But since its lowest point in October 2020, the Rolls-Royce share price has climbed almost 180%! Will it return to its pre-pandemic levels in 2021? And should I be considering the company as a value investment for my portfolio? Let’s take a look.

Why is the Rolls-Royce share price rising?

There are two primary catalysts for the recent surge in the Rolls-Royce share price, as I see it. The first is a rescue package. In October, the firm announced it had successfully avoided disaster with £5bn of additional financing by issuing bonds and rights issues.

The second seems to be some resemblance of normality returning to the aerospace sector. The UK government has recently laid out its plans to ease lockdown restrictions. Within the proposed roadmap, holiday travel is set to resume mid-May this year, just in time for the summer holiday season. While this is still a few months away, several airlines – including EasyJet and TUI – have reported a massive surge in flight and package holiday bookings.

Needless to say, this is excellent news for Rolls-Royce, and so its share price has taken off. But is it a good value stock?

A business in distress

While the impact from Covid-19 has been devastating on the Rolls-Royce share price, the company was in trouble long before the pandemic hit.

In four of the last six years, it has been losing a significant amount of money. This ultimately forced it to raise additional capital with debt throughout that period and severely damaged its financial health.

Before Rolls-Royce raised the additional £5bn, the stock had nearly £8.8bn of debt on the balance sheet. By comparison, the market capitalisation of the entire company is only around £9bn. This means the total level of debt of this business is now greater than its market value. And a highly-leveraged, unprofitable business in distress is a serious red flag in my eyes.

Value stock or value trap?

The return of holiday travel is undoubtedly good news for the Rolls-Royce’s share price. And I think it’s likely to continue climbing provided that the UK government’s roadmap doesn’t get changed (which is entirely possible).

But even if all performance expectations are met, I believe the business is still in lots of trouble. It was struggling to stay on top of its interest payments before the pandemic. And now it has another £5bn of debt to deal with. So personally, this is not a business I want to own. Given the challenges that lie ahead, the risk does not match the reward, in my eyes.

The post Will the Rolls-Royce share price recover in 2021? appeared first on The Twelfth Magpie.

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• Is now the perfect time to buy Rolls-Royce, Babcock and BAE System shares?
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Zaven Boyrazian does not own shares in Rolls-Royce Holdings. 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.

But lately, this incredible growth seems to have reversed. Since December 2020, Avon Rubber’s share price has fallen almost 40%. What’s going on? And is this a buying opportunity for my growth portfolio? Let’s take a look.

A military specialist

If you are not familiar with the business, Avon Rubber is a designer and manufacturer of personal protection equipment. Its products are predominantly used in the military and first response units such as the police and firefighters.

The business has two main units. The first and larger one creates respiratory products such as gas masks, underwater breathing units, and low profile escape hoods. Recently the firm partnered with University College London and adapted its technology to create a new patient breathing interface for ventilators used to treat severe cases of Covid-19.

Its second and relatively newer unit specialises in ballistic protection gear, such as ceramic body armour and helmets.

Combined, these products have enabled the business to become a key supplier of military-grade protective gear for the US armed forces. All the while, cementing numerous long-term contracts that have led to explosive growth for investors.

So why did the Avon Rubber share price fall?

As I just said, a core component of its rising share price is the large contracts with the DoD. So a sudden drop is not at all too surprising when the firm failed to deliver an order on time.

The company was due to supply body armour plates for the US military. However, because of an unpredicted prolonged approval process, Avon has been unable to deliver the promised products. The management currently expects the order won’t be completed until early 2022.

Needless to say, this is not good news. And it has undoubtedly impacted the stock’s reputation for reliability. However, the extent of the reputational damage appears to remain relatively limited. The stock continues to receive large scale orders. Most recently, a $33m contract to provide its respiratory devices for NATO was signed.

There are some investment risks to consider

The world of personal protection equipment is constantly evolving. Numerous competitors are targeting the same contracts which Avon currently holds. Suppose the business is unable to identify new and improved products to protect the safety of its users. In that case, competitors might be able to swoop in a take over existing contracts in the future.

The same risk applies if Avon Rubber once again fails to complete orders on time. While the most recent incident appears to be a one-off event, it may happen again in the future. If delivery dates continue to be missed, the firm’s reliability will likely come into question, resulting in future revenue loss. At least that’s what I think.

