NAHL Group News | The Twelfth Magpie

Dividend stocks: Two 8% yielders I’m considering right now

Roland Head — Wed, 18 Jul 2018 13:59:30 +0000

Can you really invest your cash in shares today and enjoy a sustainable 8% income? It’s often said that dividend yields of more than 6% are generally at risk of being cut. But as with all rules, there are exceptions. Today I’m looking at two stocks with forecast dividend yields of 8% or more for the current year.

Accidental profits

Legal services firm NAHL Group (LSE: NAH) operates in the personal injury market, generating leads for solicitors who handle claims. It also works with critical injury cases and has an unrelated service providing conveyancing leads.

The business has two parts — marketing and legal services. The structure of the legal operations has changed in recent years due to regulatory changes. This highlights a major risk with this type of company — it’s vulnerable to political and regulatory interference.

However, my impression is that NAHL is quite a well-run firm. Despite dealing with a changing regulatory environment it’s been consistently profitable and cash generative in recent years, operating with very little debt.

On track to deliver an 8% yield

In a trading statement today, the firm said that trading during the first half of the year had been in line with expectations. According to chief executive Russell Atkinson, “earnings are in line with our plans”.

Based on the group’s revised dividend policy of paying out half the group’s earnings each year, analysts expect a full-year dividend of 9.5p per share, giving the stock a forecast yield of 8%. Trading on a forecast P/E of 6.2, the shares seem cheap.

Overall, my view is that the stock’s valuation reflects the risks facing investors in this business. If NAHL continues to perform well, then I think the shares could be a good income buy at this level.

A potential bargain?

With a market cap of under £60m, NAHL might be too small for some investors. One larger company offering a super-sized dividend yield is housebuilder Crest Nicholson Holdings (LSE: CRST).

Crest’s forecast dividend yield of 8.5% is one of the highest in the FTSE 250. But the firm’s shares have fallen by 28% so far this year, as investors have taken fright at the firm’s falling profit margins.

Expensive houses are harder to sell

The Surrey-based firm’s main focus is on London and the south of England. Prices are flat in these markets, according to management, but the cost of building houses is still rising. As a result, Crest’s operating profit margin fell from 19.1% to 17.2% during the first half of this year, compared to the same period last year.

It’s worth noting that some company insiders have seen the stock’s decline as a buying opportunity. And to be fair, the company still appears to be in good financial health.

Earnings are expected to be broadly flat this year, at about 65p per share. The company has indicated plans to pay a dividend of about 33p for the full year. These figures put the stock on a forecast P/E of 6, with a prospective yield of 8.5%.

Despite this tempting price tag, I’m uncomfortable investing in a firm with falling margins after such a long housing boom. I believe there are better opportunities elsewhere in the property sector.

The post Dividend stocks: Two 8% yielders I’m considering right now appeared first on The Twelfth Magpie.

More reading

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.

2 monster dividend stocks I’d buy and hold today

Rupert Hargreaves — Tue, 06 Feb 2018 11:50:21 +0000

RM (LSE: RM) is one of the market’s dark horses. The company flies under the radar of most investors but its returns over the past five years have been nothing short of outstanding.

Indeed, over the period, the shares have returned 100% excluding dividends. Including dividends, shareholders have seen a return of 125%.

And it looks as if these returns are set to continue as today the company announced, alongside its final results for the period ending 30 November, a 25.9% increase in adjusted diluted earnings per share and a 10% increase in the proposed full-year dividend of 26.6p per share.

Successful year

This dividend hike follows a healthy year for the supplier of technology and resources to the education sector. Overall, revenues for the period increased by 11% to £185.9m and adjusted operating margins increased from 11.2% to 11.9%. These operational improvements helped the company deliver adjusted operating profit growth of 17.4%.

RM’s performance received a substantial boost in the year after the company acquired the education & care business of Connect Group plc for £59m. The acquisition contributed revenues of £27.8m for the period. Even though the group did borrow to acquire this growth, robust cash generation is already allowing it to pay off creditors. Before the acquisition, RM’s net cash balance was £40m. By year-end, net debt had fallen to £13.4m implying a reduction in net debt of £5.6m over the past few months.

