However, does the deal fully value the growth potential of UBM? And could an enlarged group really perform better than the two companies remaining as separate entities?

Value for money?

The deal would see shareholders in UBM receive 1.083 Informa shares plus 163p in cash for each of their shares in the company. This seems to be a fair deal, since it values UBM at around a 30% premium to its closing price on 15 January. With the company forecast to post a rise in its bottom line of 9% in the next financial year, it puts it on a price-to-earnings (P/E) ratio of around 18. This suggests that its shareholders are receiving a good price for their investment.

Clearly, the company has a strong position in the business-to-business (B2B) events sector. However, with its bottom line due to fall by 1% in 2018, its shares could have found it difficult to gain traction in the short term. Therefore, a bid approach from Informa could be the best solution for investors in UBM.

Growth potential

The logic for the merger is, of course, centred on synergies. Since the two companies operate in the same sector, there is scope for them to rationalise should they merge. This could not only provide a short-term boost to profitability, but may also provide the new business with a competitive advantage versus rivals. In an industry where there is currently a transition towards operating scale and specialisation, the enlarged business could capitalise on the full growth opportunities which are available.

However, a bigger business can mean less flexibility and a slower response to change. Therefore, the combination of the two companies may not prove to be a major catalyst for profit growth in the medium term. But it should provide greater consistency when it comes to areas such as sales and cash flow growth, while also providing improved diversification in case one region of the world experiences economic woes. This could help to reduce overall risk and improve the combined entity’s overall risk/reward ratio.

The right time to buy?

Clearly, the merger is not yet a done deal. There could be some uncertainty ahead for both stocks in the short run, and this could create volatility in their share prices. As such, within a media sector where there seem to be a number of stocks with low valuations that could benefit from improving global economic growth, there may prove to be better opportunities elsewhere to generate high returns in the medium term.

The post UBM plc soars 15% on news of Informa plc merger appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended UBM. 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.

Looking ahead, though, the company could have turnaround potential. In fact, it’s not the only stock which could perform well in the medium term after a difficult 2017. One company which released a trading update on Tuesday could also be worth buying for the long term.

Strong trading

The company in question is business-to-business event organiser UBM (LSE: UBM). The company’s performance since the half year has been impressive, and it’s on track to deliver significantly accelerated adjusted underlying revenue growth in annual events for the full year. This provides evidence that its strategy is working well, and also that its trading conditions remain encouraging.

For example, UBM’s major events during the quarter performed well. While there was weakness in the Fashion sector, this was offset by a strong performance within the Pharma sector and in other areas. Furthermore, the integration of Allworld is progressing well, with performance ahead of forecasts.

Since the half year, two bolt-on acquisitions have been made in the renewable energy and medical aesthetics sectors. Further deals are expected to close before the end of the year, with small asset disposals also in the pipeline. Such changes could improve the strength of the company’s business model and lead to higher earnings growth potential in the long run.

Positive outlook

In the current year, UBM is expected to report a rise in its bottom line of 25%. After its shares have fallen by 2% since the start of 2017, this means it has a price-to-earnings growth (PEG) ratio of just 0.6 at the present time. This suggests that it could offer a wide margin of safety and may be worth buying for the long term.

Similarly, Interserve also appears to be cheap. It has a PEG ratio of 0.1 and is forecast to report a rise in earnings of 16% next year. Certainly, there is scope for downgrades to its outlook, since its future is highly uncertain. Difficult trading conditions could mean the company’s operational and financial performance continues to disappoint into 2018. However, with such a wide margin of safety, the company appears to be worth buying for the long term.

Of course, both UBM and Interserve could deliver further share price falls in the near term. Their stock prices may be volatile and are perhaps not suitable for the most risk averse of investors. But with such low valuations and upbeat earnings growth outlooks, they may offer stunningly high returns in the long run.

The post Why Interserve plc is a turnaround stock with millionaire-maker potential appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended UBM. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

If you truly want to get rich in the long term, I believe you should spend more energy searching for quality businesses than for low P/E ratios. With that in mind, here are two stocks I believe have the business models to keep the payouts coming.  