Is the Avon Rubber share price a bargain?

Even after this large drop, the Avon Rubber share price is by no means cheap. But that is often the case with high growth stocks. Personally, the valuation is still a bit too rich for my tastes.

However, the business looks incredibly strong to me, so I may be tempted to add it to my growth portfolio if its share price continues to fall.

The post The Avon Rubber share price has fallen 40% in 3 months. Should I buy now? appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in Avon Rubber. The Motley Fool UK has recommended Avon Rubber. 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.

Why did the Carnival share price initially sink?

It’s been a tough year for shareholders of the cruise line operator. With safety concerns for its passengers, the firm is following the guidance of the Centers for Disease Control and Prevention (CDC). Subsequently, all cruise trips have been suspended with the earliest restart date expected to come in January 2021.

These cancellations and customer refunds have wreaked havoc on the financial health of the company. Even though their cruise ships remained parked in harbours, the costs of maintaining them haven’t changed. 

The high operational costs of the business created high barriers to entry for competitors. However, this competitive advantage has turned into a serious liability over the past year. 

Debt levels are rising!

To remain afloat (pardon the pun) Carnival has been taking on additional debt as well as issuing new shares through equity offerings.

As of August, total debt stood at $18.9bn after it successfully acquired approximately $9.2bn of additional funding through credit facilities, secured notes, and convertible notes. While it is undoubtedly good news that Carnival secured additional financing, it does raise concerns.

As part of these agreements, certain limitations are in place that restrict how much of the capital structure can consist of debt. Specifically, the firm must maintain a minimum debt service coverage – EBITDA-to-interest – of three-to-one. Put simply, the company must be making sufficient profits to cover three times its interest payments to debt holders.

With the business nearing that ratio due to the lack of sales, its ability to continue relying on debt financing is quickly diminishing. 

While most of this new debt does not need to be repaid until after 2024, its existing obligations are coming due and may drastically affect the Carnival share price.

Is the Carnival share price a bargain or a trap?

Assuming the company can keep up with interest payments and operations return to normal soon, then the current share price does look quite appealing in my eyes.

But there is a high level of risk. Suppose the worst case comes to pass and the firm declares bankruptcy. In that case, shareholders are would experience losses, even at the current low share price.

There is currently $50bn in assets on the balance sheet, $37bn of which is in the form of cruise ships. These can probably only be liquidated at an average of 40% of their reported value. Of the remaining $27.8bn, $19bn will be used to repay debts, which leaves a rough estimate of $8.8bn available to equity holders. When compared to the current Carnival share price — or $15bn market cap — shareholders are likely to experience a 46% decline in value, almost everything that was gained these past weeks.

The post The Carnival share price has rebounded 40%! Should I buy now? appeared first on The Twelfth Magpie.

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• 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?

Zaven Boyrazian does not own shares in Carnival. 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.

As a reminder, BT Group is a telecoms infrastructure business. Operating under numerous retail brands – BT, EE, Plusnet, and Openreach – the firm supplies approximately 35% of the UK population with broadband.

On the enterprise-facing side of the company, BT owns and manages the UK’s core fixed network. Over 650 communications providers piggyback off the system to provide their customers with strong mobile signal for 2G, 3G, 4G, and soon 5G.

Why the BT share price has dropped

With such a diverse and far-reaching portfolio of services, it may seem odd that the BT share price has performed so poorly. The biggest problem is its level of debt. Building and maintain its communications network is a costly process.

The firm spent billions securing 3G licenses across Europe, repeated the process for 4G, and will likely repeat the story with 5G. It doesn’t help that the government restrictions on Huawei’s involvement with building the UK’s 5G network have added more pressure. As it stands, this pressure amounts to an expected £500m additional cost for BT over the next five years.

The company’s rapid growth during its early days created a vast need for cash flow that operations were simply not producing. So BT turned to debt financing and then seemingly never stopped. As a result, it now has over £27bn in long term obligations, including loans, leases, pensions, and tax deferrals.

Today, the total debt is nearly double the firm’s £10bn market capitalisation.

Furthermore, with the impact from Covid-19, the board of directors announced the suspension of all dividend payments until 2022. Subsequently, the share price fell to a 10-year low.

Light at the end of the tunnel?

