The first of these is FTSE 250 aviation and energy firm Stobart Group (LSE: STOB). This firm has been in the headlines recently as a result of boardroom infighting. But for investors, the stock’s main appeal is a substantial infrastructure property portfolio and an 8% dividend yield.

The Stobart name has strong brand recognition through its road haulage operations. But this business was floated into a separate stock market listing, Eddie Stobart Logistics, last year.

Stobart Group is now focused on running London Southend Airport, a small regional airline and an aviation services business. The group also runs an energy business supplying biomass fuel to UK power stations.

An affordable 8% yield?

Broker forecasts suggest Stobart will pay a dividend of 18.3p per share this year, giving a whopping forecast dividend yield of 8%. But the business is only expected to generate earnings of 4.6p per share. At first glance, the dividend looks unaffordable.

However, the secret to this bumper payout is the group’s portfolio of non-operated property assets. These are gradually being sold to fund the dividend.

While this process is ongoing, Stobart is investing in its airport and energy businesses. Management is targeting 5m passengers per year at Southend by 2022, up from “over one million” last year. Rapid growth may be helped by a recent deal with Ryanair to build an operating base at the airport.

The company also hopes to increase biomass volumes from 1.3m tonnes to 3m tonnes by 2022.

If these growth projects are successful, I think this business could deliver attractive gains for shareholders. As with any growth stock, there’s some risk involved. But progress appears good so far, so I’d rate Stobart as a speculative buy.

This could be a safer choice

FTSE 250 firm John Menzies (LSE: MNZS) also operates in the aviation services sector, providing a range of ground services at airports in the UK and overseas. This is a much bigger business than Stobart’s, with annual aviation-related nearly 10 times greater than the smaller firm’s.

Menzies is also known for its newspaper and magazine distribution operation, which makes early morning deliveries to retailers. But this division is in decline and being sold off, to leave behind a pure-play aviation business.

Aviation focus could boost growth

Today’s half-year results give us a flavour of what to expect. Half-year revenue from continuing business was £641m, with an underlying operating profit of £20.9m. This contributed 13p per share to group earnings of 25p per share.

The sale of the distribution business will result in some loss of earnings, but this should be offset over time by aviation earnings growth. Last year, profit margins in aviation were roughly twice as high as in distribution, so if this business continues to expand, profits could perform strongly.

In the meantime, the board plans to maintain the current dividend, which gives the stock a forecast yield of 3.2%.

As with Stobart Group, Menzies’ aviation business isn’t without risk. But air travel continues to be a growth market. This mid-cap firm is becoming quite a large player in the aviation services sector, which should help to control costs.

I’d consider these shares as a potential dividend growth buy.

The post Have £2,000 to invest? This FTSE 250 8% dividend stock could help you retire early 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.

That’s why I’m much more interested in the more resilient earnings, and thus dividends, on offer from payments solutions provider PayPoint (LSE: PAY). It works with 50,000 retailers across the UK and Romania to provide point of sale solutions and associated services like ATMs, package pick-up and returns, and utility bill pay options that serve to increase footfall to stores.

As the market leader in this relatively asset-light business, PayPoint is highly profitable, last year earning £53.5m in operating profit from £119.6m in net revenue. With £18.5m of cash on hand and few capital investment needs, management is able to return plenty of cash to shareholders. Last year the company paid both an ordinary dividend of 45.9p and a special dividend of 36.6p that will be repeated over the next few years unless management spots an attractive acquisition opportunity.

This ordinary dividend alone represents a yield of 4.8%, but adding in the repeat special dividend bumps the actual yield up to a fantastic 8.6%. At 15 times earnings, the company’s stock isn’t the cheapest on the market. But with great income potential, substantial growth opportunities from expansion in Romania and its new PayPoint One terminal in the UK, and a proven highly cash generative business model, I’d much sooner buy and hold PayPoint than the FTSE 100.

Too many questions

Another mid-cap stock whose dividend yield far outpaces that of the UK’s biggest index is infrastructure support services provider Stobart Group (LSE: STOB). Stobart, which owns Southend airport and is also a major supplier of biomass fuel to power plants, paid out 18p in dividends last year that represent a current yield of 7.68%.

This is a high yield, but like PayPoint, Stobart is comfortably able to afford it with underlying earnings per share last year of 32.6p and a healthy balance sheet with just £36.6m in net debt. However, this does not mean I’ll be buying shares of the diversified group any time soon.  

First and foremost this is down to the bruising boardroom fight that is still playing out between the founder, former CEO and recently fired director, Andrew Tinkler, and the current Chairman Iain Ferguson stemming from a dispute over the company’s strategy and accusations of abuse of office. Ferguson was re-elected at the company’s AGM last week with a slim 51.2% of votes cast in his favour, but with Tinkler and his supporters vowing to fight on and both sides suing each other, this is one huge red flag.

