One stock that has recently cropped up on my radar is pawnbroker H&T Group (LSE: HAT). Ethical considerations aside, over the past five years, this company has proven to be a fantastic investment. Earnings per share have more than doubled as net profit has increased from £5.4m to £10.8m for 2018.

And as profits have increased, management has hiked the company’s dividend payout. The per share distribution has risen from 4.8p in 2014, to 11p for 2018. It looks as if there is still plenty of room for the dividend to grow from here.

Dividend cover — the ratio of earnings per share compared to dividend per share — was 2.7 times in 2018 and is expected to hit 2.9 for 2019. Overall, analysts have pencilled in earnings per share growth of 13% for this year. 

Growth on track

It looks as if the firm is well on the way to meeting this target. H&T’s half-year results reported a 7.9% increase in profit before tax for the first half of the year with operating profit before non-recurring expenses rising 16%. 

With profits up by a high single-digit percentage for the first half of the year, management has decided to increase the interim dividend payout by nearly 7% to 4.7p. Analysts were only expecting growth of 4.6% for the full year. So, it looks as if H&T’s dividend might grow faster than expected in 2019.

This is precisely what I’m looking for in a dividend investment. With a dividend yield of 3.4% at the time of writing, H&T ticks all the boxes on my dividend stocks checklist. That’s why I’m considering it for my Stocks and Shares ISAs today.

Time to buy?

I’m also going to be taking a closer look at the accident management assistance group Redde (LSE: REDD). Shares in this company have been a pretty poor investment in 2019. The stock is down around 56% year-to-date after management revealed that the business was not successful in securing the renewal of a hire and repair contract with a large insurer. This contract had been worth nearly £112m a year to the business.

The loss of the contract will effectively wipe out 10% of Redde’s bottom line. Nevertheless, management is confident that the company can replace this business relatively quickly, considering the scale of the group’s pipeline. Indeed, since 2014, Redde’s sales have increased by more than 160%. 

Considering the company’s track record of growth, I think the recent decline could be an excellent opportunity to snap up shares in this well-run business at an attractive price. 

The stock is currently dealing at a forward P/E of just 8.1 and, more importantly, supports a dividend yield of 10.6%. While there may not be much in the way of dividend growth to look forward to in the next few years as Redde tries to replace the lost business, I think there is a good chance dividend growth will return when the company’s sales start to pick up again. 

With this being the case, I’m looking to add the stock to my portfolio shortly.

The post Why I’m considering these dividend growth stocks for my ISA appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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.

Unfortunately, in recent years this approach has not paid off and several high profile failures have dented his reputation.

However, while the press has focused on the failures, he’s had some tremendous successes as well, which analysts seem to be overlooking.

Record performance 

Burford Capital (LSE: BUR) for example is one of the top five holdings in the LF Woodford Equity Income fund. Over the past five years, this provider of litigation finance has produced a return for investors of 1,332% excluding dividends. Over the past 12 months, including dividends, the stock has returned 80%.

And it looks as if Burford’s growth is only just getting started. Last week the company reported it had managed to more than double income and profit in 2017 and “persistent demand” for its services led to “record new investment commitments” of $1.3bn, “sowing seeds for future profits.” What’s more, even though it’s only a few months old, 2018 is shaping up to be another exciting period for the group. According to last week’s market update, $129m of capital has already been committed to 12 new investments during the first two months of 2018, compared to one single $1m investment in the same period last year.

In my opinion, this activity implies that the company is on track to smash City expectations for growth this year. After 2017’s record performance, analysts are expecting earnings per share to slide by 30% to $0.84 (60p) for 2018. But with the firm looking as if it can break another income record this year, it seems to me as if these forecasts are a tad conservative. 

Analysts have already hiked their earnings targets by 12% over the past month. With this being the case, Burford’s forward P/E of 22.4 does not seem too demanding.

The market’s best company? 

Another Neil Woodford growth stock I’m considering for my ISA is motor claims accident management service business Redde (LSE: REDD).

Redde is a tremendous growth stock. Over the past five years, shares in the company have produced a total return of 42% per annum, making them one of the best performing investments in the entire London market.

The performance is a result of a combination of both earnings growth and multiple expansion. Over the past five years, revenue has doubled as the company has moved from a lossmaking position to an estimated net profit of £36m as expected by City analysts for fiscal 2018. Off the back of this projection, analysts expect the group to earn 11.9p per share for 2018, giving a forward P/E of 14.2. 

Given the fact that growth is expected to slow during 2019 (net profit growth of 6.4% projected) this valuation is a bit on the expensive side. Nevertheless, the company currently pays out all of its earnings to investors via dividends, which means today the shares are trading at a forward dividend yield of 7%, more than double the broader market average. This yield is the primary reason why Redde looks attractive to me.

