The Rank Group (LSE:RNK) share price has been falling for some time now. At current levels, are Rank Group shares a bargain that could bounce back and recover, or should I avoid them? Let’s take a look at the pros and cons to help me make my decision.

Gambling business

As a quick reminder, Rank is a gambling business based in the UK. Some of its most prominent and best known brands include Mecca Bingo and Grosvenor Casinos.

So what’s happening with Rank Group shares currently? Well, as I write, they’re trading for 91p. At this time last year, the shares were trading for 162p, which is a 43% decline over a 12-month period. The shares took a bit of a hit in June when the business issued a profit warning, but more on that later.

To buy or not to buy Rank Group shares

So what are the pros and cons of me buying Rank Group shares currently?

FOR: Despite a profit warning for the year ended 30 June, analysts are optimistic for Rank Group’s future prospects. I do understand that forecasts may not always come to fruition, however. They predict earnings could surge as high as a triple-digit percentage, and potentially offer a dividend yield close to 5%.

AGAINST: On 20 June, Rank Group announced that it is expecting close to £40m of profit for the year ending 30 June, despite initially reporting it could be between £47m-£55m. Rank Group shares slumped to 79p, but have recovered 15% to current levels. It pointed towards cost pressures but primarily a lack of footfall from international customers and tourists who regularly frequented its London locations, especially prior to the pandemic, that have failed to return. Profit warnings are rarely a good omen for me when reviewing investment viability.

FOR: At current levels, Rank Group shares look decent value for money on a price-to-earnings ratio of just 11. Furthermore, despite a profit warning, at least the company is not in the red and is turning over a profit. Buying now at dirt-cheap levels with a view to longer-term recovery could be a shrewd move for my portfolio.

AGAINST: Macroeconomic headwinds such as soaring inflation and cost pressures have plagued many businesses in the UK. Rank Group is no different. Rising costs put pressure on profit margins. In fact, this is one of the points raised in its profit warning in the update in June. With no end in sight, these cost pressures may continue for the foreseeable future, affecting investor sentiment and returns.

My verdict

Reviewing the positives and negatives, I’ve decided I would not buy Rank Group shares for my holdings. Another factor putting me off is the rise of online gambling in line with the adoption of technology in recent years. Many traditional bingo halls and casino locations have suffered and I believe this trend may continue.

Rank Group shares are tempting, especially at current levels. I do believe they can recover and Rank will continue to be profitable in the future, however. I would rather spend my hard-earned cash on better quality stocks with prospects of profit growth that can offer consistent returns in the longer term.

The post Could falling Rank Group shares be primed for recovery? appeared first on The Twelfth Magpie.

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Jabran Khan 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.

You’ve probably heard the name before. The company has been around since 1937, starting out in the production of what it describes as “motion pictures,” a terminology that makes me think immediately of that bygone era. The company moved from films to gaming by focusing on the theme of entertainment.

Flat trading

Last year around 57% of the company’s operating profit came from its Grosvenor Casinos brand, which is “the UK’s largest” multi-channel casino operator. Some 34% came from traditional bingo clubs through the Mecca brand, and 9% came from the operation in Spain, which is branded Enracha.

Today’s third-quarter trading statement revealed flat like-for-like sales for the three months to the end of March, with total revenue rising 1% compared to the equivalent period a year earlier. I’ll admit straight away that you are unlikely to find growth in the figures from Rank, at least for the time being. I last wrote about the company in February 2018 and described how the high street and bricks-and-mortar business had been struggling, but the online operation had been doing well. Sadly, the share price is down almost 30% from the 226p it stood at when I wrote that article and today languishes around 160p.

Earnings have been on the slide, but City analysts following the firm have pencilled in a modest increase for next year. Meanwhile, the fall-back in the shares has pushed the dividend yield up, and there’s no immediate sign that the directors plan to cut the payout. The anticipated yield for the trading year to June 2020 sits at just over 5%, and anticipated earnings should cover the payment almost twice.

