Closer to home, Brexit remains another big unknown. Given such uncertainty, I think it makes sense to invest at least part of your portfolio in proven income stocks in defensive sectors.

Is growth slowing for this top performer?

One stock on my radar is Lloyd’s insurer Novae Group (LSE: NVA). This £516m FTSE Small Cap stock has a low profile among private investors, even though its share price and dividend have both doubled since 2010.

Despite this performance, Novae currently trades on a forecast P/E of 8, with a prospective yield of 4.3%. As a value investor, this modest valuation attracts my interest. So does today’s third-quarter trading statement raise any issues investors should beware of?

Novae’s gross written premium (equivalent to sales) rose by 15.8% to £717.4m during the first nine months of 2016. However, while Novae continues to expand, pricing power with existing customers appears weak. The group’s average renewal premium fell by 3.2% during the third quarter. Novae says this is the result of the firm investing in favourable sectors, while gradually withdrawing from less profitable areas.

There was nothing in today’s statement to alarm investors, in my view. What may be more of a concern is that the outlook for next year is somewhat uncertain. The latest broker forecasts suggest that Novae’s earnings per share could fall by 24% to 77.9p next year. A dividend cut of 8% is also expected.

These forecasts put the shares on a 2017 forecast P/E of 10, with a yield of 4%. I’m tempted to take a closer look, but I’d want to be reassured that Novae isn’t cutting rates in order to maintain revenue growth.

This big beast may be more reliable

If you’re unsure about Novae, FTSE 100 insurance giant Aviva (LSE: AV) could be a better choice.

Aviva’s operating profit rose by 13% to £1,325m during the first half of this year, while cash remittances rose to £752m, up from £495m during the same period last year. Full-year profits of £1,756m — or 49p per share — are expected, giving Aviva a forecast P/E of 8.7.

One major concern for Aviva investors is the firm’s dividend, which was cut in both 2012 and 2013. Although the payout hasn’t yet returned to the 26p level seen in 2011, chief executive Mark Wilson has delivered double-digit growth since 2013. This year’s payout is expected to rise by 11% to 23.1p, giving a forecast yield of 5.4%.

As a shareholder myself, I’m keen on dividend growth — but I am even more keen to see that the payout remains affordable and sustainable. So far, there don’t seem to be any signs of trouble. Aviva’s solvency coverage ratio, an important regulatory measure, was 174% at the end of June. That’s down slightly from 180% at the same point last year, but still towards the top of Aviva’s target range.

Mr Wilson’s focus on cash generation and sustainable growth has delivered good results so far. At current levels, I remain a buyer.

The post Are these insurers a safe haven in troubled markets? appeared first on The Twelfth Magpie.

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Roland Head owns shares of Aviva. 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.

Game Digital

Shares in video game retailer Game Digital (LSE: GMD) have fallen by 5% today after it released a pre-close trading update. It noted that the challenging trading conditions in the UK experienced in the first half of the year have continued into the second half, while in Spain it has experienced good growth.

In response to the difficult operating environment in the UK, Game Digital has implemented an action plan to improve its trading arrangements with suppliers, deliver cost savings across its store estate and redesign its organisational structure as it seeks to become increasingly efficient. This seems to be a sensible strategy and one likely to help to support margins over the short-to-medium term.

Looking ahead, Game Digital is cautious on its sales outlook. This is understandable given the uncertain outlook for the UK economy and with its shares trading on a price-to-earnings (P/E) ratio of 7.8, it appears to be cheap compared to the wider retail sector. However, with risks being high and its future performance difficult to predict, Game Digital appears to be a stock to watch, rather than buy, at the present time.

Novae

Shares in specialist insurance group Novae (LSE: NVA) have fallen by 3% today after the release of its first half results. Despite experiencing a challenging period, Novae has been able to deliver impressive numbers that show it’s a relatively resilient business. For example, its gross written premiums increased by 10.8% to £513.1m, while improvements to its underwriting portfolio have delivered an enhanced attritional loss ratio in a softening rating environment.

Furthermore, Novae was able to increase dividends per share by 2.7% after its pre-tax profit rose by 30.7% versus the first half of 2015. This means that Novae now yields 4.8% and with dividends being covered 2.2 times by profit, there seems to be significant potential for rapidly rising dividends over the medium term. Certainly, its outlook remains uncertain, but Novae’s strong balance sheet and dividend potential make it an attractive option for long-term investors.

Xcite Energy

Meanwhile, shares in Xcite Energy (LSE: XEL) have fallen by 4% after the release of the company’s second quarter results. Its financial outlook remains highly uncertain as, despite having positive discussions with its debt holders, a deal hasn’t yet been struck regarding debt restructuring ahead of the new deadline of 30 September.

Xcite has agreed principal terms for development funding proposals for the first phase development of the Bentley Field. But it still requires a partner to join the development group to either guarantee the full funding package, or to provide any balance of funding that may be required.

With the company making a loss of $600,000 in the second quarter and having a debt pile of around $140m (which has a 30 September deadline), its outlook remains challenging. Therefore, there may be better options on offer elsewhere for Foolish investors.

The post Are these 3 stocks ‘buys’ after today’s updates? 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.

