it could recently be seen dealing at 37p per share, down a shocking 72% since the turn of the year.

This fresh news bodes badly for fellow low-cost clothing retailer N Brown (LSE: BWNG), too. I’ve argued in times gone by that, like Bonmarche, the Jacamo and Simply Be owner can rely on its specialist product ranges — in this case plus-size fashion — to help it weather the worst of conditions.

My school of thought came crashing down in October, though. The business, in response to adjusted pre-tax profits sinking 5% between March and August, slashed the interim dividend in half and also warned of a similar cut for the final dividend of the current fiscal year.

No recovery in sight

Not even the fast-growing online segment, an area in which N Brown has been investing heavily over the past several years, can be expected to ride to the rescue of the retailers in the current climate.

This point was gloriously illustrated by ASOS this week, whose share price dropped a shocking 38% on Monday after the FTSE 250 firm cut its own profits and sales forecasts for the year. The internet giant advised of “a significant deterioration in the important trading month of November” and added that “conditions remain challenging.”

I’d add that conditions are in danger of deteriorating further as the UK is dragged closer and closer to a dreaded no-deal EU withdrawal come March. For this reason I’d be happy to overlook N Brown and Bonmarche’s big dividend yields of 9.2% and 16.8% for 2019 and sell out today.

They might be dirt-cheap, both businesses carrying forward P/E multiples inside the widely-considered bargain benchmark of 10 times and below. But they’re cheap for a reason and it’d take a braver man than me to buy into the given the economic and political uncertainty in the UK. I can see their share prices continuing to sink in 2019, and possibly beyond.

The post These dividend stocks yield 9% and 16%! Should you buy them for 2019, or sell up? 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 ASOS. 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.

Having said that, there are also plenty of dirt-cheap big yielders sitting in the index that are investment traps waiting to rout your shares portfolio.

How do the dividend stocks I have analysed below stack up?

Marston’s

The difficult outlook for many of Britain’s listed publicans means that many dividend investors may be choosing to give Marston’s (LSE: MARS) a wide berth today. I reckon this could be a mistake.

Even though the leisure leviathan is expected to endure some earnings woes in the near term — a 3% bottom-line reversal is forecast for the year ending September 2019 — this isn’t the first time the company has encountered a little profits turbulence in recent years. Yet this has not precluded the annual dividend raise.

Marston’s is still delivering significant cash flows and should help it to ride out any current trading troubles and keep advancing the dividend. And further out, I’m confident the publican’s site expansion programme should allow it to capitalise on the rosy outlook for the pub-restaurant segment and help earnings, and thus dividends, to step higher.

City brokers share my glass-half-full approach and they are expecting the annual dividend at Marston’s to climb to 7.6p per share this year, from 7.5p in fiscal 2018. As a consequence, investors can enjoy a bulky 7.5% yield.

An ultra-low prospective P/E ratio of 7.3 times sweetens the investment case.

Rank Group

I am also confident that Rank Group (LSE: RNK) should continue offering market-smashing dividend yields long into the future.

As I mentioned last time out, the gambling giant is suffering more recently from falling footfall at its Grosvenor casinos and Mecca bingo venues. This would not deter me from investing, however, thanks to the exceptional revenues potential of the online betting market.

Turnover from this segment continues to grow by double-digit percentages and the group is understandably bulking up its presence here. Last month it snapped up Spanish bingo operator YoBingo.es for a fee that could rise to €52m. The business is the Iberian state’s second largest internet bingo operator and the move improves the multi-channel proposition of Rank’s existing Spanish operations.

While the business is expected to endure a 6% earnings fall in the year to June, its rapidly-improving balance sheet and solid long term profits picture — it’s expected to rebound starting with a 5% earnings rise next year — means that dividends are still expected to keep rising at an electric rate.

Last year’s 7.3p per share reward is anticipated to rise to 7.9p in the outgoing period, and again to 8.5p in fiscal 2019. Consequently yields for these years stand at 4.3% and 4.5%, respectively.

