The privately-owned competitor has announced plans to add around 5,000 extra UK sellers to its service. Its new ‘Marketplace+’ feature reaches out to sellers who wish to use Deliveroo’s own delivery network, while still running their own deliveries too — allowing a flexible mix of both channels.

That collides head-on with Just Eat’s maturing service, which also uses a mix of its own drivers plus restaurants’ own systems, and it could be a game changer.

For me, this highlights a few key things about investing in growth stocks, the main one being to keep re-assessing your original decisions in the light of new developments.

When the news changes…

I was bullish about Just Eat when I last looked back in November, mainly because of the company’s early mover advantage and the list of impressive names on its roster — Just Eat had recently signed up KFC. I’d seen it as providing significant barriers to entry, and the shares went on to top 900p.

But this latest news has made me re-examine my view, on several counts. Deliveroo’s new tool opens the market up to thousands of extra outlets with its flexibility. And there isn’t really any long-term commitment needed from food sellers to these delivery systems.

Just Eat’s forward P/E of over 40 was risky but I’d thought it a risk worth taking. I’ve changed my mind, and knowing when to sell your mistakes is a key part of growth investing. If I’d bought at 790p at the time, I’d be selling now for a loss of 5p. 

An overlooked growth stock?

I recently looked at how running a growth screen over the FTSE’s shares can help us find candidates, and one that satisfied my criteria was auto lender S&U (LSE: SUS). I was looking at companies with low PEG ratios (which relate the P/E to growth forecasts from analysts), while keeping clear of any with worrying debt.

S&U passed the test with PEG multiples of just 0.6 for this year and next, as the City has earnings growth forecasts of 19% and 16% pencilled in for the two years. And that comes after a similar 19% rise for the year to January 2018 — a period which brought in the 18th year in a row of profit rises.

Chairman Anthony Coombs told us that “the markets in which we operate remain strong,” pointing to the Finance and Leasing Association’s data showing that “used car sales increased by 6% in number and 12% in value in 2017.“

Dividends too

But S&U isn’t attractive for its growth characteristics alone — it also pays handsome dividends. The 105p per share paid for the year just ended provided a yield of 4.6%, was almost twice covered by earnings, and represented an inflation-crushing rise of 15% over the previous year. In fact, between 2014 and 2018, S&U’s dividend has almost doubled from 54p. Forecasts suggest similar rises this year and next.

There’s surely some risk should interest rates eventually rise and the current lending boom start to cool. But with a 2020 forward P/E of under 10, I think that’s already in the share price.

The post Why I’d dump crashing Footsie champion Just Eat plc and buy this growth plus dividend stock 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?

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Just Eat and S & U. 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.

Recently, the picture has been one of contrasting performance, with FTSE SmallCap S&U up around 20% since the start of the year and FTSE 100 giant Randgold down by a similar order. Here’s why I’d sell the soaring small-cap stock but buy the out-of-favour blue-chip.

Advantage S&U

S&U sold its home credit arm in 2015, leaving Advantage Motor Finance as its core business. In its annual results, released in March, the company reported an 18th successive year of record profit at Advantage. Pre-tax profit increased 20% to £30.2m on 30% higher revenue of £78.9m.

Management said today, in a Q1 update ahead of the company’s AGM, that trading “remains strong.” This bodes well for City analysts’ forecasts of a further 20% rise in pre-tax profit this year (to £36.3m) and a 17% increase in earnings per share (EPS) to 238p.

At a current share price of 2,700p, S&U’s market capitalisation is £324m and the forward price-to-earnings (P/E) ratio is 11.3. The P/E appears cheap for the EPS growth forecast. Furthermore, a well-covered 119p forecast dividend adds a generous prospective yield of 4.4%.

Bubble waiting to burst?

Interest rates have been at historically unheard of lows for the best part of a decade. This has fueled a rise in UK household debt to unprecedented levels, a notable part of which has been a vast increase in the number of cars bought on credit. The big concern I have about S&U is that car finance looks to me like a credit bubble waiting to burst.

Current interest rates, employment figures and a recent upturn in wage increases above inflation may reduce the immediate risk, but erring on the side of caution, I’m inclined to see S&U as a stock to sell at this stage.

Golden opportunity

The poor performance of Randgold’s shares so far this year wasn’t helped by a trading update last week. Q1 gold production was down 11% year-on-year and profit for the quarter was 24% lower than in the same period in 2017. However, management maintained its full-year production guidance and I believe the depressed share price represents a good opportunity to buy a slice of one of the world’s highest-quality gold-miners.