A deluge of dividends

International beverage behemoth Diageo (LSE: DGE) has posted impressive dividend growth over the years. The payout has increased threefold since 1999. That’s a compounded annual growth rate of 9.65%.

The company’s drinks, ranging from Captain Morgan’s to Guiness, are cash-cows that provide it with a fairly steady stream of income to expand its portfolio and develop acquired brands. 

Diageo can build a brand with potential into a global powerhouse by employing its global structure (which includes huge marketing power and a vast distribution network) to increase the product’s reach and image. 

In recent years, the company has disposed of non-core assets to focus on what it does best: selling spirits and beers. Removing distractions such as the small wine segment, which accounted for roughly 4% of revenues, is a step forward in my opinion. 

That said, I’m not sure that now is the perfect time to buy Diageo. It offers only a 2.4% yield to prospective investors and the rate of dividend expansion is a little lower than the historical average at only 5% last year, although you only have to go back a few years to see the last double-digit hike. 

I’d begin considering the shares for inclusion in a life-long portfolio if the yield topped 3%. That said, investors who bought the shares back in 1998 and still hold today are receiving a 10% annual return from the dividend alone, demonstrating the power of holding quality companies for the long term. 

Quality I’d buy today

UBM (LSE: UBM) is one of the world’s largest trade show operators. Believe it or not, this seemingly boring operation provides the perfect economics for churning out big dividends. 

Despite technologies like Skype making inter-business relations easier than ever, there is still no substitute for trade shows that bring together the top players in each industry. Of course, no one wants to jump from show to show because nothing would ever get done, but this aversion towards unnecessary shows actually plays right into UBM’s hands. 

The company has carefully built a portfolio of must-see events that are attended by all industry leaders, allowing customers to only visit one or two key shows a year. Perhaps the strongest aspect of these shows is that customers book up months in advance, so UBM not only receives cash well in advance of serving its product, but can manage costs to remain profitable even when turnouts are low. 

If you want to see this dynamic in action, check out results for fellow trade show operator ITE Group. It has remained remarkably resilient in recent years despite awful conditions in its primary markets. 

UBM shares offer a 3.2% yield to investors today and management has vowed to hike the dividend at a faster rate to reflect the success of its ‘events first’ strategy. 

The post Two dividend stocks you can retire on appeared first on The Twelfth Magpie.

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Zach Coffell owns shares in ITE Group. The Motley Fool UK has recommended Diageo, ITE Group, and UBM. 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 company, which develops a range of treatments for rare and orphan diseases, announced that revenues totalled €6.18m during the first six months of 2017, a result that came in above the board’s expectations. By comparison, revenues in the corresponding period last year came out at €161,000.

Particularly encouraging was demand for Amryt’s Lojuxta drug in the period, which is used to tackle a life-threatening disorder that causes abnormally high levels of so-called bad cholesterol, or homozygous familial hypercholesterolemia (HoFH). Sales here clocked in at €5.75m between January and June, and as a result, Amryt declared that “management has revised upwards its estimate of the potential market for HoFH in its territories to approximately €100m.”

Chief executive Joe Wiley added that “[Lojuxta] revenues are ahead of our expectations and we now believe that the potential addressable market is larger than we originally anticipated.” He continued that “a major focus for us looking forward is opening up new, untapped territories covered by our licence agreement.”

Strength across the board

This was not the only good news to come out of Amryt today. The Irish firm announced that AP101 — which is targeted at a rare, genetic skin condition called epidermolysis bullosa — has commenced Phase III clinical testing, interim results from which are anticipated for the first half of 2018.

Amryt puts the size of the market for its lead development asset at around €1.3bn.

And elsewhere, the medicines giant announced that AP102, which is designed to treat rare neuroendocrine diseases, remains on track for human clinical trials for 2018.

Whilst Amryt would appear packed with brilliant revenues potential, investors must remember that the road from lab bench to pharmacy shelf can often be littered with setbacks that can create huge financial headaches through lost revenues and increased R&D bills.

And the business is not expected to flip into the black any time soon. The AIM-listed business is predicted to rack up pre-tax losses of £12.3m and £10.6m in 2017 and 2018 respectively, according to City forecasters.