Throw a dirt-cheap P/E ratio of 12.3 times for the upcoming year into the equation too, and I reckon Rank is a hugely attractive investment destination today.

DFS Furniture

I’m much less enamoured by the earnings and thus dividend prospects for DFS Furniture (LSE: DFS), however.

My pessimistic view is at odds with that of the broader market, however, as reflected by the retailer’s stunning share price ascent since the dying embers of March (its market value has swelled by a third since the release of full-year trading details back then). In fact, this spike makes me concerned that buyers have set themselves up for a fall as pressure on consumers’ spending power increases.

DFS’ latest trading statement may have matched broker expectations but should have given little reason for cheer. Had it not been for the positive contribution made by the Sofology acquisitions, sales would have fallen during the six months spanning August-January.

And who would back DFS to bounce back in the current climate? Certainly not City analysts who have downgraded their earnings estimates since the half-year results, and are now expecting a 6% bottom-line decline in the 12 months to July.

What’s more, this anticipated profits drop means that the firm’s progressive dividend policy will fall. DFS currently expected to hold the dividend at 11.2p per share. However, I reckon a possible cut cannot be ruled out given its ballooning debt pile (up £36.7m year-on-year to £172.3m in January) and its medicore medium-term earnings outlook.

A prospective forward P/E ratio of 13.2 times may make DFS cheap, but it’s cheap for a very good reason. I think investors should give the business an extremely wide berth in the current economic environment.

N Brown Group

Of course, N Brown Group (LSE: BWNG) isn’t immune to the same tough retail environment as DFS.

However, the special fit fashion retailer’s lack of exposure to so-called big ticket items like furniture, allied with its focus on the niche segment — namely the increasingly-popular plus-size segment – should allow revenues to stay broadly afloat despite declining consumer appetite.

Indeed, its strength was laid out in first quarter trading numbers this week in which the Simply Be brand owner noted that revenues grew 0.4% during the three months to June. N Brown’s resilience also pays testament to heavy restructuring that has seen it ditch its mail order model and embrace the e-commerce phenomenon.

And its move online printed a new chapter this week when the retailer announced it was considering closing all its 20 stores. N Brown now sources three quarters of total revenues via the internet and so this is a logical long-term step to keep costs down in an age of falling footfall up and down the high street.

The current travails for Britain’s retail sector means that earnings are expected to just flatline in the 12 months to February. On the plus side, however, the dividend is expected to be held at 14.23p per share, meaning investors can enjoy a 7.9% yield. And a bargain forward P/E ratio of 7.8 times puts the icing on the cake.

The post Could these 4 FTSE 250 big-yielding dividend bargains make you a million? appeared first on The Twelfth Magpie.

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• Forget meal deals! Here’s how £8 a day could be worth £357,000
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• 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 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.

Viva Aveva

Revenues rose 8.6% to £704.6m and the share price jumped more than 13%, delighting investors who will have been disappointed by its longer-term performance, with the stock trading just 13.7% higher than five years ago. Aveva completed its reverse takeover of French giant Schneider on 1 March and now it is all systems go.

Chief executive Craig Hayman said: “The integration of the business has begun in earnest to drive top-line synergies.” The planned cost savings should be realised by 2020, while the hook-up is also expected to generate “material revenue synergies over the medium term” and capture the trend towards industry digitalisation.

How much?

My worry is that Aveva now trades at a monster forward valuation of more than 50 times earnings while City analysts are forecasting a 39% drop in earnings per share in the year to 31 March 2019, albeit followed by an 11% rise the year after. Perhaps there is a monster dividend to compensate? Nope. Unless you consider a forecast 1.3% monster-like.

My Foolish colleague Peter Stephens also banged his head against these unappealing numbers, and although today’s results are more than welcome, I remain unconvinced, especially as we don’t yet know what synergies the group can generate. Others clearly feel differently this morning, though.