At a current share price of 5,740p, Randgold has a market capitalisation of £5.4bn and trades on a forward P/E of 22.7, based on a consensus EPS forecast of $3.42 (253p at current exchange rates). Following a doubling of the dividend last year to $2 from $1, analysts are forecasting another hike to $3 (222p) this year, giving a prospective yield of 3.9%.

The P/E and yield look highly attractive to me for a world-class miner. The company’s balance sheet is also as strong as they come: $739.5m cash and no debt.

The post Why I’d sell this small-cap star but buy this FTSE 100 stock 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?

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended S & U. 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.

And in that time, the annual dividend has grown from 2.3p in 2013 to 5.25p for the year to January 2017, with forecasts suggesting rises to 7.2p by 2019 — that would be a trebling in six years. The yield isn’t massive, forecast at under 2%, but that’s down to the soaring share price. And it’s four times covered by earnings, so there’s great potential for a long-term cash-cow future here.

That’s borne out by interim results released Tuesday, which show a 13% rise in pre-tax profit to £12m from a 16% hike in revenue to £93.5m. The shareholders’ bottom line saw diluted earnings per share gain 9% to 11.4p, and the firm proposed a 20% uplift in the first-half dividend to 1.8p per share.

Acquisitions too

In addition, the same day brought news of the acquisition of Charterhouse Research Limited, a “leading specialist financial market research consultancy.” The deal cost £2.75m, so it’s a relatively modest purchase.

Important new client deals, including LG Electronics, Grubhub, Marvell and NTT Data, together with a few canny acquisitions, show both sides of Next Fifteen’s growth potential — organic growth and acquisitions are surely both going to play big parts.

On the valuation front, even the stunning price growth of the past few years has not taken the shares beyond an attractive valuation in my view.

We’re looking at a 2018 P/E of 16, dropping to 14.4 on 2019 forecasts – and I reckon that’s cheap for such a strong growth candidate.

Bigger dividends

If you want bigger dividend yields, S&U (LSE: SUS) could be a good pick.

The sub-prime motor finance lender reminded us today it has achieved “17 consecutive years of increasing profit” as it reported on a first half that brought in a 20% rise in pre-tax profit to £14.3m, which provided a 21% boost for earnings per share to 96p. The interim dividend was lifted by 17% to 28p per share.

Fears of difficulties in collecting on loan payments have left the City’s big investors somewhat bearish towards S&U in the recent past, and we’ve seen an 18% share price drop over the past 12 months — though there’s been a 4.6% rebound to 2,074p on the day.

But those fears do not appear to be materialising, as S&S reported “record monthly Advantage collections of £10m achieved in July,” and chairman Anthony Coombs told us “S&U continues to experience robust and good quality demand.” 

What fears?

In fact, new Advantage motor finance agreements rose by 21% in the first half, which it seems is another new record, with improving “initial quality score.”

The annual dividend almost doubled from 46p to 91p between January 2013 and 2017, and a further increase mooted for the current year would take it to around 102.3p. That’s a twice-covered yield of 5%, which would be pushed as high as 5.7% on next year’s forecasts.

If that’s not enough, the market’s aversion to S&U shares has led to slowly falling P/E multiples — from around 16 in early 2014, current forecasts suggest a meagre 9.5 for the current year — and 8.2 next year.

I can see an upwards re-rating coming soon. But even if we don’t get that, long-term growth potential plus that progressive dividend makes S&U look attractive.

The post 2 bargain growth stocks offering rising dividends too appeared first on The Twelfth Magpie.

More reading

• 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?

Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended Next Fifteen Communications. 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.

Well, so far the problems that some columnists have found in the sector, such as loan repayments eating up an outsized portion of borrowers’ incomes, haven’t found their way through to S&U’s books. In the company’s latest trading update covering 18 May to 31 July, it increased the volume of new loans by 20% year-on-year (y/y). And it doesn’t appear that its customers are finding the loans burdensome as monthly collections rose 27% y/y and hit a record £10m in June and July.

Strong collections performance and the increasing benefits of scale certainly appear to be setting the stage for an 18^th consecutive year of record pre-tax profits. Indeed, investors responded to this morning’s trading update by sending the company’s share price up over 2%, suggesting some are finding analysts’ consensus forecast for a 19% increase in earnings this year to be a bit low.