The post 2 Neil Woodford winning growth stocks I’d buy for my ISA appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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.

However, I’ve recently stumbled across two dividend stocks with yields of 6% that look safe even in the most adverse scenario. 

Returns of 1,700% in five years

Specialist accident management and niche insurance product provider Redde (LSE: REDD) has doubled its sales during the past five years. Shareholders have been well rewarded thanks to this growth. The stock is up 1,411% since year-end 2012, excluding dividends. 

Including dividends, the returns are even more impressive. Redde has consistently distributed around 100% of earnings per share to investors every year, and as a result, the yield on the shares has remained above 6%. Including these dividends, the total return has been 1,700% since year-end 2012. 

It looks as if the firm can keep this track record going. In a trading update published today ahead of the company’s AGM, management said the positive start to the financial year has continued and “as a consequence, trading profits are ahead of the corresponding period last year.” The announcement also confirmed the prospect of £17m or 5.6p per share for the dividend, the “12th consecutive dividend since June 2013. Payments since that date will amount to £105m representing 38p per share.“

The key to dividends

Cash flows are the key to dividends. Luckily for investors, Redde is a cash cow. For fiscal 2017 the company generated a free cash flow of £43.6m before dividends. 

According to my numbers, payouts cost the company £30m, so the distributions were easily covered by cash generated from operations. Over the past five years, the firm has produced £171m in cash and paid out only £86m leaving plenty of headroom for other purposes. All in all, Redde looks like a top income stock to me. 

Despite concerns about its business model, Connect Group (LSE: CNCT) also appears to be generating mountains of cash. According to my figures, for fiscal 2016 the firm reported a free cash flow of £44m, easily covering dividends paid, which totalled £23m. The same trend can be seen for the past five years. The average free cash flow/dividend cover ratio for the company for the past five years is two times. 

Double-digit payout 

Concerns about Connect’s future have weighed on the company’s stock this year. The distribution company’s shares have lost around 40% of their value as investors bail out due to concerns about the firm’s ability to survive as paper sales slide. For the full year, City analysts are projecting a decline in earnings per share of 18%. 

Still,  even though Connect’s outlook is mixed, the shares trade at a bargain basement valuation of only 6.1 times forward earnings, which in my view more than makes up for the uncertainty. Connect also supports a dividend yield of 10.2%. 

As shown above, this distribution seems to be well covered and secure for the time being. So, despite worries to the contrary, Connect looks to be a great income share to me. 

The post 2 stocks I’d buy with dividends yielding more than 6% appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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.

However, if you include dividends, the company’s returns light up. Since summer 2012, the shares have returned around 23% including those payouts. This performance highlights the power of dividends, and with a yield of 5.5% at the time of writing, it looks as if Kier will continue to be an income champion for some time to come.

On-track 

City analysts are expecting it to report earnings per share of 107p for the fiscal year ending 30 June, and according to a trading update from the company today, the group is on track to hit this target. Today’s pre-close trading statement also proclaims that Kier is making real progress reinvesting in its operations and trying to increase value for shareholders. Net debt is expected to be £150m at the end of the year, and the lower end of market forecasts and cash generated of £69m during the year is projected to be reinvested in property and residential divisions. These two groups made a return on capital employed of more than 10% during the fiscal year making them by far the most profitable of the entire group.

Management’s efforts to reduce debt and reinvest in the most lucrative business divisions should underpin further dividend growth. City analysts have pencilled-in earnings per share growth of 11% for the fiscal year ending 30 June 2018, and off the back of this growth, a dividend increase of 4.6% is expected. 

If the company hits this forecast, the shares should yield 5.8% next year based on current prices. For value hunters, this income comes cheap as the shares currently trade at a forward P/E of 11.4, falling to 10.2 for next year.

Market-beating yield 

Along with Kier, Redde (LSE: REDD) is another income champion you should consider for your portfolio.

the insurance services company has chalked up much better long-term returns than Kier, even without dividends. Over the past five years, shares in the company have returned nearly 1,500%. Including dividends, the return is closer to 1,700%.

Unfortunately, in the near term, further share price gains may be capped as shares in Redde currently look expensive trading at a forward P/E of 15.7. Still, for yield hunters, the stock looks attractive as it currently supports a dividend yield of 6.4%. Analysts have pencilled-in payout growth around 5% for the fiscal year ending 30 June 2018, giving an estimated dividend yield of 6.7%. 

This payout is only just covered by earnings per share, but on a cash basis, it looks secure. During the first half, the firm generated just over £22m in cash from operations but the dividend cost only £15m, giving plenty of headroom for further payout growth.