Brown down

Manchester-based clothing and homeware retailer N Brown Group (LSE: BWNG) is out of vogue, sliding 1.62% after publishing its Q1 trading statement for the 13 weeks to 2 June. Investors are understandably wary with management only able to describe a “satisfactory performance in a challenging period” for fashion retail, while announcing a 0.4% rise in group revenue.

The group also announced it had launched a consultation to consider closing all of its 20 stores, in the latest bad news to hit the high street. However, its stores only account for just 2% of group revenue, with 75% now generated online, rising to 84% for new customers.

Smart work

CEO Angela Spindler was satisfied given strong comparatives and the tough industry backdrop, saying: “We continue at pace our journey to become a global online retailer, uniquely delivering fashion that fits. This will underpin our future growth, both in the UK and internationally.” 

It is a big prize, for a company with a market cap of £553m, whose brands include the relaunched JD Williams, Simply Be and Jacamo. The stock has fallen 30% in the year but the good news is that it now trades at just 8.6 times earnings. Roland Head reckons its decline has gone too far.

N Brown’s numbers are the reverse of Aveva’s, and look more attractive. Its earnings growth prospects do look sluggish but the yield is glorious at a forecast 7.2%, covered 1.6 times. Closing stores is sad but makes sense amid falling high street footfall. It looks an interesting contrarian opportunity to me.

The post I’d choose this 7%+ bargain dividend stock over this FTSE 250 share appeared first on The Twelfth Magpie.

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• 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?

harveyj 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.

The largely bricks-and-mortar-based retailer is leaning far forward into headwinds that ravage the sector. The onslaught from internet and discount retailers is relentless. They are disrupting the traditional high-street retailing businesses that many of us are used to – make no mistake about that.

Disappearing retailers

Names such as Woolworths and BHS (in its high street form) are long gone. Others, such as Debenhams, appear to be teetering on the brink. But what will become of good old M&S? The company has been struggling for years, never quite managing to pick up the mojo it once clasped so firmly. One good indicator of a firm’s performance and its outlook is to examine the directors’ decisions surrounding the dividend. It’s not good news. The dividend is more-or-less stuck in the mud with City analysts predicting the 2020 payment to be hardly any bigger than the 2015 one.

In the long run, my guess is that we won’t see M&S go bust because it has such a trusted reputation and brand image to exploit, but what we are likely to see is a managed decline and shrinking of the business. If the firm could change to embrace the new world order in retailing, surely it would have done so in a meaningful way by now. I’m sure there will be mini-recoveries along the way, but I reckon the long-term operational and share-price trend is down, and that’s not a good basis for an investment, so I’m looking at N Brown Group (LSE: BWNG) instead.

Moving with the times

I like the way the fashion retailer, which targets the plus-size and more mature customer markets, has migrated its sales from catalogue shopping over to internet shopping during the last few years. The company is moving with the times, and today’s full-year results reveal that 73% of orders arrive via the firm’s websites, with 76% of all traffic originating from mobile devices. N Brown is plugged into the modern world.

Yet the trading backdrop has been “challenging.” Nevertheless, the company managed to grow its revenue 3.9% compared to the year before and adjusted earnings per share moved 4% higher. The directors held the full-year dividend flat, signalling a cautious outlook. City analysts following the firm expect earnings to decline 1% for the year to February 2019 and to rise 4% the year after that.

N Brown earns its profits both from product retailing and from providing credit for customers to finance their new goods. The year saw “strong performance” in its financial services operation, driven by “continued improvement in the quality of the loan book, together with a reduction in arrears as a result of minimum payment changes.” 

Meanwhile, it’s hard to make a case for the shares being expensive. Today’s 205p puts the forward P/E ratio for the trading year to February 2020 at just below nine, and the forward dividend yield runs a little over seven. My guess is that N Brown will emerge as one of the retail winners over the years to come.

The post Why I’m ignoring the Marks & Spencer share price and going for this recovering retailer instead 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.

With the deadline rapidly approaching for investors to top up their ISA allowance before the 2017/2018 tax year slams shut, I’m looking at two dividend shares investors need to consider buying.