A decent dividend record

Despite Rank’s operational challenges, the firm has a decent dividend record, as you can see from the following table, which sets out some of the key statistics in the financial record:

The dividend has risen almost 66% over five years and there’s clear support form normalised earnings and cash flow. Meanwhile, offsetting the lack of business growth on offer, Rank sports a modest valuation. The recent share price near 160p puts the forward-looking price-to-earnings ratio for the trading year to June 2020 at just under 11.

I think Rank’s business could be less cyclical than BP’s and the stock is well worth my consideration as a dividend-led investment, with the potential for the firm to post modest growth in the years ahead as it works through the current operational challenges.

The post Why I’d consider this 5% yielding stock alongside dividend star BP appeared first on The Twelfth Magpie.

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Kevin Godbold has no position in any 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.

Four-fifths of group revenues are generated at its physical sites, and consequently adjusted pre-tax profit at Rank dropped 27.6% year-on-year to £29.1m. Particularly disappointing was news that performance at its Grosvenor casinos deteriorated because of “reduced contribution from major players, a weather-impacted first quarter and [a] challenging consumer backdrop.”

On the plus side…

However, there were two big pieces of news that sent investors piling back into the share following Thursday’s results, firstly news that business picked up in the final quarter of the interim period and helped the FTSE 250 firm reiterate its full-year guidance.

And secondly, the release showed that its online services continue to go from strength to strength. Like-for-like sales among Rank’s digital operations leapt 5.1% in the six months, with customer volumes at both Mecca and Grosvenor rising in the period. Including the contribution of its recently-acquired Spanish bingo arm YoBingo! total digital turnover rose 15.8%.

In light of these two factors, City analysts expect Rank to bounce from an estimated 6% earnings drop in the 12 months to June 2019 with a 5% increase in fiscal 2020. And this encourages the Square Mile to anticipate that Rank will have the confidence to keep growing dividends too.

Last year’s 7.45p per share dividend is predicted to rise to 7.7p in the current period and to 8.1p next year. Consequently Rank carries big, big yields of 4.8% and 5% for fiscal 2019 and 2020 respectively.

Another big dividend star

Clearly performance at the company’s venues remain problematic and could still yet throw up some nasties in the months ahead. In my opinion, though, these troubles are baked into the firm’s low valuation, a forward P/E ratio of 11.5 times. Indeed, I reckon this low base could provide more share price strength should Rank carry over the better momentum of the second quarter.

Now Victrex (LSE: VCT) may not be packing the same sort of value as Rank — the firm carrying a prospective P/E multiple of 17.9 times — though I believe that it’s still a name worthy of investment. And not just because of a predicted 124p per share dividend for the year to September 2019, a projection which yields a giant 5.4%.

The plastics manufacturer never recovered from the October share market sell-off after a blistering first nine months of 2018, a drop which I consider a prime buying opportunity. Indeed, while conditions have been difficult for its Automotive and Consumer Electronics units of late, these  are expected to swing back into action during the latter half of the current fiscal year.

On top of  this, there are some lucrative sales opportunities for Victrex’s Gears and Aerospace divisions, helped by its new aero facility in the States as well as the likely creation of additional long-term alliances with aerospace OEMs. The earnings outlook is very strong at the FTSE 250 firm, then, and I think that this should keep translating into great dividend growth.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Victrex. 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.

Getting a stocks & shares ISA instead and using it to invest in stocks that pay decent dividends is, in my view, a far better option, and there are two in the news that I reckon warrant a closer look.

Faster than inflation

Not only has transport operator National Express Group (LSE: NEX) been paying attractive dividends for years, its annual rises have been coming in way ahead of inflation too.

Current forecasts suggest the dividend this year will have grown by 49% since 2013, and added to a five-year share price rise of 52%, that’s an impressive performance. The 2018 yield is forecast at 3.9%, with 2019 forecasts suggesting 4.2%. Those who bought five years ago would effectively be getting around 5.7% and 6.2% respectively on their purchase price.

