The good news keeps on coming

Today, we received more good news from the firm in the form of the half-year results report. Sanderson earns its living as a specialist provider of digital technology and software solutions for the retail, wholesale, supply chain logistics, food and drinks processing and manufacturing sectors, and things have been going very well.

Compared to the equivalent period last year, revenue came in 18% higher, operating profit increased by 34%, adjusted earnings per share moved more than 32% higher and the company improved its cash balance by almost 137% to £3.29m, which beat the directors’ previous expectations. They were so pleased with the trading outcome and the outlook for the future that they slapped 20% on the interim dividend.

Chief executive Ian Newcombe explained in the report that despite the current buoyant trading, the directors are being cautious about the general economic environment and are monitoring conditions in the market. But he thinks Sanderson is “well positioned” to make further progress for the year to September 2019 because of the strong trading momentum in the first half of the year, the “healthy” order book, high recurring revenue, the cash-backed balance sheet, and the firm’s reputation trading record.

Success pays dividends

Newcombe pledged to channel future success into the ongoing progressive dividend policy, which could reward shareholders well if the company can repeat its previous performance. Over the past five years, the dividend has risen by 100% and the share price is around 80% higher than it was. A performance like that could indeed make Sanderson a millionaire-maker share if it can be repeated going forward.

Since the end of the period, the firm announced the £4m acquisition of Lancashire-based Gould Hall, a specialist provider of logistics solutions. The acquisition “further builds on the Group’s capability” and the directors expect it to be earnings enhancing in its first full financial year under Sanderson ownership.

The firm aims to target “selective” acquisition opportunities in the future, which should add to the robust organic growth we’ve been seeing. I think this dual approach to growing the business looks set to pay dividends down the line, both literally and metaphorically. Indeed, in the report today, the directors make many references to how they intend to channel the firm’s ongoing success into the progressive dividend policy, which I believe is a strategy that will drive up the share price too, giving shareholders a double kicker when it comes to total returns. I like Sanderson a lot and believe it’s worth further research with a view to me buying some of the shares.

The post 1 potential millionaire-maker share I like that’s trading “ahead of expectations” 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.

Of course, there are other dividend growth shares which could be of interest to income-seeking investors. Reporting positive results on Monday was a small-cap stock which could have a bright dividend future, in my opinion.

Improving outlook

The company is Sanderson Group (LSE: SND), the specialist provider of digital technology solutions and innovative software. Its results for the year to 30 September were ahead of the prior year, as well as market expectations. As a result, its share price gained as much as 9% following their release, with investors seemingly increasingly optimistic about its financial prospects after a fall in its market value in recent months.

Revenue increased by 49% to £32.05m, while like-for-like (LFL) revenue was up 6.5% to £22.97m. Pre-contract recurring revenue now accounts for 55% of total revenue, which could provide better sales visibility over the medium term. And with operating profit moving 33% higher to £5.18m, the company’s financial performance has improved significantly.

With a dividend yield of 2.9%, Sanderson Group may not have the highest yield around at the present time. However, dividends are due to rise by 21% in the current year, while they’re covered over twice by profit. As such, strong dividend growth could be ahead, with the stock offering an improving income investing outlook.

Dividend potential

As mentioned, SSE currently has a dividend yield of over 8%. This has risen recently as a result of its falling share price, with uncertainty surrounding the company increasing. For example, its recent update suggested that the plan to merge its domestic energy supply business with npower, to create a larger business that could benefit from economies of scale, may not now take place. Further talks are expected, but the process of combining the two businesses appears to be more challenging than was previous expected.

SSE, though, continues to offer a strong track record of dividend growth, as well as plans to beat inflation when it comes to future dividend growth. With inflation at 2.4%, and seemingly likely to remain at elevated levels over the medium term, an ability to beat CPI in a variety of economic circumstances could become increasingly appealing to investors. That’s especially the case since a number of cyclical stocks in the FTSE 100 may struggle to generate improving profitability, should the world economy face a challenging period.

As such, although SSE may have experienced a difficult period and could lack the defensive appeal, which may investors assume it to have, its dividend investing prospects seem to be attractive in the long run.

The post Have £2,000 to invest? SSE is a FTSE 100 dividend stock I’d buy for the long term appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of SSE. 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, while the index is only down by just 75 points versus its starting price in 2018, this hides the story of volatility that has been present in recent months.

While this may not seem to be a sound time to buy shares, since paper losses cannot be ruled out in the near term, in the long run there could be significant total returns on offer. As such, these two stocks could be worth a closer look.