On top of this, the group’s core operations remain fairly low-margin and for the next few years, its dividend will essentially be covered by disposals of non-core assets, such as last year’s realisation of a £123.9m holding in Eddie Stobart Logistics. Together, these two issues are enough for me to look towards safer harbour for my retirement investments. 

The post Seeking high income? Why I’d skip the FTSE 100 for this 8%+ yielder appeared first on The Twelfth Magpie.

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• 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?

Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of PayPoint. 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 business, which provides ‘Big Box’ warehouses to blue-chip retailers and manufacturers, is continuing to reap the rewards of Britain’s lack of gigantic logistics spaces, a problem worsened by the stratospheric growth of online retailing.

Indeed, chief executive Colin Godfrey hit the nail on the head earlier this month when he commented that “the development of the Big Box logistics market remains in its infancy, with operational efficiencies and e-commerce likely to drive occupational demand for some time to come.”

Tritax saw its contracted rent roll per annum rise £108.7m between January and June, up 9% year-on-year, while the value of its portfolio soared 10.9% to £2.1bn. Meanwhile, pre-tax profit soared 49.9% in the period, to £80.5m.

And Tritax remains busy on the acquisition front to harness its vast revenues opportunities. Just last week the business exchanged conditional contracts to purchase a development site at Littlebrook, Dartford, which it plans to utilise “for the efficient distribution of goods across London and the home counties.” Construction is scheduled to begin during the autumn of 2018.

Mammoth yields

Even though City analysts expect earnings to cool to 4% in 2017, this is not expected to put the shackles on further excellent payout growth. Indeed, last year’s 6.2p per share payment is anticipated to stomp to 6.4p in the present period. Consequently Tritax sports a jumbo forward yield of 4.5%.

And the good news does not cease here. Helped by a predicted 9% profits advance in 2018, the dividend is predicted to rise to 6.6p, meaning that the yield moves to a formidable 4.6%.

Keep on trucking

The Square Mile is also pretty excited about Stobart (LSE: STOB) and its dividend-paying capabilities in the medium term.

Despite an expected 33% earnings slip in the period to February 2018, the infrastructure and support services star is expected to ratchet last year’s 13.5p per share payout to 17.5p. This creates a chunky 6.1% yield.

And in fiscal 2019, the total dividend is expected to clock in at 18.2p, nudging the yield to a blockbuster 6.4%.

With the fruits of recent divestments helping to power dividends skywards, I am convinced the London-headquartered firm can continue delivering monster payouts long into the future, and not only due to the prospect of further asset shedding.

Indeed, the boffins over at Edison recently commented that “over the long term, we believe the group could unlock significant value from its core assets, especially Southend Airport, which is set to be a major beneficiary of airport capacity constraints in the South East.” The company remains on course to move 2.5m passengers from the Essex airport by the close of the next calendar year, it says.

As a consequence, a 37% earnings rebound is predicted for next year. And I reckon further explosive growth can be expected as the exciting growth strategies spanning its Aviation, Energy and Rail businesses take off.

The post 2 under-the-radar dividend stocks I’d buy today appeared first on The Twelfth Magpie.

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• 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?

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

Impressive growth

Reporting on Thursday was infrastructure and support services company Stobart (LSE: STOB). It announced to the market that it is on track to deliver its targets of 2.5m passengers at London Southend airport and 2m tonnes of biomass supply annually, by the end of the 2018 calendar year. Further targets have been set to 2022, with the company well-positioned to continue to deliver improving operational performance.

Looking ahead, Stobart faces a somewhat uncertain future. Its CEO, Andrew Tinkler, is stepping down but will remain as an Executive Director. As with any company, this inevitably brings a degree of risk and uncertainty, but since the business seems to have a solid strategy this may not cause significant disruption.

With the company trading on a price-to-earnings (P/E) ratio of 37, it appears to be overvalued at the present time. However, since it is expected to report a rise in earnings of 171% in the next financial year, its price-to-earnings growth (PEG) ratio of 0.2 suggests it could offer upside potential. While the company has ambitious growth targets and is undergoing a period of major change, it seems to have a sufficiently wide margin of safety to merit investment for the long term.

Solid outlook

Also offering capital growth potential is international consultancy company, RPS Group (LSE: RPS). It is forecast to record a rise in its bottom line of 9% in the next financial year. This is ahead of the growth rate of the wider index, and means it has a PEG ratio of 1.5. This could be relatively low considering the company’s track record of growth, as well as its long-term strategy which seems to be progressing well according to its most recent update.

As with Stobart, RPS is about to change its CEO. Its valuation indicates there is a margin of safety on offer, while its income potential means it could become more popular among investors. That’s especially the case since inflation is forecast to rise from its already high level of 2.9%.

RPS currently yields 3.9% from a dividend which is covered 1.7 times by profit. This means it could raise shareholder payouts at a faster pace than profit growth without harming its scope to reinvest capital for future growth. A rising dividend also seems affordable even with the company’s acquisition programme factored-in. According to its most recent update it is seeking to engage in M&A activity, which could act as a positive catalyst on its financial performance.