As long as that continues, shareholders would be seeing their income growing in real terms every year — and if you invest your growing dividends in new shares, you could accelerate that.

Thursday’s Q3 update suggests everything is going just fine, with revenue up 9.5% (8.9% in constant currency terms) and pre-tax profit up 18.3%. The company says its margins are up year-on-year too, and that it expects the current momentum to carry on over the medium term.

As far as the outlook goes, chief executive Dean Finch said the firm’s “continued focus on cashflow and operational performance should allow us to continue to grow profit in the years ahead.” It looks like a fairly safe one to me.

Shares too cheap?

Another that’s caught my attention is the forecast 4.9% dividend yield from Rank Group (LSE: RNK), the owner of Mecca Bingo and Grosvenor Casinos. If analysts are right, the dividend will have risen by 80% in five years, which is really hammering inflation.

But seeing that a recent share price slump has contributed to the yield growing from 2.7% in 2013 to that predicted 4.9%, I’m a lot more cautious. Although Rank shares are marginally ahead of the FTSE 100 over five years, we’ve seen a 45% fall since the end of 2015, and the reason seems clear.

With the rise of online gambling and its ease of play, the demand for bricks and mortar gaming establishments is diminishing — and Thursday’s update only reinforced that.

Like-for-like revenue for the 16 weeks to 14 October fell by 4.9%, with revenue from the firm’s venues dropping by 6.1%. Growth in digital revenue of 1.7% helped to offset that a little, but considering how fast some of Rank’s online competitors are growing, I don’t find that too impressive.

Rank is in a transformation programme at the moment, and the early days of a period when a company is undergoing a refocusing of its operations is not the ideal time to seek reliable progressive dividends. At least that’s my opinion, based on having seen so many companies in similar situations in the past having to control costs by cutting their dividends. I’d give this one a miss.

The post Forget a cash ISA! I’m considering these 2 big dividend stocks to protect my pension from inflation appeared first on The Twelfth Magpie.

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Alan Oscroft 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.

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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• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
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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.

If you’re looking for the best sustainable dividend investments, I think it’s important to look beyond the well-covered FTSE 100 names to find stocks that are available at attractive valuations.

Strong cash generation

Chesnara (LSE: CSN), the life insurance and pensions consolidator is a great example of small-cap stock with a dependable dividend policy.

Owing to economic tailwinds and the successful completion of the acquisition of Legal & General Nederland, Chesnara’s reported group cash generation in 2017 soared to £86.7m, up from £34.3m in the previous year. Pre-tax profit more than doubled from £40.7m to £89.6m, after it partially benefitted from a £20.3m non-recurring gain from the takeover.

As a result, the board delivered another 3% increase in its full-year dividend to 20.07p per share, marking its 13th successive rise in annual dividends. At its current share price of 414p, Chesnara yields 4.8%.

Dividend safety

But the shares’ high yield is only part of the story — the safety of the yield is just as important. And in Chesnara’s case, the payout is very secure. With group cash generation covering its dividend payout by nearly 2.9 times (and profits covering the dividend by a similar ratio as well), the possibility of a dividend cut is extremely remote, while the likelihood of further dividend growth is high.

Sure, Chesnara can afford a higher dividend amount right now, but the board has made it clear that it is not currently considering it. Instead, the company is looking to save its firepower for future acquisitions.

Acquisitions enable the company to grow more quickly and often at a much lower cost to writing new business. On the downside however, the company’s future growth is dependent on its ability to continually find new attractively valued acquisition targets.

Attractive yield

Looking elsewhere, Rank Group (LSE: RNK) may not be a company that you may have come across, but I’m sure you have heard of some of its brand names. The company’s main operations are in the UK, where it owns Mecca Bingo, and Grosvenor Casinos, the UK’s largest casino operator.