Strong performance

Reporting on Monday was software and IT services business Sanderson Group (LSE: SND), with a trading update for the first half of its financial year. During the period it expanded through the acquisition of Anisa Group for an enterprise value of £12m. So far, integration has been successful and the company’s Enterprise division has been enhanced in terms of size and scale.

The performance of the company during the six-month period has been ahead of expectations. Revenue and profit have both grown by over 30% during the period, with the company continuing to focus on building recurring revenues including subscription, cloud and managed services revenues. And with sales order intake continuing to be strong and the company’s order book being 15% ahead of the same point last year, its prospects appear to be bright.

Looking ahead, Sanderson Group is expected to post a rise in its bottom line of 9% in the next financial year. The stock trades on a price-to-earnings growth (PEG) ratio of 1.7 and this suggests that it could generate strong share price growth.

Dividend growth

Also offering the opportunity for higher total returns than the FTSE 100 is diversified financial services company Prudential (LSE: PRU). The business is in the process of rationalising its asset base as it seeks to become increasingly efficient and more streamlined within what remains a relatively fast-growing sector.

With Prudential’s bottom line due to rise by 11% in the next financial year and it having a dividend coverage ratio of over three last year, its shareholder payouts have room to expand. In fact, over the next two years it is expected to grow dividend payments at an annualised rate of 8.7% on a per share basis. This puts it on a forward dividend yield of 3% next year, with there being significant scope for further growth in future years.

As such, Prudential could become a more enticing income share. Its exposure to Asia has been a major growth catalyst in recent years and this trend looks set to continue over the medium term. Due to this and the changes it is making to its business model, now could be a good time to buy it.

The post One FTSE 100 dividend stock and one growth stock I’d buy right now appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Prudential. 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.

Both firms have delivered steady growth and rising dividends in recent years, but remain very affordable.

A ‘picks and shovels’ business

During the gold rush, canny entrepreneurs found that it was more profitable to sell essential supplies to would-be gold miners than to mine the gold themselves. Software firm Sanderson Group (LSE: SND) seems to be taking a similar route, with equal success.

It provides a range of software systems used by retailers in their stores, warehouses and online operations. By selling licences upfront and then delivering services, this Coventry-based firm is able to generate enviable free cash flow without having to take on the risks of the retail business, such as long leases, stock and logistics.

Shares in this group rose by more than 5% today after it issued a strong trading statement.  The integration of Anisa, a specialist supply chain software business acquired in November, is proceeding well. Alongside this, Sanderson’s existing businesses are also growing. During the four months to 31 January, like-for-like sales rose by 5% and comparable operating profit climbed 10%.

Why I’d buy

Sanderson’s earnings per share have risen by an average of 12% per year since 2012, while its dividend has risen by an average of 17% per year. Despite this, dividend cover remains at a healthy 2.3 times forecast earnings.

Analysts expect earnings per share to climb 15% to 5.99p this year. A dividend of 2.6p per share is expected for the current year.

These projections give the stock a forecast P/E of 15 with a prospective yield of 3%. In 2018/19, double-digit earnings growth is expected to reduce this P/E rating to 13. I believe the firm’s growth and financial performance mean that it deserves a buy rating.

Solving problems proves profitable

What do you do when you have an ageing cable television network and need to start offering internet-enabled services?

One option is to call Amino Technologies (LSE: AMO), which will provide the software you need to migrate your customers onto a more modern system, often by remotely upgrading their set-top boxes.

This is just one of the television-related services Amino offers its clients, who are happy to pay to avoid a more costly and disruptive rollout of new hardware.

This could be the right time to buy

Last week’s full-year results showed a 12% rise in earnings per share last year, with pre-tax profit 10% higher at £11.2m. The group’s net cash balance doubled to £13m, providing a solid foundation for a 10% dividend increase.

The board expects the company to deliver “sustainable profitable growth” this year and analysts’ forecasts indicate that the stock trades on a P/E of 14, with a prospective yield of 3.7%.

Amino’s performance over the last five years has been impressive. And while past performance is no guide to the future, I think there’s a good chance this company will continue to fire on all cylinders, rewarding loyal shareholders with further gains.

The post 2 high-growth dividend stocks I’d buy and hold for five years appeared first on The Twelfth Magpie.

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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.

Software and IT services provider Sanderson Group (LSE: SND) is one that I think fits the bill. The share price has been a bit volatile over the past couple of years, but at 74p today we’re looking at a 55% gain over five years.

But more important from an income perspective is a dividend that has soared from 1.5p per share in 2013 to 2.65p for the year ended September 2017. That represented an 11% rise over last year, for a 3.6% yield on the current share price. It’s also almost two-and-a-half times covered by earnings per share, so it’s really not stretching the company at all.