Going forward City analysts are expecting further growth from the company. Following this year’s strong performance, earnings per share growth of 9.1% is projected for 2018 indicating that the shares are trading at a discount forward P/E of only 8.3. A market-beating dividend yield of 4.3% is also on offer.

So overall, if you’re looking for a cheap growth stock with a dividend growing at a double-digit percentage every year, RM could be the company for you.

Changing with the times

Another dividend stock that’s on my radar today is NAHL (LSE: NAH). This personal injury-focused law firm has fallen out of favour with investors over the past few years, due to government attempts to clamp down on the sector. However, management has been trying to diversify, and so far this strategy is succeeding, with the group’s critical care division and residential property arm producing steady results.

These efforts are expected to help the company continue to grow in a harsh environment. Over the next two years, City analysts expect revenues to expand by around 9%, although net profit is expected to slide by 25% over the same period.

Still, NAHL’s discount valuation and high-single-digit dividend yield more than make up for this earnings decline. The shares currently trade at a forward P/E of 9.3 and support a dividend yield of 7.3%. The payout is covered 1.5 times by earnings per share, and the group has a relatively stable balance sheet with net gearing of just 16.2%, leaving plenty of room for manoeuvre.

It could also be the case that City expectations for the company’s outlook turn out to be too pessimistic. Indeed, only a few weeks ago the firm announced to the market that trading during the fourth quarter had exceeded expectations and, as a result, earnings for the full year would beat City estimates. With this being the case, I’m optimistic about NAHL’s future.

The post 2 monster dividend stocks I’d buy and hold today appeared first on The Twelfth Magpie.

More reading

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.

Two 7% yielders I’d consider buying today

Roland Head — Wed, 17 Jan 2018 16:50:41 +0000

As an income and value investor, stocks with very high dividend yields always attract my interest. But I don’t usually buy them, as quite often I find warning signs suggesting that a dividend cut might be likely.

Today I want to look at two stocks with 7% yields that I believe could be quite safe.

Better than expected

Shares in personal injury specialist NAHL Group (LSE: NAH) fell by nearly 4% today, despite the firm advising investors that its full-year underlying operating profit for 2017 should be in line with expectations.

In fairness, this stock has put on a spurt in recent months, having risen by 40% since September. I wouldn’t be surprised if some traders had decided to take profits after such a strong run.

For longer-term investors, this business still seems attractive to me. Unlike some rivals, debt levels are low and the group doesn’t have a lot of money tied up in unpaid bills. Cash generation is strong. Previous years’ dividends have generally been paid out of genuine surplus cash.

As such, the shares look cheap to me, with a 2018 forecast P/E of 9.5 and a prospective yield of 7.2%.

What’s the catch?

The main risk here seems to be that the legal regulations which govern NAHL’s business are changing. Management have already taken steps to restructure the business to work within the new rules, which are expected to come into force no earlier than April 2019.

However, it’s not yet clear how large the eventual impact on profits will be. Earnings are expected to have fallen by around 8% in 2017, and are forecast to drop a further 20% in 2018.

NAHL’s dividends are also falling to reflect this lower level of earnings. So although the stock is cheap, investors have to take a view on future earnings growth. Overall, I think this unusual stock is probably worth a closer look.

This Woodford pick looks cheap to me

Fund manager Neil Woodford’s focus on belief in the UK economy has led him to invest in a number of housebuilding stocks. One of these is Crest Nicholson Holdings (LSE: CRST), a FTSE 250 firm with a focus on the south of England.

The group’s shares currently trade on a relatively modest valuation compared to some rivals, with a forecast P/E of 7.3 and a prospective yield of 6.9%. This payout should be covered twice by earnings this year and looks entirely affordable to me in the current market.

The group’s balance sheet also seems healthy enough, with just £30m of net debt versus forecast profits of £167m.

What might go wrong?

The obvious risk is that the housing market could crash. However, low interest rates and government support through Help to Buy seem likely to delay this. I suspect a crash could still be some way off.

I also think that Crest’s focus on “the southern half of England” could help to make it more resilient in a downturn. Historically, the south has recovered more quickly from housing slumps than most other parts of the UK.