Although revenue was given a big boost by the start of a new rail operation in Germany in December, underlying revenue from existing operations was still up 4%, with growth in every division. Passenger numbers were higher too, with underlying growth of 3%.

According to the latest broker forecasts, adjusted earnings per share should rise 3.4% to 24.6p this year. This puts National Express on a 2016 forecast P/E of 13.5, which seems reasonable.

However, the firm’s dividend potential is of more interest, expected to rise by 7% to 12.1p this year, giving a forecast yield of 3.6%. This payout would cost £62m, so should be comfortably covered by the group’s targeted free cash flow of £100m.

Young upstart looks cheap

Shares in challenger bank OneSavings Bank (LSE: OSB) have fallen by 20% so far this year, but today’s trading statement suggests this stock could be an attractive buy.

The bank generated £627m of new business during the first quarter and acquired a further £131m of business. OneSavings confirmed that it expects to report a net interest margin of 3% for the full year, with a cost-to-income ratio of about 26%.

These figures are significantly better than any of the big banks can manage, making me wonder whether I should look at small banks as potential dividend buys. OneSaving’s decline this year has certainly made the stock cheap enough to be a dividend contender.

The stock now trades on a 2016 forecast P/E of 7.5, with a prospective yield of 3.4%. In 2017, earnings per share are expected to rise by 11%, while the dividend is expected to jump 22% to 11.7p per share, giving a potential yield of 4.1%.

As far as I can see, OneSavings is financially sound and profitable. The only risk with investing in such a small bank is that it may never achieve the scale needed for viable long-term future. At today’s price, I think that could be a risk worth taking.

Is insurance returning to growth?

Lloyds insurer Novae Group (LSE: NVA) insures assets such as ships, oil rigs and buildings against a wide range of risks.

It’s a complex business to understand, but Novae has been a very profitable investment in recent years. The shares have doubled since the start of 2013 while paying out generous dividends.

Novae currently trades on just 10-times forecast earnings and offers a prospective yield of 4.1%. The firm’s gross written premium rose by 9.8% to £282.8m during the first quarter, according an update today. That’s a welcome sign of growth in a sector where pricing has been under pressure. Quality players like Novae have actually been turning down sub-profitable business.

However, claims levels have also been low, which has allowed Novae to return fairly high levels of cash to shareholders each year. A costly string of claims, however, could put pressure on dividend growth, but this appears to be a well-run company in a sector that has seen a lot of takeover activity recently.

The post Are National Express Group plc, OneSavings Bank plc & Novae Group plc dividend buys after today’s updates? appeared first on The Twelfth Magpie.

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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.

However, insurance stocks such as Aviva (LSE: AV) (NYSE: AV.US) continue to offer excellent value for money. That’s despite Aviva’s share price having risen by an impressive 58% in the last five years, with its turnaround strategy being successful in taking a red bottom line, returning it to positive territory and delivering excellent profit growth last year.

In fact, Aviva currently trades on a price to earnings (P/E) ratio of just 11.4, which is difficult to justify when you consider the numerous positive catalysts that are on the horizon. One notable potential catalyst that could push the company’s share price higher is the expectation that Aviva will post earnings growth of 12% next year. That is around twice the growth rate of the wider index and puts Aviva on a price to earnings growth (PEG) ratio of 0.8, which indicates that its shares are very undervalued.

Furthermore, Aviva is set to improve its efficiency in the coming years as it integrates the Friends Life business that was acquired into its own. This may cause teething problems in the short run, since merging two large businesses is never a straightforward task, but in the long run it should mean a lower overall cost base, improved margins and a more dominant position relative to Aviva’s competitors.

Meanwhile, non-life insurer Hiscox (LSE: HSX) also appears to offer excellent value for money at the present time. For example, it has a price to book (P/B) ratio of 1.75 and has a trailing P/E ratio of just 13.5. Furthermore, Hiscox has significant income potential, too, with its dividend currently being covered by profit an impressive 2.4 times. This should provide it with considerable scope to increase dividends at a rapid rate even if profit growth disappoints.

In fact, if Hiscox were to pay out around two-thirds of profit as a dividend then it would equate to a yield of 4.3% and, while Hiscox’s current yield of 2.7% is rather modest, it clearly has the potential to move much higher.

It is a similar story with smaller peer, Novae (LSE: NVA). Its dividends are covered twice by profit and, with it having a yield of 4.1% at the present time, there is scope for a very generous income return over the medium to long term. Furthermore, like Aviva, Novae also offers stunning capital gain potential, too. For example, it is forecast to grow its earnings by 10% next year and, despite this, its shares currently trade on a PEG ratio of just 1.1, which indicates that strong growth is on offer at a very reasonable price.

The post My Favourite FTSE 350 Stocks Right Now: Aviva plc, Hiscox Ltd And Novae Group Plc appeared first on The Twelfth Magpie.

More reading

• A £10,000 ISA buys 1,931 shares in these 6.5%+ yielding dividend stocks!
• 3 top passive income shares to consider with dividend yields above 5%
• How much do you need in a SIPP to target a stunning £750.75 weekly passive income?
• How to turn a £20k ISA into a £12,000 yearly second income
• Starmer resigns as PM — what could this mean for UK stocks and the FTSE 100?

Peter Stephens owns shares of Aviva. 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.