Now, this doesn’t mean problems in the sector won’t eventually affect the company. Would-be investors should closely follow the company’s impairment rate, which acts as a decent bellwether for the quality of loans S&U is advancing. Last year the impairment rate did rise to slightly over 20% but is still within respectable limits. Furthermore, management blamed increased competition to attract higher-quality customers for the increase in impairments and this argument makes sense as we saw the much larger sub-prime lender Provident Financial attempt to push its way into the sector.

Investing in S&U isn’t without its risks, but the company has a stellar history of shareholder returns, its loan book still looks pretty healthy and even if the economy heads into reverse, the fact that its loans are secured should provide some peace of mind. Given these positives, a high dividend yield, operating margins of 41% last year and an attractive valuation, S&U is certainly on my watch list.

Painting a pretty picture 

Another growth share that I reckon could turn into a very nice income share over the long term is value make-up company Warpaint London (LSE: W7L). As you could probably guess by its name, the company prefers brash designs, colours and names for its products.

The company’s strategy is to figure out the latest trend in make-up, quickly get the factories in China and Europe it sources from to churn out the product and then distribute it to its retail and distributor clients. In 2016, its first as a public company, the ability of its founder-led management team to successfully execute this strategy was on display. Sales rose 21.1% y/y to £27m as it began direct-to-consumer online sales and signed on 49 new clients to take its total to 319.

The beauty of its business model is that by not having to run expensive high street stores the company is very profitable with operating margins around 25%. It’s still early days and the company is highly valued at 17 times earnings but I see plenty of reason to closely follow Warpaint London.

The post Is this fast-growing, 5% yielder too cheap to pass up? appeared first on The Twelfth Magpie.

More reading

• 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?

Ian Pierce 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.

Changing business

Reporting on Friday was non-standard lender Provident Financial (LSE: PFG). Its trading update showed that it is making encouraging progress despite an uncertain outlook. It is focused on investing in its various divisions, which seems to be a sound strategy given the difficulties which may lie ahead for the consumer lending space. With inflation moving higher, competition within the sector may intensify. Therefore, a focus on digital capabilities and new operating models could allow Provident Financial to post improving financial performance versus its peers.

Provident Financial currently pays out 79% of profit as a dividend. This appears to be a sensible level of payout, since it provides the company’s investors with a generous income return of 4.4% at the present time. It also means there is sufficient capital to reinvest in improving the business for the long term.

Dividend growth is expected to be 12% next year, which is slightly behind the forecast growth in earnings of 14%. This shows that a double-digit rise in shareholder payouts could be sustainable over the medium term. With a price-to-earnings (P/E) ratio of 17.8, the company appears to offer a sensible valuation given its impressive growth outlook. Therefore, capital gain prospects could be high alongside its strong income return.

Growth potential

Also offering growth potential is motor finance and specialist lender S&U (LSE: SUS). It faces an uncertain outlook due to the challenges posed by rising inflation. However, its bottom line is expected to rise by 17% this year and by a further 15% next year despite the risks from a deteriorating UK economy. As such, now could be the right time to buy it.

Even though it offers robust growth potential S&U trades on a low valuation. It has a P/E ratio of just 9.9, which suggests a wide margin of safety is on offer. When its rating is combined with its growth potential, it equates to a price-to-earnings growth (PEG) ratio of only 0.6.

In terms of income potential, S&U’s dividend yield of 5.3% remains highly enticing. Dividends are covered 1.9 times by profit, which suggests they should be able to grow by at least as much as earnings over the medium term without compromising the company’s financial standing. Therefore, with a potent mix of income potential, value appeal and bright growth prospects, S&U seems to be a logical buy for the long run.

The post These dirt-cheap dividend stocks could help you retire rich appeared first on The Twelfth Magpie.

More reading

• 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?

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.

Flowtech’s share price has added 8% in value since Tuesday’s update, investors sweeping the fluid power product designer to 11-month highs. But I believe the firm is still undervalued by the market despite these chunky gains.

Flowtech advised that group revenues surged 32% during January to March, to reach £17.5m, with sales at its core Flowtechnology division moving 11% higher in the period, to £10.1m.

The West Lancashire business advised that a combination of good organic sales growth, and the impact of the Indequip acquisition last year, have helped to drive the top line in recent weeks.