The group’s forward sales were up by 13.6% at the end of October, and total sales are expected to rise by about 13% to £1,205m this year. In my view, this 7% yielder could be a rewarding buy in 2018.

The post Two 7% yielders I’d consider buying today appeared first on The Twelfth Magpie.

More reading

This forgotten turnaround stock could yield 12%

Roland Head — Tue, 19 Sep 2017 10:59:37 +0000

Today I’m going to take a look at a stock which could be a very rare find indeed — a company with the ability to offer an affordable 12% dividend yield.

The business in question is personal injury-focused legal services group NAHL Group (LSE: NAH). In its half-year results today, the company confirmed that its performance so far this year is in line with expectations.

The group’s dividend policy remains unchanged, which means that the full-year payout should be covered 1.5 times by earnings per share. Based on forecasts for full-year earnings of 24p per share, that gives a total dividend of 16p. Today’s interim dividend of 5.3p supports this forecast, as NAHL’s final dividend is usually twice the size of its interim payout.

At the current share price of 132p, a dividend of 16p gives a yield of 12.1%. So what’s the catch? Why aren’t income investors buying as much stock as possible?

2 possible problems

NAHL is a business in transition. Changes to the regulations regarding personal injury claims have forced the group to reshape its business. It’s too early to say how successful this will be or whether profits will be sustained at historic levels.

The company expects 2017 and 2018 to be transition years. Analysts’ forecasts are for the group’s profits to fall by around 20% in 2018. I’d expect a similar cut to the dividend next year. But this still gives a prospective yield for 2018 of 9.9%.

Buy or sell?

There’s considerable risk here. But the group’s management has generally delivered well in the past, and its finances remains strong.

I’d argue that if NAHL can maintain profits at next year’s forecast level of around £9m, the shares could rise by about 50% from their current level. However, failure to deliver could result in permanent losses for shareholders.

How safe is this 6.6% yield?

Another company with a very high yield is men’s formalwear specialist Moss Bros Group (LSE: MOSB). This business hires and sells suits to customers and has, for several years, offered a generous yield of about 6%.

This dividend has not been covered by earnings since 2014. But the company’s strong net cash position, boosted by advance payments on hired outfits, has meant that this generosity has been affordable.

However, shareholders will know that the value of Moss Bros shares has fallen by more than 15% since May. While this has lifted the yield on the stock, I believe it’ also highlights growing risks to the dividend.

Clouds gathering?

Moss Bros’s trading update for the 15 weeks to 13 May warned of a 0.5% reduction in retail margins due to a midseason sale. This was introduced in response to “a much tougher trading environment”.

The update also revealed a 3.8% fall in hire orders, while like-for-like hire sales on a ‘cash taken’ basis fell by 14.2% during the period. This was due to the firm reducing the deposit it takes from each customer when hire orders are placed.

Pressure on both cash flow and profit margins appears to be growing. And with the stock already trading on 16 times forecast earnings, I think the dividend is the only thing supporting the share price. If the payout falls, I’d expect the shares to plummet. I’m not tempted at current levels.

The post This forgotten turnaround stock could yield 12% appeared first on The Twelfth Magpie.

More reading

2 super-charged income stocks trading at ultra-low valuations

Ian Pierce — Wed, 02 Aug 2017 11:00:59 +0000

Despite rising almost 60% in value over the past year, shares of plastic doorframe and window manufacturer Eurocell (LSE: ECEL) still trade at a bargain basement 8.9 times trailing earnings while kicking off a healthy 3.74% dividend yield.

The company has done remarkably well recently as rising property values and solid economic growth have led homeowners to upgrade to double-glazed windows and doors or add a conservatory to their homes. This has driven demand for the rigid plastic frames that Eurocell makes and distributes.

By acquiring competitors and expanding its retail presence across the country, this growth has continued in the six months to June despite a flat remodelling market in the UK. Year-on-year (y/y) revenue rose 11% to £108.1m as the company opened up 15 new branches and also made inroads into the new build housing market that continues to grow steadily due to restricted supply.

It wasn’t all good news though as rising materials costs due to inflation and the weak pound did send gross margins down from 52.1% to 51.4% y/y, which led to adjusted earnings per share rising by just 8%. However, with net debt falling to just £20.8m, or less than one times EBITDA, management was still able to increase the interim dividend payout by 7% to 3p per share.