Recent weak trading figures have sent shares in the company tumbling, but I still reckon its shares offer an attractive sustainable yield. At its current share price of 175p, Rank offers a 4.2% yield which is backed up by more than two times earnings cover. The balance sheet is also in a good position, with the company reporting a small net cash position of £4m at the end of its first half.

Certainly, its brick and mortar business is stagnating or shrinking, with recent figures pointing to a 2%-3% decline in its Mecca and Grosvenor Casino revenues. But this is a manageable decline and is partially offset by double-digit growth in its digital business, which continues to trade strongly. Moreover, one-off factors were partly to blame, with Grosvenor Casinos’ underperformance exacerbated by a negative contribution from its VIP players, while both UK venues were hit by unexpected cold weather this year.

Looking ahead, City analysts expect the dividend to continue grow, with forecasts of 8p this year and 8.6p in 2019. Adjusted earnings per share for 2017/18 are expected to be flat on last year, although growth of 5.5% is pencilled in for next year. This means its dividend cover ratio is expected to fall only modestly from 2.2 times last year, to a still resilient two times figure by 2018/19.

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Jack Tang has no position in any 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 frankly disastrous trading update at the start of April has seen investors scurry from Rank Group (LSE: RNK) like there is no tomorrow.

The gambling giant’s share price has slumped to levels not seen since February 2015, the intense selling action kicking in after Rank advised that fading footfall at its casinos and bingo halls caused like-for-like revenues to flatline during the 40 weeks to April 1.

Sure, the result was clearly disappointing and caused brokers to scribble out and downgrade their earnings estimates with some gusto. But there was still some cheer to emerge from the release as it underlined the exceptional revenues potential of the online gaming market — Rank saw turnover from its digital operations soar 17% in the 40 weeks.

Stunning yields

A record of steady earnings growth has allowed it to consistently lift the dividend year after year and, while the business is expected to print a rare 4% earnings reversal in 2018 in the wake of this month’s update, thanks to its exceptional cash generation this is not predicted to prove a barrier to further payout growth. The company managed to magic net debt of £33m during July-December 2016 into net cash of £4m during the latest half-year period.

City analysts are expecting the FTSE 250 firm to raise the 7.3p per share dividend paid in the 12 months to June 2017 to 7.9p in the current fiscal period, meaning that investors can enjoy a huge 4.5% yield.

And helped by an anticipated return to earnings growth in fiscal 2019 — a 6% profits improvement is estimated — Rank should have the firepower to raise the dividend again to 8.5p, or so say the number crunchers. Consequently the yield for next year moves to 4.9%.

Whilst Rank’s retail operations are clearly going through a sticky patch, I reckon a low forward P/E ratio of 11.4 times reflects this. And I am confident the rich potential of the online gambling market means it remains a solid growth and income stock for long-term investors.

Crack the code

Those not fancying a slice of Rank may want to take a look at Morses Club (LSE: MCL) instead, another share which offers up yields that smash up much of the competition.

A payout of 6.8p per share is expected when the doorstep lender reports for the 12 months ending February 2018. And with earnings predicted to keep swelling by double-digit percentages — rises of 18% and 17% are forecast for fiscal 2019 and 2020 respectively — dividends are expected to rise at a fair lick too.

The dividend projection for this year stands at 7.6p, and it moves to 8.9p for next year. Yields subsequently stand at an eye-popping 5.8% and 6.8% for these years.

Like Rank, Morses Club can also be picked up for next to nothing, the AIM-quoted stock trading on a forward P/E ratio of 9.9 times. This is much too cheap in my opinion given the rate at which demand for its credit is picking up. Total issued credit boomed 21% last year to £174.3m. And there’s the the rapid improvement in the quality of its loans book too as customer numbers rose 6% in fiscal 2018, helped by an 18% uptick in the quantity of ‘highest tier’ customers.

The post 2 dirt-cheap dividend stocks I’d buy with £3,000 today 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.

Specifically, while the group saw double-digit growth at its online business during the period under review, revenues at the casino and bingo businesses declined 3% and 2%, respectively.