Still, given the vast revenues potential of its core markets, I reckon Amryt is at least worthy of a glance from growth hunters.

Media master

UBM (LSE: UBM) is another share I reckon could deliver solid earnings expansion in the years ahead, a view which is also shared by the number crunchers.

The media and events organiser is predicted to deliver a 25% earnings rise in 2017, and a fractional improvement is forecast for next year. As a consequence, UBM deals on an ultra-cheap forward P/E ratio of 13.3 times as well as an ultra-cheap PEG reading of 0.6.

Whilst profits growth is expected to slow markedly next year, I reckon the fruits of its upbeat acquisition strategy, allied with its consequently-expanding global footprint, should keep earnings moving regularly higher in the years to come.

Meanwhile, there is also plenty to please dividend chasers — predicted payments of 22.9p and 23.9p per share for this year and next yield 3.4% and 3.6%. And I am backing dividends to keep growing at a healthy rate given the company’s rosy earnings outlook.

The post 2 under-the-radar stocks I’d consider in September appeared first on The Twelfth Magpie.

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Royston Wild has no holdings in any shares mentioned. The Motley Fool UK has recommended UBM. 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.

I have long been convinced by the long-term growth profile of BBA Aviation (LSE: BBA). And the market is increasingly cottoning onto its perky bottom-line outlook too, the stock striking fresh record peaks above 316p per share just today.

A robust US economy continues to drive the amount of corporate jets in the sky, bolstering demand for the company’s flight support and aftermarket services. On top of this, the London firm’s shrewd acquisition of rival Landmark Aviation in early 2016, as well as vast investment in its fixed base operator (or FBO) in North America and beyond, should lay the framework for stunning sales growth long into the future.

Investor sentiment received a shot in the arm after BBA announced in early May that group revenues soared 19% in the four months ending April, a result the business advised had reflected “both the contribution from acquisitions and organic growth.”

Plane brilliant

Revenues at its core Signature flight support division galloped 26% higher in the period, the company announced, with an additional month of contribution from Landmark — on top of the impact of FBO additions during the past year — helping to boost the top line.

But this was not the only cause for celebration thanks to the company’s bubbly assessment of the aviation space. Indeed, BBA noted that “growth in the North American [business and general aviation] market has shown signs of strengthening with flight movements up 4% in the first two months of the year.”

Against this backcloth City analysts expect earnings to soar at the firm in the near-term, and a 27% rise is pencilled-in for 2017 (compared with last year’s reported 8% advance). And the bottom line is predicted to keep on swelling with a 9% advance next year.

And in my opinion these forecasts make BBA a brilliant bargain. While the flying ace deals on a forward P/E ratio of 16.8 times (nudging above the widely-regarded value watermark of 15 times), a sub-1 PEG reading of 0.6 suggests it is, in fact, attractively priced relative to its growth potential.

When you also throw in the probability of increasingly-chunky dividends as cash generation steadily improves (yields clock in at 3.3% and 3.7% for 2017 and 2018 respectively), I believe BBA Aviation is worthy of serious attention at current prices.

Trade show titan

However, it is not the FTSE 250’s only hot growth star trading far too cheaply, and I reckon value seekers also need to check out media and events mammoth UBM (LSE: UBM).

The number crunchers expect UBM to enjoy a 26% earnings uplift in 2017, resulting in a mega-cheap P/E ratio of 14.2 times as well as a PEG readout of just 0.5. And the company is expected to follow this with a 2% advance in the following 12-month period.

The commercial events provider can rely on its broad geographic and sector footprint (it operates out of more than 20 countries and covers more than 50 different industries) to keep delivering solid earnings growth. And UBM remains busy on the M&A trail to keep business ticking higher — the company announced this month that “the pipeline of bolt-on acquisitions continues to be good.”

The post 2 bargain growth shares on my watchlist appeared first on The Twelfth Magpie.

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Royston Wild has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended BBA Aviation. The Motley Fool UK has recommended UBM. 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.

Considering UBM’s (LSE: UBM) performance over the past decade, the company may not be the first choice for growth investors.