Flowtech also announced on Tuesday that total annual revenues climbed 20% during 2016, to £53.8m, a result that powered operating profit to £6.14m, a rise of 12% year-on-year.

While sterling’s steady erosion has seen costs mount since the summer, the firm’s ability to effectively lift prices has helped muffle the impact. Meanwhile, a £10m share placing last month boosted the probability of fresh acquisitions, enhancing Flowtech’s position in heavily-fragmented markets and underpinning long-term revenues growth.

Go with the Flow

Following this bounce-back into earnings growth in 2016, the City expects the bottom line to really rev up this year with a 38% rise. An extra 12% rise is anticipated for next year.

These prospective numbers result in mega-low P/E ratios of 10.1 times and nine times respectively, around and below the benchmark of 10 considered bargain territory. And sub-1 PEG readouts of 0.2 and 0.7 underline Flowtech’s position as great value.

Furthermore, there’s also plenty for dividend chasers to get excited about. A perky profits picture is expected to propel Flowtech’s total payout to 5.8p per share in 2017, up from 5.51p last year, and to 6.1p in 2018. These forward figures yield a delicious 4.1% and 4.3%.

Loans leviathan

Auto finance giant S&U (LSE: SUS) is another brilliant value pick that fits the bill for both growth and income investors.

The business saw revenues shoot 34% higher in the year ended January 2017, to reach £60.5m, driving pre-tax profit 29% higher to £25.2m. S&U saw profits at its Advantage Finance car finance arm hit record levels for 17 years on the spin. And toughening economic conditions in the near term and beyond should keep customer demand for the company’s credit on an upward tilt — loan applications shot 53% higher in fiscal 2017.

S&U is anticipated to report earnings rises of 19% and 12% in 2018 and 2019 respectively, resulting in hugely-attractive P/E multiples of 10.3 times and 9.2 times. And PEG readings clock in at a mere 0.5 and 0.8 for these years.

In addition, dividend chasers also have a lot to look forward to if City forecasts prove correct. An estimated 106.9p per share payout for 2018 yields 5.1%, while 2019’s expected 118p dividend yields a smashing 5.6%.

The post 2 of the best value shares you’ve probably never heard of 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?

Royston Wild 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.

This comes as little surprise as the UK’s biggest newspaper and magazine wholesaler’s exciting growth plans gain traction. And causing particular excitement is Connect’s plan to extend its Pass My Parcel operations, which tap into the fast-growing click and collect phenomenon. The service caters to some 3,000 parcel shops and counts the likes of Amazon among its big-league clients.

City brokers expect earnings growth to slow to a fractional advance in the period to August 2017. But this still leaves Connect dealing on a P/E ratio of just eight times, some distance below the broadly-regarded bargain watermark of 10 times.

And Connect also provides income chasers with much to get excited about — a predicted 9.8p per share dividend yields a stunning 6.2%.

Finance fave

With customer numbers hitting new records at car finance provider S&U (LSE: SUS), I reckon now is the time to buy up some of the stock before the broader market wises up.

S&U saw customer numbers shoot 34% higher from the start of August to December 7, the firm noted last month, taking its client base to around 42,000. And the company is looking to replicate its success in the auto market by entering the property bridging loan sector some time in 2017.

The number crunchers expect these factors to keep sending earnings skywards, and they expect bottom-line growth of 28% and 18% for the years to January 2017 and 2018 respectively.

Not only do these projections create decent P/E ratios of 13.1 times and 11.1 times, but sub-1 PEG readings of 0.5 and 0.6 for this year and next rubber-stamp S&U’s terrific value.

Furthermore, the finance play also gives its London-quoted rivals a run for their money in the dividend stakes — expected rewards of 90p and 106.9p per share in fiscal 2017 and 2018 respectively yield a mammoth 4% and 4.8%.

Business still bubbling

Mirroring the bounce in market appetite over at Connect Group, Costain Group (LSE: COST) has also been the beneficiary of bumper buying activity in recent sessions, the stock recently topping out at 12-month peaks

And I reckon additional strength can be expected as new business continues to roll in. Costain’s order book clocked in at a robust £3.9bn as of December, reflecting its strong track record of relationship building.

And the business also announced last week that it had secured a place on Transport for London’s Surface Transport Major Projects Framework. The framework is valued at some £500m and involves work on the capital’s bridges, tunnels and highways.