One of these is N Brown Group (LSE: BWNG), a share which is in great shape to keep on delivering market-smashing yields, despite an increasingly-difficult marketplace.

I warned back in January that the clothing retailer’s focus on the value end of the market is no guarantee of immunity to the wider pressure on consumer spending on non-essential items.

However, there were two factors that convince me N Brown has what it takes to keep delivering impressive revenues growth. Firstly, a dedication to servicing the needs of the ‘curvier’, or plus-size, end of the market gives it a pocket of opportunity over its more general high street competitors.

And finally restructuring in recent years to latch onto the exploding e-commerce segment also gives it an edge over many of its rivals, such as fellow cut-price clothing retailer Primark. Indeed, N Brown saw more than 80% of new customer demand generated online during the 18 weeks to January 6, a result that helped total internet revenues rise 9% year-on-year.

And a slew of improvements to its online operations, from the rollout of app upgrades through to customer service improvements such as the introduction of new delivery options, should keep the hit counter ticking over, too.

Looking good

Despite the current strain on shoppers’ wallets, City analysts expect N Brown to finally snap into earnings growth with a 3% rise in the year ending February 2019. As a consequence, the retailer is predicted to keep the dividend frozen at the anticipated reward of 14.23p per share for the prior period. As a result, investors can drink in a monster 8.3% yield.

The good news doesn’t stop here, either. With profits expected to tread 4% higher in fiscal 2020, the dividend is anticipated to improve to 14.7p, meaning the yield stomps to a stunning 8.6%.

Clearly N Brown is not without risk. However, I believe a forward P/E ratio of 7.5 times more than reflects the troubled business environment.

Foreign firecracker

While yields over at SThree (LSE: STHR) may lag those of N Brown by no little distance, I reckon the company should still attract serious interest from income investors.

While the recruitment ace is expected to keep dividends on hold for yet another year in the 12 months to November 2018, at 14p per share, this prediction still results in a gigantic 4.2% yield.

And with earnings growth expected to rev to 16% next year from 6% in the present period, SThree will finally resurrect its progressive dividend policy again, or so say City analysts. A 14.8p reward is currently being forecasted, a figure that nudges the yield to 4.5%.

Like N Brown, SThree can also be picked up for next to nothing, with the company carrying a forward P/E rating of just 12 times. This is far too cheap in my opinion given the stunning progress it’s making in mainland Europe.

The post One day to go! 2 last-minute dividend stocks for your ISA 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 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.

Despite broker belief that J Sainsbury (LSE: SBRY) should continue to offer above-average dividend yields, I remain far from convinced about the grocery giant.

The ongoing fragmentation of the UK supermarket space has seen the London business endure three earnings dips on the bounce. And another fall is forecast for the year to March, a 13% drop currently being estimated.

Fresh downgrades to this year’s forecast in recent weeks lead me to doubt current hopes that Sainsbury’s will finally fight back with rises of 11% and 6% in fiscal 2019 and 2020 respectively too. And latest industry data from Nielsen is far from encouraging. It showed more erosion of Sainsbury’s market share, to 15.5% in the three months to December 30 from 15.8% a year earlier.

In this environment the grocer is expected to cut the dividend yet again, to 9.8p per share from 10.2p last year. This yields a chunky 3.8%, but given the prospect of additional dividend cuts down the line, neither this — nor the low forward P/E ratio of 12.2 times — is enough to tempt me for one to buy shares in the business.

Get down with N Brown

Instead of stashing their cash in Sainsbury’s, I reckon yield hunters would be better served by checking out N Brown Group (LSE: BWNG) today.

The Jacamo SimplyBe and JD Williams owner is not immune either to the increasing strain on shoppers’ purses, even if its focus on the value end of the market may help it to sail through the worst of the storm. This was underlined by fellow cut-price peer Bonmarche’s latest trading statement this month in which it advised of a 5.5% sales slump in the 13 weeks to December 30.