If last year’s final dividend payout of 5.7p per share rises by a similar amount, investors could be looking at around a 9.1p payout for the full year that would yield roughly 4% at today’s share price.

That said, the markets it targets are very reliant on continued economic growth and rising property values. And the fact that companies such as Safestyle UK that operate in the same sector have recently warned on profits is not a good sign. Eurocell continues to grow nicely and offers a healthy dividend yield, but the cyclical nature of the sector scares me and I reckon there are safer income stocks out there.

Too good to be true?

While Eurocell looks cheap and its dividend yield is impressive, both figures pale in comparison to those posted by NAHL Group (LSE: NAH), which offers a 14.6% dividend yield while trading at just 5.4 times forward earnings.

These figures may look incredibly appealing but when something looks too good to be true, it generally is. I believe this holds true in the case of NAHL. The group’s core business is operating the National Accident Helpline that connects those injured in accidents with a lawyer in exchange for a small fee.

This was a tidy little business for a long time but proposed regulatory changes have the potential to damage it. The main alterations would be an increase in the maximum claims ceiling that could be sought in small claims court, which would mean less need for lawyers, and changes to how personal injury cases are compensated. The market has understandably reacted negatively to these proposals and sent the share price of NAH plummeting 45% over the past year.

There’s still hope for NAH as it is diversifying its revenue streams, remains highly cash generative and has low debt. But until we see for sure what effect these proposed changes will have on NAH’s bottom line, I won’t be picking up its shares.

The post 2 super-charged income stocks trading at ultra-low valuations appeared first on The Twelfth Magpie.

More reading

Ian Pierce has no position in any shares mentioned. The Motley Fool UK has recommended Safestyle UK. 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.

2 shares with explosive long-term growth potential

Rupert Hargreaves — Tue, 21 Mar 2017 12:00:03 +0000

Shares in Vectura (LSE: VEC) are shooting higher today after the company reported an impressive set of results for the nine-months ending 31 December. The results, which show the first six month period after the firm’s merger with peer Skyepharma back in June, revealed revenue in the nine-month period was up 76% to £126.5m from the £72m generated in the prior 12-month period. Recurring revenue accounted for 80% versus 60%.

Earnings before interest, tax, depreciation and amortisation in the nine-month period hit £34.1m, up from the £23.2m reported for the prior 12-month period.

Cash is king

On a pro-forma basis that compares the nine months to the end of 2016 versus the nine months to the end of 2015, revenue was up 27% to £115.6m from £91.6m while EBITDA was up 57% to £17m from £10.8m.

Unfortunately, due to higher amortisation charges of £64m, compared to just £18.8m for the prior 12-month period, Vectura’s pre-tax loss ballooned to £40.1m. But in many ways this accounting loss is irrelevant. What really matters is its cash generation. During the nine-month period, the company generated £28.2m of cash, taking the cash balance to £92.5m at the end of the period, almost 9% of Vectura’s market capitalisation.

As it shortened its financial year after merging with Skyepharma, these results should be interpreted as the group’s full-year 2016 results. Analysts had been expecting a loss from the company but going forward they believe its earnings will surge. For 2017 earnings per share growth of 27% is pencilled-in and for 2018 growth of 48% is expected as the firm continues to roll out new products.

Even though shares in Vectura currently trade a forward P/E of 25.4, this growth is certainly worth paying for, especially considering its cash balance. The company does not currently offer a dividend although considering the cash pile it holds, I wouldn’t rule out a dividend in the near future.

Dividend champion

As well as Vectura, shares in National Accident Helpline (LSE: NAHL) are also rising today following an upbeat set of results from the company.

For the year ending 31 December, underlying revenue declined 2.6% to £49.4m but underlying operating profit rose 15.1% to £18m thanks to an improvement in the firm’s operating profit margin from 30.8% to 36.4%. Profit before tax increased 13.3% to £15.8m and basic earnings per share rose 1.4p to 27p. Off the back of these results, management has increased NAHL’s dividend payout for the year by 1.6% to 19.1p giving a dividend yield of 11.4%.