The stock price has recently begun to rally following the release of the half-year report. Management raised guidance on the expected earnings before interest, taxes, depreciation & amortisation (EBITDA) from £7.2bn-£7.5bn to £7.3bn-£7.5bn. I’ve estimated this to translate into a net income of £1.6bn-£1.9bn.

Operationally, the business appears to be doing rather well. A new partnership with Belfast Harbour to deploy 5G was secured, improvements made to infrastructure have reduced annual costs by £352m, and the 5G network is now live across 112 cities around the UK.

Yet despite all this good news, revenues and profits continued to fall by 8% and 20%, respectively. However, a very positive sign was the repayment of £720m of debt. This doesn’t solve the solvency problem by a long shot, but it’s nice to see debt levels finally begin to decline.

The bottom line

Such a sharp rise in share price on what appears to be mediocre news tells me the stock is vastly undervalued. However, given the state of the balance sheet, I’d much rather invest my money into a company which isn’t riddled with liabilities.

The post The BT share price is starting to rise. Here’s what I’m doing now appeared first on The Twelfth Magpie.

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Zaven Boyrazian does not own shares in BT Group. 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 stock market must be one of the only markets in the world where people cheer its offerings becoming more and more expensive. But as every savvy investor knows, as shares become more expensive, they become more a speculation and less an investment.

The truth is that cheaper stocks are fantastic news for every long-term investor. And even after the FTSE‘s recent gains, there are still bargains for sale.

Vodafone, one of those cheap stocks

Vodafone (LSE: VOD) is one of these bargains, I feel. It is also one of the largest providers of mobile and data services in the world. The stock lost 55% of its value over the last five years due to declining revenues and heavy losses, but the firm is maintaining its dominant market position.

Fortunately, the business fundamentals appear to be changing for the better. Vodafone is selling off its non-core assets to improve its margins, create better cash flow and reduce its debt pile. Furthermore, its strategy of additional cost-cutting measures and more investment in high-margin areas is producing results.

Vodafone reported growing revenues and a positive financial performance over the last six months. It’s improving cash flow gives the company the confidence to sustain its 5.5% dividend yield at a time when many other FTSE 100 firms are cutting theirs. In addition, the spin-off of its European Tower Co division, expected in 2021, will reduce leverage.

Currently trading around 136p, Vodafone shares are selling at an attractive valuation for expected improved future business fundamentals. In addition, the price-to-book ratio is hovering around 0.62, creating a solid investment.

Aviva

Aviva (LSE: AV), the insurer and savings products provider, is another one of these ‘cheap’ stocks. Currently trading around 275p, it’s down 50% from its 2015 peak.

I find the size of this drop surprising. Aviva surprised markets this year by posting a 6% increase in its 2019 operating profits. And this in a year when lower interest rates increased the firm’s liabilities by an estimated £3bn!

There are other positive signs too, such as an improvement in insurance sales and a 2% increase in customers. The £300m cost-savings programme is also going well and the balance sheet is strong. Moreover, Aviva improved its solvency ratio by 8% over the last six months, meaning cash flow is better covering its liabilities.

However, the coronavirus pandemic has produced an uncertainty that may impact the end-of-year results. In addition, the government-enforced restrictions have prevented many expected new business sales. This may hit the firm’s revenues and profits at the end of the year, but almost every other FTSE firm will be impacted too. So this must be viewed relatively. 

Aviva cannot do much about the Bank of England’s monetary policy. But it can make assumptions and plan accordingly. Indeed, the company’s management appears to be doing just this and Aviva is demonstrating its operating resilience. Long may it continue.

I think the market has been too harsh on Aviva. In the future, its shares may be due for a correction. And as for Vodafone, the need for data is likely to increase. The firm is well-positioned to capitalise on it. I’d buy both these cheap stocks in the sale now.

The post Don’t waste the sale! 2 cheap stocks I’d buy and hold today appeared first on The Twelfth Magpie.

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Rachael FitzGerald-Finch 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.

Often, for many FTSE 100 companies, the price you pay can be far higher than the actual tangible value of the company on its accounts — its net asset value (NAV). Indeed, this is why many value investors will often look for stocks trading at prices close to the NAV figure. And after the coronavirus crash, there are definitely more of these firms in the Footsie.