The post 2 dirt-cheap growth stars that could make you rich appeared first on The Twelfth Magpie.

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• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?
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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. 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 property developer is expected to see earnings moderate in the near-term as the rampant growth in home prices draws to a close. Indeed, bottom-line expansion of 6% and 4% is pencilled-in for the periods to July 2017 and 2018, a sharp decline from the 39% rise Bellway enjoyed last year.

Latest data from Halifax showed house values rose just 5.1% in February, the slowest rate since July 2013.

However, Bellway should remain a reliable earnings generator as government plans to kick-start homes construction continue to yield very little and generous mortgage rates persist.

Against this backcloth, Bellway is anticipated to pay a 110.8p per share dividend in 2017, yielding a stonking 4.1%. And the yield rises to 4.4% in 2018 thanks to an expected 119.1p payout.

Insurance star

With revenues powering higher and the balance sheet becoming ever-stronger, the dividend outlook is getting steadily brighter at RSA Insurance (LSE: RSA).

The financial giant hiked the dividend by an eye-popping 52% in 2016, to 16p per share, as group profits went through the roof. Indeed, the company saw operating profit soar 25% last year to £655m, reflecting the hard work RSA Insurance has made in stripping out costs and slimming down to concentrate on key geographies in Europe and North America.

And the insurer’s restructuring plan is not done yet, RSA Insurance upgrading its cost reduction target again just last month — the business now aims to cut expenses by £400m per annum by 2018, up from its prior target of £350m.

This naturally bodes well for dividends in the near term and beyond, and the City expects rewards of 21.5p per share in 2017 and 29p in 2018.  These projections mean the yield jumps from 3.6% this year to 4.9% in 2018.

I reckon RSA Insurance’s heroic turnaround strategy now makes it an excellent long-term dividend pick.

Keep on trucking

The fruits of huge restructuring over at Stobart (LSE: STOB) should also deliver stunning dividend flows, in my opinion.

The company has big plans to turbocharge revenues from its Energy, Rail and Aviation divisions. At its flying arm Stobart is steadily stepping up expansion at Luton Airport and last month bought the outstanding 33% stake in aircraft leasing firm Propius Holdings from Aer Lingus..

Elsewhere, a steady stream of recent contract wins has helped Stobart’s railway pipeline to continue to bulge. And at its energy operations, Stobart plans to deliver more than 2m tonnes of biomass fuel by the close of next year.

The City currently has dividends of 12p per share chalked in for the years to February 2017 and 2018, giving Stobart a monster 6.2% yield. And I reckon dividends should continue to outperform the broader market as sales stream in across the business.

The post 3 great dividend stocks for your ISA appeared first on The Twelfth Magpie.

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• 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?
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Royston Wild 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.

And City brokers don’t expect this trend to cease soon either. Indeed, SThree is expected to pay a 14p per share reward again in the period to November 2017.

But investors shouldn’t forget that this projection still yields a colossal 4.5%, and takes out the forward average of 3.5% for Britain’s blue chips by no small margin.

While an expected 5% earnings decline in the current year results in dividend coverage of 1.4 times — trailing the widely-considered security benchmark of two times — SThree’s strong cash-generative qualities should soothe fears over dividend projections for the current period. Net cash climbed to £10m in November from £6.2m the year before.

And I believe SThree’s growing success in foreign markets like the US and Europe should underpin its position as a lucrative dividend selection long into the future.

Hit the floor

Flooring play Headlam Group (LSE: HEAD) is also expected to remain a winner for income chasers for some time yet.

The Birmingham business is anticipated to raise the dividend for fiscal 2016 to 22.1p per share from 20.7p the year before. And this upward trajectory is predicted to persist in the near term at least — a 23.1p payout is predicted for the current year.

This creates a stunning dividend yield of 4.8%. And while payout coverage may also stand at 1.4 times, I believe that Headlam’s strong progress at home and abroad provides the base for dividends to keep creeping skywards.

Headlam soothed the fears of those hand-wringing over Brexit last month by advising of “no discernible impact on trading following the EU referendum in June 2016.” And the floor coverings colossus advised that recent price hikes to mitigate sterling weakness have had “no adverse impact on residential sector revenue.”

Trucking on

I also believe the fruits of massive restructuring at Stobart Group (LSE: STOB) should blast dividends northwards again from this year onwards.

Like SThree, Stobart has kept shareholder rewards locked for some time, on this occasion around 6p per share. But with the business now kicking up oodles of cash, Stobart is predicted to pay dividends of 11.2p and 12p for the years to February 2017 and 2018 respectively.

These figures produce monster yields of 6.3% and 6.7%. And while projected dividends may sail above predicted earnings through to the end of fiscal 2018, the heaps of cash Stobart is generating from property disposals should allow the business to meet these generous predictions.

And with revenues streaming in across its infrastructure and support services divisions — the top line swelled 13% during March-August — I reckon Stobart should remain one of the small cap index’s hottest income picks.

The post Are these the best small-cap shares for dividend investors? 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?

Royston Wild 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.