City analysts are not optimistic about NAHL’s outlook but today’s results should alleviate concerns about the company’s future. Falling revenue but rising profitability shows that NAHL can adapt to the changing regulatory environment, which is good news for shareholders.

And even if earnings collapse as predicted over the next two years (analysts have pencilled-in a 30% decline in earnings per share) the shares still look cheap. Based on 2018 forecasts, shares in NAHL currently trade at a forward P/E of 8.2 and support a dividend yield of 8.6%.

The post 2 shares with explosive long-term growth potential appeared first on The Twelfth Magpie.

More reading

Rupert Hargreaves owns shares in Vectura. 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.

These 8%+ yields are some of my top dividend buys for 2017

Rupert Hargreaves — Wed, 04 Jan 2017 10:35:49 +0000

Dividends are the bread and butter of every portfolio. Many studies have shown that over the long term, dividends power the bulk of any portfolio’s returns and without these payouts, investors could be sacrificing as much as 4% per annum in returns over the long-term.

In today’s low-interest-rate environment dividends are even more important as they can give a new lease of life to your savings. So, here are three of my favourite dividend stocks for 2017.

Slow and steady

Furniture and flooring group SCS (LSE: SCS) may not be the most exciting company around, but it is an income champion.

Indeed, for the year ending 31 July 2016, City analysts expect the company to pay a dividend to shareholders of 14.5p per share, which equates to a yield of 8.5% at current prices. The shares currently trade at a forward P/E of 7.9 and the payout is covered 1.5 times by earnings per share.

Unfortunately, analysts aren’t expecting any fireworks from the group this year. Earnings per share growth of zero is pencilled-in for the year ending 31 July. Still, SCS’s low valuation and 8.5% dividend yield appear to make up for the lack of growth.

Putting shareholders first

Shares in DX Group (LSE: DX) lost around 75% of their value last year when the company warned on profits and ever since the shares have struggled to return to their former glory. Nonetheless, even though DX’s earnings per share have fallen by 50% since 2015, the company’s dividend payout of 2.5p is still covered twice by earnings per share indicating that the payout is safe for the time being.

A dividend payout of 2.5p per share equates to a dividend yield of 13.9% at current prices. What’s more, just like SCS, shares in DX trade at a highly attractive valuation. City analysts are projecting group earnings per share of 4.8p for the year ending 30 June 2017, meaning that the shares currently trade at a forward P/E of 3.8.

Cloudy outlook

Legal services group NAHL (LSE: NAH) will be glad to have put 2016 behind it. Concerns about the company’s business model knocked 47% off the share price during 2016 as investors fled the stock. However, City analysts aren’t predicting doom for the firm any time soon.

For the year ending 31, December 2016 analysts are expecting the group to report earnings per share growth of 16% although these gains are expected to disappear next year. For the year ending 31, December 2017 earnings per share are projected to fall 21% back to the level reported for 2015. Analysts are also expecting management to reduce the company’s dividend payout in line with declining earnings. From a payout of 19.2p for 2016, analysts have pencilled-in a full-year dividend payout of 15.9p per share for NAHL during 2017, down 17.2% year-on-year but still equal to a dividend yield of 11.8%.

Further, NAHL’s shares currently trade at a forward P/E of only 5.7, which is cheap even considering the market’s concerns about the company’s outlook.

The post These 8%+ yields are some of my top dividend buys for 2017 appeared first on The Twelfth Magpie.

More reading

Rupert Hargreaves 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.

Two cracking shares for growth and dividends

Alan Oscroft — Wed, 21 Sep 2016 13:40:01 +0000

Whether to seek share price growth or dividend income is an age-old question, but is it a choice we really have to make? Here are two companies with news out today that I think are set to provide years of both.

Personal injury profits

NAHL Group (LSE: NAH) is perhaps not a familiar name, but its National Accident Helpline brand is — and that, along with the rest of the firm’s marketing services provided to the legal profession, looks like good business to me. I wasn’t surprised to see first-half pre-tax profit up 17% to £7.5m, as reported in Wednesday’s interim figures, together with a 5.6% rise in earnings per share. Cash conversion of 95.7% helped the firm hike its interim dividend to 6.35p per share.