However, a stock is not necessarily a great investment just because it’s trading near its NAV. If you want to profit from the bear market, you need to find a stock with three additional factors: a moderate price/earnings (P/E) ratio, a strong financial position, and a realistic prospect of future earnings.

1. Moderate P/E ratio for the FTSE 100

The P/E ratio is the current share price divided by the earnings per share (EPS). It gives a rough idea as to how a firm’s price compares with its actual value. My advice is to work this out this yourself using the average EPS figure from the last three years and the current price. This will give you the best estimate of earnings because it evens out fluctuations.

The late financial sage Benjamin Graham advised limiting your company selection to stocks whose average P/E is no higher than 15. I can’t disagree with him, but bear in mind that a normal P/E range for one industry will differ from another one.

Due to the crash, many Footsie companies will now be trading on a lower P/E than previously, meaning values are better aligned to prices. 

2. A strong financial position

Right now, a company needs a sizeable pot of working capital to get it through the hard times. Benjamin Graham used a current ratio test of 2:1. This means that current assets should be twice the current liabilities. This ratio, and a long-term debt figure lower than the amount of working capital, are good indications that the firm will likely have the cash flow to survive the bear market.

3. Prospect of future earnings

A realistic prospect of future earnings implies a well-managed company with stable income and some year-on-year growth. It’s a good sign if a firm can grow EPS year-on-year for a decade or more, through different stages of the business cycle and varying economic climates. 

Positive earnings per share for the last 10 years is a good test. Even better if a firm has increased its EPS by one-third over that 10-year period. This test is tough enough to eliminate risky firms but not too restrictive when it comes to choosing stocks. The 10-year period is long enough to see if management knows what it’s doing, and will include good and bad times.  

An investor needs to be realistic with expectations after a stock market crash. Forget brilliant company prospects for the time being. However, if you focus your stock picking on the above three criteria, I think you’ll find some good FTSE 100 investments to profit from in the future. 

The post Stock market crash: 3 criteria to help you profit from the FTSE 100 appeared first on The Twelfth Magpie.

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Rachael FitzGerald-Finch 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.

Canada’s Prem Watsa, India’s Radhakishan Damani and Spain’s Francisco García Paramés come to mind. Until recently, fund manager Neil Woodford was considered Buffett’s British counterpart. However, after a disastrous run over the past few years, Woodford had to stop withdrawals from his flagship investment fund down, leaving his reputation permanently damaged. 

Woodford’s misfortune has left a gap for British investors seeking inspiration and a few stock tips. So I set out to find the country’s next big investment legend.

The criteria

Warren Buffett presents a straightforward framework for wealth creation — buy a bunch of diverse companies below their intrinsic value and hold them for extended periods of time, preferably forever. Buffett, of course, used the float from his insurance business to fund these investments, so a little bit of leverage was involved. 

Since he took over his investment vehicle in 1964, Buffett has managed to expand the company’s book value at an annualised rate of 18.7%, while the S&P 500 has compounded at a mere 9.7% over that same period. 

With that in mind, it’s clear that the British Buffett is probably a professional stock picker or a business leader in charge of capital allocation at a well-diversified conglomerate that has grown faster than the FTSE 100 over several decades. 

Britain’s wealthiest entrepreneurs

Britain’s two richest families, the Hindujas and the Reuben brothers, both fit the bill. The Hinduja Group is a massive global conglomerate that is involved in several different industries, including motor vehicles, banking, call centres and healthcare.

Meanwhile, the Reuben brothers are bona fide investors who’ve managed to compound their wealth from $3.2bn in 2003 to £18.9bn in 2019, an annualised growth rate of 11.7%. The FTSE 100, meanwhile, has merely doubled over that period, implying a compound growth rate of 4.4%. 

However, the Hinduja Group isn’t a listed entity while many of its subsidiaries are listed in Mumbai. The Reubens have focused on private real estate deals and venture capital investments that are beyond the reach of retail investors such as myself. Whereas most of Buffett’s investments are public and his holding company is listed in New York.  

That brings me to the thriving wealth management scene and the fund managers that have earned a reputation for investing other people’s money wisely. 

Fund managers

One of the top performing equity funds in the country is Lindsell Train Global Equity. Managed by an investment team that includes Nick Train, Michael Lindsell and James Bullock, the fund has outperformed its benchmark MSCI World Index (developed markets) by several basis points. 