Big 5-year jump

With the dividend having risen by 77% in four years, if you’d bought shares around the start of 2013 for about 50p, you’d be earning an effective yield of 5.3% this year on your original purchase price, and the 2.9p forecast for next year would take that to 5.8% — just a shade short of that 6%.

Revenue for the year was largely flat at £21.56m, but adjusted operating profit picked up 5.7% to £3.9m with adjusted basic earnings per share up 18% to 5.2p.

Most importantly (in my view), the firm reported continued strong cash generation which led to a year-end net cash balance of £6.18m — up from £4.34m a year previously and “well ahead of market expectations.“

Buying now could lock in some big future returns.

Superior cover

Norcros (LSE: NXR) has exhibited a slightly less spectacular dividend progression in the past few years, but it’s still impressive. From 4.6p in 2013 (adjusting for 2015’s share consolidation), the dividend has grown to 7.14p for the year to March 2017. That’s a rise of more than 55% in four years, which is massively ahead of inflation.

Forecasts suggest a 4% dividend hike this year followed by a further 5.2% next year, which is a slowdown in the rate of growth — but still beating inflation, and I’m happy with it for a couple of reasons.

First, the cash would be more than three-and-a half times covered by forecast earnings, so it’s looking pretty safe. The other thing is that this is while Norcros, which supplies showers, taps, bathroom accessories, tiles and adhesives, is facing difficult trading conditions — and if it’s looking this good in tough times, I’m optimistic about the longer term.

Acquisition

In fact, Norcros looks to be in a good state to benefit from trade headwinds by making acquisitions at attractive prices. On 23 November, the firm competed the acquisition of Merlyn Industries funded by a new £31.4m open offer, with the enlarged company now on a market cap of £145m.

On top of that, debt at the interim stage at 30 September stood at £20.8m, down 24% and not what I’d call remotely troubling, and the company saw fit to lift its first-half dividend by 8.3%.

Forecast yields currently stand at a little over 4%, with the shares on a forward P/E of only around 6.3. I reckon Norcros is a dividend and growth combination to hold for the long term.

The post Two growing dividend stocks that could soon yield 6%+ appeared first on The Twelfth Magpie.

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The Motley Fool UK has recommended Norcros. 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.

Supported by a steady stream of earnings rises, the software provider has lifted shareholder rewards at a pretty impressive rate in recent times (dividends have been raised at a compound annual growth rate of 12.5% during the four fiscal years up to September 2016).

If broker projections are to be believed, another hefty hike — to 2.6p per share from 2.4p — is on the cards when the Coventry company reports for fiscal 2017. And for the current year another rise is forecast, a 2.9p payout currently being expected, meaning that Sanderson sports a chunky 4.2% yield.

What’s more, this prediction could also be considered pretty well protected, Sanderson boasting dividend coverage bang on the widely-regarded security benchmark of two times.

Revenues rising

Now City analysts are expecting things to have become a bit more trickier at Sanderson more recently and a 2% earnings slip is expected for the 12 months ending September. However, this is expected to be a one-off result.

Sanderson advised today that revenues are predicted to have risen to £21.5m in the past year from £21.3m a year earlier. And news on the company’s order book suggested that sales should continue chugging northwards. This rose to an “optimal” £5m last year from £3m in fiscal 2016, with order intake clocking in at £13.7m versus £12.3m previously.

The City believes that earnings should bounce back immediately in fiscal 2018, and they predict a bottom-line bump of 5%. Moreover, this forecast results in a mega-cheap forward P/E rating of 11.8 times. Those seeking so-called value dividend stocks may want to take a close look at Sanderson in my opinion.

Picture perfect

But whether or not you fancy snapping up some Sanderson, I reckon Photo-Me International (LSE: PHTM) is a share that is definitely worthy of your attention.

With profits growing by robust double-digit percentages over the past five years, the photo booth play has increased the annual dividend by a whopping compound annual growth rate of 19.5% over the period. And the number crunchers are expecting further expansion on both counts.

Even though earnings growth is expected to cool to 5% in the year to April 2018, this is not predicted to prove a barrier to further significant payout growth — an 8.4p per share reward is currently predicted, up from 7.03p last year and which translates into a bumper 4.7% yield.

And for next year, helped by an estimated 6% earnings rise, a 9p dividend is forecast, driving the yield to an impressive 5.2%.

While Photo-Me rocks up on a slightly expensive prospective P/E ratio of 17.7 times, this does little to take the sheen off for me, given the probability of sustained earnings and dividend growth long into the future.

Last week it announced that its entry into the laundry market and photo booth expansion programme continued to deliver the goods, helping revenues to rise 11.2% during May-September. And with these programmes still having plenty of gas in the tank, I believe investors should enjoy sustained profits and dividend growth.