But what does surprise me is the valuation of NAHL’s shares, priced at 263p. Forecast EPS growth of 19% this year and 33% next gives us low P/E multiples of 8.9 and 8.6. That results in PEG ratios of 0.5 and 0.3 respectively — anything around 0.7 or lower is usually considered a good sign by growth investors.

This low valuation has come about through fears of changes to personal injuries regulation — plans to curtail whiplash claims were announced last autumn by George Osborne, but he’s history now. But even when changes do come, NAHL seems to be on top of it, with chief executive Russell Atkinson speaking of the firm’s diversification and its “deliberate strategy to reduce volumes and focus on higher value case types,” which is helping to improve margins.

And on top of that, NAHL is expected to pay dividend yields of around the 7.5% mark, which should be well enough covered by earnings. It’s a risky investment, but I see over-reaction in the low share price and I think it could be a winner.

Building on services

Another tempting combination of share price growth and dividends I see is Interserve (LSE: IRV), whose shares are down 29% over the past 12 months to 402p. But they’ve been recovering of late, having picked up 80% since early July, and that includes a 4% hike on the day the services firm announced a new contract. Interserve’s construction joint venture Khansaheb is set to expand the City Centre Ajman mall in the United Arab Emirates under an £81m deal.

August’s first-half results revealed modest improvements all round, with the interim dividend lifted by 2.5% to 8.1p per share. Net debt was reduced to £275.6m, from £308.8m at the end of 2015, though that should rise again by the end of this year to £300m-£320m — and that does concern me a little.

The firm’s guidance was unchanged, so we should see a full-year EPS fall of around 5%, but the City folk have a return to growth on the cards for next year. And with what chief executive Adrian Ringrose described as a “healthy future workload” (which stood at £7.6bn at the interim stage), I can see further years of steady earnings growth.

On valuation terms, we’re looking at P/E ratios of just 6.3 this year and 5.8 next, and on top of that we have dividend yields of 6.3% and 6.6% pencilled-in. I was previously concerned that a cut might be needed, but strong forecast cover and the confidence the firm has shown by increasing its halftime payment have allayed that concern.

The post Two cracking shares for growth and dividends appeared first on The Twelfth Magpie.

More reading

Alan Oscroft 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.

3 soaring small-caps: STM Group plc (+12%), Verona Pharma plc (+20%) and NAHL Group plc (+9%)

Peter Stephens — Mon, 20 Jun 2016 15:58:00 +0000

Relatively upbeat

Shares in Verona Pharma (LSE: VRP) have soared by over 20% today after the company announced a successful placing to raise gross proceeds of £44.7m. The money raised will be used to fund a Phase 2b clinical trial in chronic obstructive pulmonary disease (COPD) for the company’s treatment called RPL554. Further Phase 2 studies for RPL554 in COPD and cystic fibrosis are also planned, with the money being earmarked for that use, too.

Clearly, the outlook for Verona Pharma is relatively upbeat and market sentiment is improving following a challenging year for the company’s investors. Even after today’s rise, shares in Verona Pharma are still down by 37% in the last year but with the company’s financial outlook being optimistic, that could be about to change.

Certainly, Verona Pharma is a smaller, high risk play which lacks the diversity of a major pharmaceutical peer. However, for less risk averse investors it could be worthy of a closer look – especially for the medium to long term.

A step-change in sentiment

Also increasing in value today are shares in STM (LSE: STM), with the financial services company recording a rise of 12%. That’s despite no significant news flow having been released by STM, with a rising wider market likely to be the major reason for improving investor sentiment in the stock.

Today’s rise is a step-change in investor sentiment for STM, with the company’s share price having fallen by 13% year-to-date even with today’s double-digit gains taken into account. And with STM forecast to increase its bottom line by 23% in the current year and by a further 33% next year, it would be somewhat unsurprising if the market continued to view STM more favourably.

This could lead to an upward rerating and with STM trading on a price-to-earnings growth (PEG) ratio of just 0.2, there is tremendous scope for this to take place over the medium to long term. Furthermore, due to STM’s yield of 3.1% and its forecast growth in dividends of 31% next year, it remains a sound income option for less risk averse investors.