Over the last 10 years, shares in the company have lost 26% of their value as the group has struggled with a number of headwinds. However, it now looks as if management has pulled the business back on track. Over the past five years the shares have gained 19.2% excluding dividends, and over the previous 12 months, shares in UBM have added 9%. And for the first time in five years, last year revenue expanded by a noticeable amount.

Back to growth?

Between 2011 and 2015 UBM’s revenue bounced between £794m and £550m, with an average of around £750m. For 2016, revenue of £863m was reported, and analysts have pencilled-in revenue of £1bn for 2017. What’s more, for 2017 the company is expected to report a pre-tax profit of £250m, more than the past two years combined. Earnings per share are set to come in at 50.4p, up 26% year-on-year and based on these figures the shares trade at a forward P/E of 14.

As well as UBM’s earnings growth, the shares also support a relatively attractive dividend yield of 3.2%, and the payout is covered twice by earnings per share.

So, after a decade of floundering it now looks as if it could be time to bet on UBM’s recovery as the group builds on the foundations put in place over the past few years. As well as the company’s attractive growth profile, it also boasts a healthy cash balance of nearly £300m, as reported at year-end 2016.

Freedom to grow

Like UBM, data services Euromoney (LSE: ERM) has struggled to find growth over the past five years. City analysts have pencilled-in earnings per share of 71.4p for the year ending 30 September 2017, up only 5.3% from fiscal 2012’s reported number of 67.8p.

Still, while the company has struggled to find growth in the past, analysts are predicting bright things for the firm. For example, they expect earnings per share growth of 7% for this fiscal year followed by growth of 8% for 2018, the company’s only two-year growth run since 2013.

According to management, the recent reduction of DMGT’s stake in the business, from 68% to 49% has helped speed up diversification efforts, which explains why analysts now expect Euromoney’s growth to pick up after several years of stagnation.

Looking after investors

Shares in Euromoney might look expensive today as they trade at a forward P/E of 14.4, but this multiple seems appropriate for the business. The company is highly cash generative and during its last fiscal interim period spent £200m buying back shares from DMGT. This deal has sent debt skyrocketing to £83.6m from a net cash position of £55.9m, but with around £50m of free cash being generated every year, it shouldn’t be long before this debt is eliminated.

As well as the buybacks, which show that management is set on creating value for investors, the shares support a dividend yield of 2.4% at the time of writing. The payout is covered 2.8 times by earnings per share.

The post 2 exciting growth stocks with untapped potential appeared first on The Twelfth Magpie.

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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended UBM. 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.

Full-year results released on Wednesday show what the excitement is all about, with better-than-expected figures pushing the share price up more than 10% in morning trading. Billings during the year (that is, invoiced sales but not revenue) rose by 18.2%, despite the Brexit-led fall in the pound. 

The company reported an adjusted operating profit of $38.3m, which was lower than the previous year but still ahead of expectations, and it saw free cash flow almost trebling to $133.4m. But this year’s figures aren’t really what it’s about — after all, adjusted earnings per share of 8.5 cents (approx 6.6p) puts the shares on a P/E of 62.

Sparkling expectations

No, it’s the future that people are investing for, with Sophos reckoning it can reach annual billings of around $1bn by the year 2020, with operating profit of more than $100m. On that basis, we could see a P/E multiple of around 20 or lower, which would be a lot less scary.

But I’m just a little cautious at the moment as I can’t help feeling I’m seeing a bandwagon effect on the share price from last week’s massive cyber-attack that hit the NHS. Computer security spending is expected to rise as a result, and Sophos does supply security systems to the NHS — but I can see investors drifting away as the panic subsides.

Overall, I’m seeing a good company with a great future here, but with perhaps something of a short-term overvaluation. I’d consider buying on any future dips. 

Revamped growth

B2B events organiser UBM (LSE: UBM) is a very different proposition. The company largely reshaped itself in 2016, disposing of its PR Newswire business for £490m (of which £243.7m was paid out as a special dividend), and acquiring Allworld Exhibitions for £392.9m.

That made comparisons with previous years tricky, but UBM did record a 19.2% rise in adjusted operating profit from continuing operations, with diluted earnings per share (again from continuing operations) up 31%. Free cash flow looked strong with an impressive cash conversion rate of 96%.