The City expects Costain to follow a predicted 7% earnings advance in 2016 with an extra 15% rise in the current year. This results in a P/E ratio of just 12.4 times, as well as a PEG reading of 0.8.

And a forecasd 14.4p per share dividend yields a chunky 3.7%. I reckon Costain is a great pick for growth and income seekers.

The post Are these the best value small-cap shares? appeared first on The Twelfth Magpie.

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• £1,000 buys 531 shares in this UK defence and nuclear stock that’s tipped to soar

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.

Just Eat announced plans to purchase British rival hungryhouse for up to £240m to bolster its share of the fast-growing online takeaway market, creating “an enlarged customer base for restaurant partners to access, while increasing the breadth of choice on offer to UK consumers through Just Eat’s platform.”

The business also snapped up Canadian food delivery service SkipTheDishes for an initial consideration of £66.1m.

Such aggressive international expansion is helping to propel Just Eat’s top line, and the firm saw total orders gallop 34% higher during July-September, to £33.3m. And I believe Just Eat’s appetite for expanding its global presence should continue to deliver tasty returns — the business has bought businesses in Spain, Italy, Brazil and Mexico in 2016 alone.

The City expects Just Eat to follow a 74% earnings surge in 2016 with a 48% advance next year. And while the latter projection results in a heady P/E ratio of 33.9 times, a sub-PEG ratio — at just 0.7 — suggests the business is, in fact, attractively valued relative to its anticipated growth trajectory

Medical marvel

I also reckon healthcare giant Smith & Nephew (LSE: SN) is a splendid pick for growth chasers.

The firm is at the forefront of artificial limb and joint design and has honed in on explosive niches like Sports Medicine Joint Repair through organic investment and shrewd acquisitions to deliver earnings expansion. And with good reason — sales in this one segment surged 8% during July-September.

And Smith & Nephew can also rely on its massive global footprint to keep sales chugging higher. Turnover from the gigantic US marketplace climbed 2% during the quarter, while demand in emerging regions bumped 6% higher with China returning to growth.

The number crunchers expect Smith & Nephew’s long run of positive earnings growth to grind to a halt in 2016, and a 3% decline is currently anticipated. But this is expected to be a mere blip and a chunky 9% advance is expected for 2017.

This results in a P/E ratio of 16.4 times which, although peeking above the FTSE 100 average of 16.6 times, is great value in my opinion as healthcare investment the world over shoots through the roof.

Car star

I believe the ambitious expansion plans of specialist finance provider S&U (LSE: SUS) also make it one of the hottest growth prospects out there.

Business activity at S&U’s Advantage Finance motor finance division continues to bubble higher, and customer numbers here surged 34% between August 1 and December 7.

And the financial goliath is zeroing in on other markets to generate growth. Indeed, S&U is set to launch its Aspen Bridging Finance property bridging loan pilot in the coming months, and could really light a fire under the top line. S&U estimates that the property-backed bridging loan market is currently worth £5bn and is set to double by the end of the decade.

The City expects S&U to get earnings moving higher again following a 14% earnings fall in the year to January 2016 — rises of 28% and 20% are expected for fiscal 2017 and 2018.

And these figures create mega-low P/E ratios of 12.9 times and 10.8 times respectively. With PEG ratings also clocking in at 0.5 through to end-2018, I reckon S&U merits serious attention at current prices.

The post What should growth investors buy for 2017? appeared first on The Twelfth Magpie.

More reading

• 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?

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.

Marketing marvel

I reckon investors should take advantage of heavy share price weakness at Communisis (LSE: CMS) and pile into the marketing services play.

Communisis boasts an enviable client list featuring the likes of Barclays, Centrica and Legal & General, and is steadily expanding its global footprint to keep business renewals and new contract wins from major blue chips flowing in.

With earnings tipped to keep rising, and Communisis generating shedloads of cash — free cash flow doubled in 2015 — the City has pencilled-in dividends of 2.4p and 2.5p for 2016 and 2017.

Consequently Communisis sports giant yields of 5.8% and 6.2% for these years.

Gadgets great

Despite current market difficulties, I believe that TT Electronics (LSE: TTG) is also a sound pick for dividend chasers as its transformation strategy clicks through the gears.

The electronics specialists has seen business pick up in recent months, with revenues 4% higher during January-April on a constant currency basis. And the December acquisition of Aero Stanrew provides plenty of reasons to be cheerful — TT Electronics said that integration of the electromagnetic component specialist “has progressed well.“

The number crunchers expect dividends to turn higher again from 2016, resulting in a reward of 5.6p per share. This figure yields an impressive 4.5%.