Rank’s Grosvenor casino and Mecca bingo venues have been impacted by “weaker than expected” visits “compounded” by two periods of cold weather. Unfortunately, it seems trading has only deteriorated further as 2018 has progressed. 

During the last 13 weeks, Grosvenor’s revenue has declined 9%, as the slowdown has been “exacerbated by a negative contribution from its VIP players.“

The one bright spot in the trading update is the reported growth at its digital arm. UK online revenue rose 17% on a like-for-like basis for the 40-week period.

Sharpe contrast 

Rank’s performance contrasts sharply with that of its larger international peer William Hill (LSE: WMH). 

At the end of February, William Hill posted an underlying pre-tax profit of £225m for 2017, up 19% year-on-year as net revenues increased 7% to £1.7bn. Like Rank, William Hill’s brick & mortar stores suffered while its online business flourished, although the decline in sales at betting stores for the period was only 1%. Meanwhile, net revenues at its online business, which is predominantly in the UK and Europe, rose 13%.

Based on these growth figures, it looks to me as if William Hill is a better investment than Rank. That  said, William Hill is not without its own problems. 

The company is still waiting on the outcome of the UK government’s review of fixed odds terminals. The Gambling Commission has recommended setting the maximum stake for these terminals at £30, significantly above the worst-case scenario figure of £2 that anti-gambling campaigners have called for. But until the government announces its final decision on the matter, the outlook for William Hill and its peers remains uncertain.

Still, I believe that the company should be able to offset any negative impacts from a lower stake limit by cutting costs and expanding its online division both in the UK and abroad. 

For example, the group’s US business — where it’s a leader in the sports betting market — reported adjusted operating profit growth of 24% for the 52 weeks to 26 December 2017.

Dividend growth 

If the company can continue on its growth trajectory, then I believe it’s a much better income investment than Rank. At the end of February, William Hill hiked its full-year dividend per share by 6% to 13.2p, in line with the policy to pay out approximately 50% of underlying earnings.

This increase means the shares are now yielding 4.2%, compared to Rank’s 4%. What’s more, Rank’s problems indicate to me that the firm will struggle to grow its payout in the years ahead, while William Hill, with its fast-growing international business, seems to have a much brighter dividend growth outlook.

The post 1 FTSE 250 dividend stock I’d buy for my ISA and one I’d sell appeared first on The Twelfth Magpie.

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• 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?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

The waves of risk aversion washing over global stock indices over the past week or so mean that the good news in Rank Group’s (LSE: RNK) latest trading statement has been washed out.

This gives savvy share pickers the opportunity to steal a march on the competition, however, and to pile into the FTSE 250 business ahead of the broader market.

The terrific progress Rank Group is making in cyberspace was underscored by recent news that digital revenues in the UK leapt 16% during the six months ending December, to £60.6m. Consequently operating profit here jumped 56% to £11.4m.

The strength of its exciting online operations allowed it to overcome issues like continued pressure on the high street (revenues across its venues dropped 1% in the period, to £317.5m), as well as the impact of new gaming duty laws on customer bonuses. And it allowed group operating profit before exceptionals to rise 14% in the six months to £41.7m.

Big yields

Rank Group’s positive first-half result gave it fresh juice with which to power up its progressive dividend policy — it hiked the interim reward by 8% to 2.15p per share. And City analysts believe there is much more to come in the near term and later on.

Although earnings are expected to flatline in the 12 months to June 2018, its positive long-term profits outlook — a 5% bottom-line improvement is forecast for fiscal 2019 — means that a full-year payment of 7.3p last time around is predicted to sprint to 8p in the current year.

With the payment expected to rise again in the following period, to 8.7p, yields for fiscal 2018 and 2019 stand at a delicious 3.6% and 3.9% respectively.