Since its inception in 2011, the fund has returned 20.6% on an annualised basis. The MSCI benchmark has delivered an annual rate of 13% over that same period. 

Their top holdings are some of my favourite stocks. I recently called Unilever the most dependable FTSE 100 stock and have said that Diageo’s resilience surpasses gold. Some 16% of the Lindsell Train portfolio is invested in those two stocks. 

So it seems I found what I was looking for. Britain’s answer to Warren Buffett is… a team of London-based portfolio managers.  

The post My search for the British Warren Buffett 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?

VisheshR has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Diageo and Diageo. 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.

WPP

Advertising giant WPP (LSE: WPP) was one FTSE 100 stock that made it, and this isn’t surprising in my view, as the shares have fallen significantly over the last few years and currently trade on a low P/E ratio of just 9.7. Even if the stock rose 50% from here, it would still only trade on a P/E ratio of 14.5, which isn’t high for a company with WPP’s track record.

After a difficult few years in which the advertising industry has been disrupted by technology companies, and influential CEO Martin Sorrell has left the company, WPP appears to be turning things around slowly. For example, just last week, the group announced in an AGM statement that new business performance has been “solid”, with notable client wins including Adidas, Duracell, GSK, and L’Oréal. The company also advised its sale of Kantar is progressing in line with its expectations.

With WPP shares currently yielding 6.2%, I see a lot of value on offer right now and I think there’s definitely potential for upside. 

Aviva

Another out-of-favour FTSE 100 value stock that made Mirabaud’s list was insurance group Aviva (LSE: AV). Like WPP, it also currently trades at a low valuation – its forward-looking P/E ratio is a rock-bottom 6.7.

As my colleague Rupert Hargreaves recently pointed out, Aviva has lacked direction recently. For a while there, it didn’t even have a CEO, so it’s no surprise the shares have languished. However, in March, the group appointed Maurice Tulloch as chief executive, and he’s already announced plans to cut costs and split up the company’s life and general insurance businesses to enhance the group’s focus. So it looks like Aviva is heading in the right direction.

With a high prospective dividend yield of 7.8% on offer right now, I think Aviva shares have the potential to rise in the years ahead.

Schroders

Finally, investment management Schroders (LSE: SDR) also made the list. Now, I’m a big fan as the company has an excellent reputation within the investment management industry and it also has a fantastic dividend growth track record.

I own the non-voting shares myself. However, to be honest, I would be surprised if the stock was able to climb 50% in the next three years, given we are already 10 years into the current bull market. It’s not impossible, of course, given that the shares currently trade on a P/E ratio of nearly 15, a 50% gain from here in the space of 36 months is asking a lot of the shares.

That’s not to say the stock isn’t a good buy right now. A P/E of 15 for Schroders is quite reasonable, in my opinion, and with a yield of 3.8% on offer (4.7% if you buy the non-voting shares), I think the stock is capable of providing solid total returns for investors in the years ahead.

The post These 3 FTSE 100 ‘value’ stocks have 50% upside, according to city broker appeared first on The Twelfth Magpie.

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• How to turn a £20k ISA into a £12,000 yearly second income
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Edward Sheldon owns shares in WPP, Aviva and Schroders (non-voting). The Motley Fool UK has recommended Schroders (Non-Voting). 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.

Nevertheless, having the courage to buy what others are selling has at least the potential to be very profitable over the long term. In addition to benefiting from a reversal in a company’s share price, contrarians may also receive dividends that can be reinvested into buying more shares along the way, further improving their gains.

With this in mind, here are three possible recovery plays that, in addition to being relatively cheap to buy, also offer decent payouts.

Get paid to wait

Floorcovering product supplier Headlam (LSE: HEAD) is first up.

Thanks to concerns over declining pre-tax profit from to a weakening residential market and higher costs (not to mention the debacle at peer Carpetright), the company continues to be out of favour with the market. 

The shares are down a third in value from where they were back in 2017 and now trade on a price-to-earnings (P/E) ratio of just under 11. That’s beginning to look reasonable, particularly given the sizeable dividend on offer. 

Assuming it returns the predicted 24.9p per share in 2019, Headlam yields 6% at its current share price, covered 1.5 times by profits. As a comparison, the best cash ISA offers just 1.45%.