The post Should you buy these ‘secret’ dividend stocks 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.

Solid results

Technology firm Sanderson Group (LSE: SND) produces software systems used by trade customers including retailers and food and drink companies. Examples include ‘click & collect’ systems and software to manage inventories of ingredients for food and drink producers.

Systems like this are increasingly considered essential for maximising a company’s profits and controlling its costs.

In today’s year-end trading update, Sanderson said that revenue for the year ended 30 September is expected to be about £21.5m. That’s marginally below analysts’ forecasts for sales of £22.25m for the year, a factor which may explain why the group’s shares have fallen 4% today.

I don’t think investors need to be too concerned about this slight miss. Today’s trading statement guides for adjusted operating profit of £3.9m. This gives an adjusted operating margin for last year of 18%, which is a slight improvement on last year’s equivalent figure of 17.3%.

Growth prospects

The group has reported several new customer wins over the last year, ending with an order book of £5.8m, up from £3.02m a year ago. Management describes the order backlog as “optimal” and says that net cash at the end of September was “over £6m”, up from £4.34m at the same point last year.

Today’s figures suggest to me that analysts’ forecasts for earnings of 5.4p per share this year are likely to be broadly correct. On that basis, the group’s stock trades on a forecast P/E of 13, with a prospective dividend yield of 3.6%.

At under 70p, I believe the shares could be worth a closer look for small-cap investors.

The next ARM Holdings?

It’s a completely different picture at advanced semiconductor wafer group IQE.

Shares in this high-tech firm have triple-bagged this year, as investors have raced to buy into an exciting growth story. Following the company’s recent interim results, IQE shares now trade on a 2017 forecast P/E of 44, falling to a P/E of 37 for 2018.

There’s no dividend, so what’s the appeal of this high-octane investment?

I’m not a technical expert, but my understanding is that IQE makes semiconductor wafers using more advanced materials than silicon. These are used by manufacturers to make the most high-performance processing chips and sensors in devices such as top-end smartphones and robotics.

The company claims to be the global leader in this field and has a number of major new products due to be launched over the next couple of years. Management believe that the market for its technology is approaching an inflection point, with massive growth potential.

My verdict

In my view, this is a pure growth buy. Based on recent trading, the stock looks expensive. But if IQE does reach the hoped-for inflection point and its sales multiply, the stock could be good value. It could even become the next ARM Holdings, a true tech superstar.

I don’t know enough about IQE to judge how likely this is, but I can say that the company appears to have a solid financial platform for growth, and strong investor backing.

The post One small-cap value stock I’d consider before IQE plc appeared first on The Twelfth Magpie.

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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.

Interim update

Reporting on Wednesday was software and IT services business Sanderson Group (LSE: SND). It delivered a rise in revenue of over 10% versus the same period of last year, with pre-contracted recurring revenues up to £5.4m from £5.2m in the first half of last year. They now account for around half of total revenue and show that the focus on fostering long-term customer relationships is bearing fruit.

Operating profit was 5% higher, while net cash at the period end was up to £4.5m from £3.4m at the same point last year. The company raised dividends by 10%. While this was ahead of profit growth, Sanderson Group still has a dividend coverage ratio of 2.1. This suggests that dividends could increase at a faster pace than earnings without putting the company’s financial position under pressure over the medium term.

Looking ahead to next year, Sanderson Group is expected to record a rise in its bottom line of 6%. This could help to boost dividends yet further, and they are expected to increase by over 10% next year. While this puts the company on a modest forward dividend yield of 3.5%, more dividend growth could make Sanderson a relatively attractive income share for the long run.

Growth potential

Also offering upbeat growth potential is escrow and assurance service provider NCC (LSE: NCC). Its dividend yield of 2.8% is also below that of the FTSE 100, but the company is expected to deliver improving earnings growth over the next two years. This could act as a positive catalyst on shareholder payouts.

For example, NCC is forecast to record a rise in earnings of 16% per annum over the next two years. Given that it has a dividend coverage ratio of 1.6, this could lead to a fast-paced dividend growth outlook. In fact, shareholder payouts are expected to rise at an annualised rate of 8.6% over the course of the next two years. This rate of growth is likely to be above and beyond the rate of inflation, which could make NCC a more popular income share.

As well as its income prospects, NCC also offers clear upside potential. It has a price-to-earnings (P/E) ratio of 23, which, when combined with its growth outlook, translates into a price-to-earnings growth (PEG) ratio of just 1.4. Given the company’s track record of growth and the sound business model which it has adopted, now could be the right time to buy it for the long term.

The post These promising dividend growth stocks could help you retire early appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK owns shares of NCC. 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.