An added bonus is that these projections are actually looking pretty secure. They are covered 2 times by predicted earnings through to the close of fiscal 2019. And the gambling giant’s impressive cash generation (cash flows from operating activities leapt 19% during July-December to £61.9m) provides an extra layer of security.

Even bigger yields!

Like Rank Group, dividends over at Ibstock (LSE: IBST) are also expected to advance at an electrifying rate now and beyond, helped by a predicted surge in profits.

In 2017 the total dividend (assisted by a modest 1% earnings uplift) is anticipated to improve to 8.2p per share from 7.7p in the former period. As I say, payout growth is expected to pick up the pace from now onwards — a 14% earnings improvement in 2018 is expected to push the reward to 9.5p.

And next year the dividend, helped by an anticipated 10% annual profits jump, is predicted to rise to 11p in 2019. This means that yields for this year and next rock in at 3.9% and 4.5% respectively.

Ibstock carries a brilliant blend of above-average yields and exceptional security as well, with dividend coverage ranging from 2.1 times to 2.2 times through to the close of 2019.

The Leicestershire-based business saw revenues in its core UK marketplace increase 5% last year, with demand for bricks continuing to grow as 2017 progressed. And Ibstock is well placed to capitalise further on the gaping supply/demand imbalance once its new brick manufacturing plant hits full capacity later in 2018.

The post 2 top dividend stocks I’d buy this February appeared first on The Twelfth Magpie.

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Royston Wild owns shares in Ibstock. 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.

But the share price chart reveals how vulnerable the firm is to the market price of the commodities it produces. There’s a great vee-shaped valley in the chart that mirrors the movement of the price of oil, with a low in the winter of 2016. But in today’s full-year results report, Shell declares that earnings benefitted from higher oil, gas and liquefied natural gas (LNG) prices during the year.

Robust trading

The figures are robust. Cash flow from operations came in 73% higher than a year ago at $35.65bn, of which free cash flow is around $27.6bn. Earnings per share lifted 172% to $1.58, but the directors held the dividend flat at $1.88, which seems prudent since earnings don’t fully cover the dividend payment. That said, the dividend does enjoy decent cover from cash flow.

As well as higher oil prices, improved refining performance and higher production from new fields drove up earnings and offset the effect of field declines and divestments. Operationally, Shell seems to be performing well and I’d be happy to ride the momentum and collect the dividend yield running close to 5.5%, at today’s 2,477p share price. However, I’m wary that things will only remain this rosy as long as the oil price holds up. So my finger would remain close to the ejector button if I took a position in the shares, so constant vigilance is the way forward.

Emerging growth

Gaming services provider Rank Group (LSE: RNK) is another firm with a good record of achieving annual increases in earnings per share and a rising dividend. The company’s traditional high street bricks-&-mortar business is struggling to make progress, but there’s a vibrant and fast-growing online operation within the business that could go on to ensure good returns for investors in the years to come.

Today’s half-year report is encouraging. Although like-for-like revenue was just 1% higher than the equivalent period a year ago,  adjusted earnings per share scored a 16% rise and cash from operations shot up 19%. In a sign of the directors’ ongoing confidence in the outlook, they pushed up the interim dividend by 8%.

Operational challenges

Chief executive Henry Birch said in the report that the good figures came in despite new gaming duty rules on customer bonuses, and in the face of a more challenging retail trading environment on the high street during H1. I’m not too worried about a possible declining high street market in the case of Rank, because operating profit from UK digital operations achieved a massive 56% uplift compared to the year before, accounting for 27% of overall operating profits. If that rate continues, Rank could emerge as a high-growth proposition on the market, as long as the firm’s traditional business doesn’t deteriorate further and offset the progress that digital is making.

At today’s share price near 226p, the price-to-earnings ratio for the current year is below 14, and the dividend yield is around 3.6%, suggesting that the market is not asking us to overpay for Rank’s potential.

The post Why I’d buy Royal Dutch Shell plc and Rank Group plc for their dividends and growth potential 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 recommended Royal Dutch Shell B. 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.