Wide margin of safety

Meanwhile, shares in NAHL Group (LSE: NAH) are also among today’s biggest gainers. They are up by as much as 9% despite no significant news flow having been released by the company since its AGM statement in May. Encouragingly, NAHL reported back then that it was trading in-line with expectations, although its outlook remained uncertain given the prospect of regulatory change following the Chancellor’s Autumn Statement from 2015.

Looking ahead, NAHL is forecast to increase its bottom line by around a third next year. If met, this would put it on a forward price-to-earnings (P/E) ratio of around 8.2 which would indicate excellent value for money. And with a wide margin of safety, NAHL could be worth buying even though market sentiment is weak following its 26% fall in value over the course of the last year.

The post 3 soaring small-caps: STM Group plc (+12%), Verona Pharma plc (+20%) and NAHL Group plc (+9%) appeared first on The Twelfth Magpie.

More reading

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.

Are 9%+ Yields At NAHL Group PLC, Vedanta Resources plc & Lancashire Holdings Limited Too Good To Last?

Roland Head — Tue, 22 Mar 2016 11:45:53 +0000

Dividends of more than 6% are generally said to be high risk. But there are occasional exceptions. In today’s article I’ll take a look at three stocks offering yields of close to 10%.

NAHL Group

Shares in legal services firm NAHL Group (LSE: NAH) fell today, despite the company confirming a 19% dividend hike which gives NAHL stock a trailing yield of 9.9%!

The problem is that more than 90% of NAHL’s pre-tax profits last year came from personal injury claims, via its National Accident Helpline business. The Chancellor announced a review of the personal injury (PI) sector in his Autumn Statement last year, and NAHL believes “some regulatory change in PI is inevitable”. A crackdown on whiplash compensation and other controversial claims is expected.

NAHL warned today that lower demand for personal injury claims will lead to reduced profits in 2016. Despite this, the group said today that it’s confident of delivering earnings growth in 2016, albeit “marginally below expectations”.

The shares currently trade on a trailing P/E of just 7.4. If NAHL can maintain earnings growth, then this could prove to be a bargain. But uncertainty about future regulatory changes makes this a risky bet, in my opinion.

Vedanta Resources

Indian mining group Vedanta Resources (LSE: VED) is expected to pay a dividend of $0.36 this year, giving a forecast dividend yield of 7.6%. Although this is 44% less than last year’s payout, Vedanta remains one of the highest-yield stocks in the FTSE 250.

Is this yield sustainable? There are no guarantees, but it’s just possible that Vedanta will be able to avoid further cuts.

Vedanta has a proven ability to generate free cash flow at quite low commodity prices. The group’s interim results for the six months to 30 September showed free cash flow of $1.3bn. Net debt fell by $0.9bn to $7.5bn during the period.

The forecast dividend of $0.36 per share will only cost Vedanta $100m to pay, as the group has just 276m shares in circulation. I suspect that chairman and 68% shareholder Anil Agarwal will be reluctant to cut this payout unless conditions get much worse.

Vedanta is still quite risky, but I suspect it could be a good income buy at current levels.

Lancashire Holdings

Specialist insurer Lancashire Holdings (LSE: LRE) covers assets such as oil rigs and cruise ships. The group also provides catastrophe insurance for property assets such as power stations and airports.

Market conditions have been soft in recent years. Rather than cutting prices or relaxing its underwriting standards, Lancashire has simply returned surplus cash to shareholders. In 2015, the group declared ordinary and special dividends of about 70p. At the current 555p share price, that gives a trailing yield of more than 12%.

Lancashire paid out a similar amount in 2014, but the outlook will eventually change. A surge of claims or an upturn in business conditions would reduce the group’s surplus capital.

Another concern is that one of Lancashire’s three divisions, Cathedral, has seen a number of senior departures recently. We don’t yet know if this is significant.

Lancashire currently trades on 11 times 2016 forecast earnings and has a forecast yield of 9.2%. I suspect this could be a good buy, but the complexity of the business makes it hard to be certain.

The post Are 9%+ Yields At NAHL Group PLC, Vedanta Resources plc & Lancashire Holdings Limited Too Good To Last? appeared first on The Twelfth Magpie.

More reading

Roland Head 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.