The post Two 5.5%+ dividends that could jump-start your returns appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Rupert Hargreaves 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.

Kcom (LSE: KCOM) has all the hallmarks of an excellent dividend stock and at the time of writing shares in the telecommunications company support a dividend yield of 6.5%.

Return to growth

Over the past few years, Kcom has struggled with rising customer churn thanks to increasing competition, two factors that have weighed heavily on the company’s share price. Management has also been investing heavily in the group’s offering. For the year to the end of March, the company reported a pre-tax profit of £30.5m, down from £88.7m in the year-ago period as operating costs rose to £299m from £257m.

This restructuring is expected to simplify the group and improve profit margins. Management has aligned all of Kcom’s businesses under one brand and is focusing on the operational performance of two segments, Hull & East Yorkshire and Enterprise. In these two markets, the company has almost no competition. It is now focused on investing in its fibre network within these two regions which should drive long-term growth for both the company and shareholders, without distractions.

Excluding last year’s poor performance, between year-end 31 March 2013 and 31 March 2016, the company generated an average annual pre-tax profit of £51m compared to a total dividend cost of around £30m. If the company can return to this historic level of profitability, it looks as if the group’s highly attractive dividend yield is here to stay.

Cash is king

Insurance services provider Redde (LSE: REDD) also appears to be a top dividend stock. At the time of writing, shares in the company support a dividend yield of 6.3%. For the year ending 30 June, analysts have pencilled-in earnings per share of 10.5p, the same level as the dividend payout, giving a dividend cover of just one. These figures may not suggest that Redde’s dividend is really all that sustainable but just like Kcom, looking at the company’s cash figures gives a different picture.

Cash flow from operations is a more reliable indicator of dividend strength than earnings per share, as the latter metric is easily manipulated. If a company does not have the cash to fund a dividend, no matter how strong its earnings are, the payout is not sustainable. For the six months to the end of December, Redde earned cash from operations of £22.3m; dividends paid cost the group just under £15m, easily covered by operational cash flows.

Based on these figures then, Redde’s 6.3% dividend yield looks safe and highly attractive in the current low-interest rate environment.

The post Two 6% dividends to help you achieve financial independence appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

Rupert Hargreaves 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.

Redde is planning to publish its official results for the six months to December 31 at the end of February 2017 but based on trading to date, the group is expecting to report solid year-on-year sales growth. Organic growth and its acquisition of fleet accident management company FM (acquired during October 2015) have both helped to drive sales growth. Management is so confident about the company’s outlook, the board decided to announce today that it expects to declare an interim dividend of not less than 4.9p per share, an 8.9% increase on its interim dividend in the prior financial year of 4.5p.

For the financial year ending 30 June 2017, City analysts are expecting Redde to report year-on-year earnings per share growth of 2%. However, based on today’s update City forecasts could be revised higher as the company now looks set to exceed expectations. 

That said, even if Redde does exceed City expectations for growth this year, the company’s shares already look fully valued. Shares in the company are trading at a forward P/E of 16.2, so earnings growth of 16% per annum or more is needed to make the shares look cheap. Still, after today’s dividend hike Redde’s shares support a highly attractive dividend yield of 6.6%. 

Overall, for income seekers who are not too bothered about Redde’s valuation, the company could be an attractive buy. 

Cautious outlook

As Redde rises, shares in Impellam (LSE: IPEL) are sliding today after the company announced it expects earnings for 2016 will broadly meet market expectations despite disruptions suffered in the UK healthcare market. 

It seems as if the market is concerned about Impellam’s use of language here. “Will broadly meet” is hardly the most inspiring statement and implies earnings will actually come in lower than expectations for the full year. If earnings were on track to meet full-year targets, the press release would have most likely used different terminology. 

Still, City analysts have pencilled-in earnings per share growth of 14% for Impellam this year, but the market is making it clear it doesn’t believe the company can hit this target. Indeed, shares in Redde trade at a discounted seven times forward earnings, a low multiple for a firm expected to report 14% earnings growth this year and 8% earnings growth for 2017. Put simply, it looks as if the market isn’t expecting fireworks from the company anytime soon. 

However, if you’re looking for a cheap stock that’s been neglected by the market, Impellam may be for you. 

Like many of its recruiter peers, Impellam has fallen out of favour with the market due to concerns about the company’s growth outlook after Brexit. If you believe the group has what it take to weather the storm, the shares might offer value. 

The post Today’s small-cap winner and loser: Redde plc and Impellam Group plc appeared first on The Twelfth Magpie.

More reading

• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
• This 7.5% yielding passive income share is at a 13-year low! Time to consider buying?

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.