Forecasts for 2017 currently suggest a further 26% rise in EPS, putting the 707p shares on a forward P/E of 14. With that level of expected growth, I see that as an attractive valuation, especially with dividends of around 3.2% on the cards.

Good start to 2017

Wednesday’s trading update assured us that things are going well, with a full-year outlook that’s unchanged. The company did admit that its spring fashion events had been “mixed“, but stressed that its “focus remains on accelerating organic growth and driving further margin improvement.“

But I do pause for thought a little when I see the modest 2% EPS rise pencilled-in for 2018, and I think a year of no real growth like that could knock the share price back. I’m in this investing lark for the long term, but the markets are fickle and rarely see beyond the end of the current year.

The integration of Allworld is apparently going well, and I really do think we’re seeing a good long-term growth prospect here. But I’m wary of sentiment, and it’s another that I might consider buying on the dips.

The post 2 exciting growth stocks with great long-term potential appeared first on The Twelfth Magpie.

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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has recommended UBM. 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.

Winning strategy

Global events group United Business Media (LSE: UBM) has enjoyed another good year with its share price reaching a nine-year high on the back of strong results for 2015, backed up by more impressive numbers for the first six months of the current year. The media firm’s Events First strategy was looking like a winner when it revealed that revenues for 2015 were up by a massive 39.9% to £769.9m and pre-tax profits up by £18m to £119.6m.

Shares in the FTSE 250 firm haven’t looked back since, rising from 543p when the results were announced in February to current levels around 700p. In July the company revealed further progress when it announced its interim results for the first six months to June. Pre-tax profits rose to £51.8m from the £35.1m reported for the first half of 2015, on higher revenues of £380. The firm said it raised £530m from the sale of PR Newswire and £2.1m from the disposal of French print magazine Janus Investment, as it continues to transform into a more events-focused business.

The London-listed global media group expects to see little direct impact from the result of the EU referendum as over 80% of revenues are generated in the US and emerging markets, and less than 10% from the UK, although it should see some benefit from the stronger dollar. With market consensus estimates predicting more impressive growth in the coming years, I feel UBM is priced to buy with the P/E rating falling to 16 by the end of next year.

Get ready to pounce!

Private healthcare provider NMC Health (LSE: NMC) has also enjoyed another outstanding year of growth with its shares continuing to post record highs. But the recent surge hasn’t deterred brokers from reiterating their buy recommendations and continuing to push up their target prices. The mid-cap firm recently reported another set of encouraging figures for the six months to the end of June, with revenues increasing by 46.9% year-on-year and earnings before interest, tax, depreciation and amortisation (EBITDA) rising 68.2% to $115.9m over the same period.

The UAE-based healthcare chain has gone from strength to strength since its London listing in April 2012 with the shares trading at more than six times the IPO price of £2.10 and revenues expected to hit £1bn by the end of next year. The FTSE 250 firm is expected to post an impressive 44% rise in earnings for the full year to the end of December, pushing underlying profits above £100m.

NMC’s shares have soared this year, gaining a massive 74%, and no doubt some existing shareholders will be itching to take some profits off the table. When that happens, I see a golden opportunity for growth-focused investors to take advantage of the weakness, and pounce.

The post Here’s why smart investors are buying these FTSE 250 shares! appeared first on The Twelfth Magpie.

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• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has recommended UBM. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Clearly, the outlook for the wider retail sector is relatively uncertain at the present time and investors are rather nervous regarding the prospects for the UK economy. Therefore, shares in JD are up by less than 1%. That’s despite a rising wider market and its upbeat trading statement with JD being on track to record a rise in its bottom line of 14% in the current financial year, followed by further growth of 12% in the next financial year.

These rates are around twice those of the wider market and yet JD has a price-to-earnings growth (PEG) ratio of just 1.3. This indicates that its shares offer good value for money and are worth buying for the long term.