And further earnings growth next year is expected to propel TT Electronics’ dividend to 5.8p, yielding 4.6%.

Dividends driving higher

With demand for new vehicles continuing to explode, I reckon shareholder payouts at financing specialists S&U (LSE: SUS) should keep pounding higher.

The company has seen motor finance transactions at its Advantage Finance division accelerate in recent months, and its customer base registered at an impressive 35,600 as of mid-May, up 3,000 from the end of 2015.

And helped by a robust UK economy, I expect earnings at S&U to rev higher from this year onwards, a promising omen for dividend seekers.

This view is shared by the City, and S&U is anticipated to pay dividends of 89.8p and 106.8p per share for the years to January 2017 and 2018, respectively. The finance play subsequently sports juicy yields of 3.9% for 2017 and 4.6% for the next year.

Paper play

I believe newspaper and magazine distributor Connect Group (LSE: CNCT) is also in great shape to deliver solid returns.

The company — formerly known as Smiths News — is gearing up to embrace the fast-growing online retail segment, and Connect is now a major ‘click and collect’ service provider for heavyweights such as Amazon and ASOS.

On top of this, a five-year contract extension inked last month with publishing giant Northern & Shell provides Connect’s outlook in its traditional markets with a welcome shot in the arm.

Boosted by its solid earnings picture, the company is expected to fork out dividends of 9.5p and 9.9p per share in the years to August 2016 and 2017. These figures create exceptional yields of 5.9% and 6.2%.

The post 4 dividend stars you probably haven’t heard of! appeared first on The Twelfth Magpie.

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• 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?

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.

Of course, many investors may be somewhat concerned about the medium term outlook for lenders such as S&U. That’s because, with interest rates set to rise, demand for loans may come under pressure and could see the company’s top and bottom lines weaken somewhat. However, today’s trading update from S&U shows that the business is performing well and is able to look ahead to further strong performance moving forward.

For example, S&U has reported that gross receivables in its motor finance division, Advantage Finance, have increased to £200m for the first time in the company’s history. And, while total transaction volumes for the half year to the end of July have fallen, recent strength means that they should reach a record level for the full year.

Meanwhile, S&U’s home credit business reported a fall in sales of 9% in the first half of the year. And, while its profitability is flat versus the same period of last year, the decision to sell the business for £83m appears to be a sound one, since growth prospects for the division appear to be somewhat limited. Furthermore, the sale should provide S&U with increased scope to become a more specialist and niche lender, which could have a positive impact on the company’s profit margins.

Looking ahead, S&U is expected to post strong growth numbers next year, with its bottom line forecast to rise by as much as 18%. The company’s valuation, though, does not appear to reflect this impressive growth rate, with S&U trading on a price to earnings growth (PEG) ratio of just 0.8, which indicates further share price gains are on the cards.

Clearly, S&U is heavily reliant on the performance of the UK economy and, while it appears to be worth buying at the present time, a company with far less correlation to the wider economic outlook could outperform it. In fact, pharmaceutical company GlaxoSmithKline (LSE: GSK) offers a very bright outlook for next year, with its earnings set to rise by around 12%. As with S&U, its share price does not appear to reflect such impressive growth potential, with it trading on a PEG ratio of just 1.4.

In addition, GlaxoSmithKline offers a higher dividend yield than S&U. It yields around 5.7%, while S&U has a current yield of 3.1% and, while interest rates may be set to rise, impressive dividend yields are likely to remain en vogue among investors over the medium term, which could push GlaxoSmithKline’s share price higher.

This, coupled with its hugely impressive pipeline that notably includes potential HIV treatments via is ViiV Healthcare subsidiary, as well as excellent growth, low correlation with the wider economy and a relatively appealing valuation, means that GlaxoSmithKline appears to be a better buy than S&U at the present time. Certainly, GlaxoSmithKline may be going through a transitional period but, for long term investors, this presents an opportunity to buy-in ahead of improved financial performance.

The post Is S & U PLC A Better Buy Than GlaxoSmithKline plc? appeared first on The Twelfth Magpie.

More reading

• 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?

Peter Stephens owns shares of GlaxoSmithKline. The Motley Fool UK has recommended GlaxoSmithKline. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.