However, I am confident that N Brown’s niche — namely the plus-size — segment should continue to protect it from heavy revenues pressure in the immediate term. Indeed, the FTSE 250 business advised this month that, despite challenging conditions at the present time, revenues advanced 3.2% during the 18 weeks to January 6, while sales jumped 7.3% across its so-called Power Brands.

City analysts certainly do not expect troubles on the high street to prove a barrier to N Brown’s eagerly-awaited flip into the black as it throws off the financial shackles of massive restructuring in recent years. Sure, in the year to February 2018 a 3% profits decline is forecast. But rises of 5% and 4% are being predicted for fiscal 2019 and 2020.

And this anticipated return to growth is expected to finally get its progressive dividend policy up and running again. The predicted 14.23p per share reward for this year is predicted to rise to 14.3p in the upcoming period, and again to 14.8p in 2020.

And as a consequence, yields smash those at Sainsbury’s, clocking in at 6.8% through to the end of next year and 7.1% for 2020.

N Brown can be picked up for next to nothing, the retailer boasting a forward P/E ratio of just 9.5 times. But unlike the FTSE 100 supermarket, thanks to its niche product offerings and terrific progress in the e-commerce segment, I think it is a bargain worth picking up today.

The post A FTSE 100 dividend stock I wouldn’t touch with a bargepole 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.

Transforming its clothing lines has long been a problem amid charges that its ranges are both old-fashioned and expensive, particularly when lined up against what’s found over at the likes of Next and H&M.

And Marks & Spencer’s November market update showed that these accusations remain very much alive and well. While revenues have improved over the most recent quarter, the company still endured a 0.7% decline in like-for-like sales for the six months to September.

Food failing

To add to the its headaches, the allure of its previously-robust Food arm is also declining slightly. Like-for-like sales here dropped 0.1% during April-September, its performance again lagging that of the wider grocery industry. M&S noted noted the detrimental impact of the online home delivery and convenience segments on sales, and the price pressures that are driving customers into the arms of the discounters.

The FTSE 100 firm plans to slow the rollout of its Simply Food outlets, and to change its product proposition with a greater focus on value. This is likely to put further stress on already-pressured margins and higher costs and increased promotions in the first half have caused M&S to say Food margins will fall between 75 and 125 basis points in the full year.

A bleak outlook

Falling demand for its edible items is the last thing Marks & Spencer needed given its ongoing failure to attract fashion shoppers.

Chief executive Steve Rowe recently commented: “The business still has many structural issues to tackle as we embark on the next five years of our transformation” and he is not kidding, the challenging retail environment making it even harder to achieve its much-awaited turnaround.

The City is expecting earnings to drop 9% in the year to March 2018, and the likelihood of any bounce-back thereafter is built on pretty sandy foundations, in my opinion. I reckon investors should give the company a wide berth despite its low paper valuation, a forward P/E ratio of 10.8 times.

Brown sugar

Marks and Sparks’ poor profits outlook, expensive transformation programme and colossal debt pile (net debt stood at £2bn as of September) leave dividends in danger of falling short of forecasts. Analysts are expecting an 18.4p per share reward, creating a jumbo 6.2% yield.

Instead, I believe those seeking a cut-price dividend star should take a look at N Brown Group (LSE: BWNG). The FTSE 250 retailer is expected to deliver a 14.22p per share reward, resulting in a monster 5.2% yield.

Although the retailer is not immune to the broader pressures washing over the UK high street, its focus on the ‘plus size’ niche segment and under-served 50-plus market puts it in a much stronger position than M&S to ride out the storm and deliver long-term earnings growth. Indeed, sales at its Jacamo and Simply Be fascias increased 6.7% and 21% respectively during March-August.

The City is expecting earnings to slip 3% in the 12 months to February, but I am expecting earnings to flip higher thereafter, helped by its increased focus on online retailing. I reckon a forward P/E ratio of 12.4 times makes N Brown worth a serious look today.

The post Why I’d sell this FTSE 100 shocker to buy this dividend star 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.