Acquisition trail

Also releasing news today was Wood Group (LSE: WG), with the oil and gas engineering specialist announcing the acquisition of the trade and assets of Enterprise Engineering Service Limited’s (EESL) Aberdeen based fabrication and manufacturing business. The deal enhances Wood Group’s asset integrity management capabilities and adds fabrication to its services. The outcome for customers is potentially greater efficiencies and an extension of the lives of upstream and midstream assets in the oil and gas sector.

While the wider oil and gas sector has endured a challenging time in recent years due to the falling price of oil, Wood Group has performed much better than a number of its peers. However, in the current year its earnings are due to fall by 29%, which could hurt investor sentiment in the stock. But with growth of 4% pencilled-in for next year and Wood Group having a sound strategy of investing during a downturn, it could prove to be a strong long-term buy.

Special dividend

Meanwhile, UBM (LSE: UBM) has also been in the news today after it announced the disposal of its PR Newswire business to Cision. The total net cash proceeds of the transaction are £490m and UBM will return £245m of the proceeds to shareholders by means of a special dividend, with an associated 8 for 9 consolidation of UBM’s shares being conducted.

The special dividend works out as 55.3p per share and will be paid on 8 July to shareholders on the register on 24 June. The disposal of PR Newswire is a key step in UBM’s Events First strategy, with the company now being focused on the high-margin and high-growth events sector. As such, it seems to be a sound move for the long term outlook of the business.

With UBM trading on a PEG ratio of only 0.9, it seems to offer excellent value for money. And with it yielding 3.9% and forecast to raise dividends by 2.3% next year, it appears to be a top-notch income play, too.

The post Are JD Sports Fashion plc, John Wood Group plc and UBM plc ‘screaming buys’ after today’s updates? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended UBM. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Scope for increases

Revenue increased by 3.8% at constant currency, while normalised pre-tax profit was up by 29.3%. This has allowed the company to increase its dividend payout by 10% to 11.33p per share, which puts it on a yield of 3.5% at its current share price.

Looking ahead, there is further scope for rapid increases in dividend payments, since National Express continues to enjoy significant contract wins, as well as recording rising revenues, profits and margins in every one of its divisions in 2015. This, plus a dividend coverage ratio of 2, indicates that shareholder payouts have tremendous scope to increase over the medium term, with earnings growth of 12% forecast for next year also likely to allow for double-digit dividend rises moving forward.

With National Express trading on a price to earnings (P/E) ratio of 13.7, it appears to offer good value for money given its bright prospects and upbeat performance. As such, it seems to be worth buying –especially for income-seeking investors.

Transformed

Also reporting today was media company UBM (LSE: UBM), which said it performed well during what proved to be a transformational year in 2015. It included the proposed disposal of PR Newswire for $841m, as well as the acquisition of Advanstar. Furthermore, UBM says it is making good progress with its Events First strategy and this has been at least partly responsible for improved margins, as well as contributing to a rise in total adjusted operating profit of 31%.

With dividends increasing by just 1.4%, UBM may appear to be a rather unlikely income play. However, its shares currently yield a very enticing 3.7% and with dividends being covered 1.6 times by profit, more rapid dividend rises in future are a possibility.

That’s especially the case since UBM appears to have a sound strategy which is expected to contribute to an increase in its earnings of 15% next year. This should enhance the potential for a dividend increase and with a special dividend of £245m due to be paid in the near term from the proposed disposal of PR Newswire, now could be a good time to buy UBM for its income prospects.

Significant headroom

Meanwhile, Diageo (LSE: DGE) also appears to be a sound long term income play. It may only yield 3.1% right now, but with the beverages company’s bottom line due to rise by 8% in the next financial year, it has the potential to increase dividends at a brisk pace. This prospect is further enhanced by the fact that dividends are covered 1.5 times by profit, which affords Diageo significant headroom when making payments to its shareholders.

With Diageo’s wide range of premium drinks brands, it would not be a major surprise for it to become a bid target. Clearly, there is no guarantee of that happening, but with a diverse geographic footprint which is set to benefit from growth in demand from developing nations in the coming years, Diageo’s P/E ratio of 21.2 could move substantially higher.

The post Are Dividends At National Express Group PLC, Diageo plc And UBM plc About To Explode? appeared first on The Twelfth Magpie.

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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has recommended Diageo and UBM. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.