While margins aren’t exactly huge in this line of work, the company generates pretty decent returns on the money it invests. At the time of its last interim results, there was also £16m in net cash on the balance sheet. Full-year numbers are out on 6 March.

Next up is investment manager Polar Capital Holdings (LSE: POLR). After a pretty awful second half of 2018 during which investors pulled their money from its funds, the shares now appear to be stabilising. And given that they still trade on just above 10 times earnings, I think there’s decent money to be made in time.

Like Headlam, Polar Capital has a good balance sheet with the equivalent of over 20% of its market cap in cash. Right now, analysts are penciling in a total dividend of 32p per share for the 2018/19 financial year (ending 31 March). That leaves the shares yielding almost 6.5% at the current share price.

Of course, Polar could experience more volatility in the months ahead, particularly if Brexit negotiations fail and no deal is agreed. As such, a bit of pound-cost averaging may be prudent here.

Freight management services provider Xpediator (LSE: XPD) is the final stock on my list. Again, the company’s value has been hit hard in recent times, down 45% from the high of 85p hit last July. Based on last Monday’s trading update, this could be a great opportunity to build a position. 

Total revenues rocketed 54% to £179m over 2018 with over 14,000 customers now on the small-cap’s books. Two recent acquisitions appear to be bedding in well with more likely to follow.

For those concerned by the impact of Brexit, Xpediator stated that it had been “working closely with leading transport associations and port authorities to plan ahead” and boasts that its status as an Authorised Economic Operator will allow it to support companies looking for solutions to get their products to where they need to be. 

Available for just over nine times forecast 2019 earnings, it is set to yield almost 4% at the current share price. These payouts look secure and, importantly, are growing rapidly. 

The post 3 cheap contrarian stocks that pay great dividends 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?

Paul Summers 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.

Diversifying its way to growth

One is pharma giant GlaxoSmithKline (LSE: GSK). Even though it hasn’t increased its dividend in three years as it digests a major acquisition, its shareholders are currently netting a 4.99% yield annually. Combined with a sedate valuation of just 14.2 times forward earnings, this means it’s one appearing on many value screens.

And while analysts aren’t expecting dividend payments to increase over the next two years, there’s solid income growth potential over the long term. If dividend payments are to resume marching upwards, much of the credit will be going to the group’s slew of new drugs just entering the market.

From a series of new HIV treatments, whose sales are already growing by double-digits, to promising shingles treatments, these new drugs helped send group-wide constant currency pharmaceuticals sales up 1% in the first half of the year. This came despite sales of its blockbuster asthma drug Advair slowly declined, as it comes off patent.

And as these new drugs find their footing in the market, the company can thank its other two divisions, vaccines and consumer health, for pushing overall group revenue up 4% in constant currency terms during the period to £7.3bn.

CEO Emma Walmsley has also listened to investors and is pushing through wide-ranging, cost-cutting exercises that are already improving operating margins. In H1, this led free cash flow to double to £0.8bn. With sales and profits moving in the right direction, GSK should have more money to play with in the medium term, used to pay down debt, make further acquisitions, or juice shareholder returns.

Either way, now could be an interesting time to take a closer look at the pharma giant.

Far from dead in the water 

Another FTSE 100 stock offering index-beating income is Royal Mail Group (LSE: RMG), and its 5% dividend yield. Even though the company’s share price has risen a respectable 20% over the past year, its shares still trade at an attractive 12.1 times forward earnings.

Of course, this low valuation isn’t without good reason as the continued decline in the volume of letters being posted eats away at Royal Mail’s sales and profits. However, the management team, like the rest of us, hasn’t been surprised by this trend and is bulking up its position in the market for parcel delivery.

Last year, rapid growth in its UK and European parcel business helped boost group-wide revenue by 2% to £10.1bn, despite a 4% drop in letter revenue. This overall performance was impressive given UK letters still accounted for around 40% of overall revenue.

For the time being, the steady decline in letter volumes will keep Royal Mail growing slowly. But investments in automated sorting facilities are already having a positive effect on margins and hold the promise of further profit and dividend growth in the future. While Royal Mail is unlikely to ever deliver magnificent returns, its steady but dependable growth could appeal to value investors.

The post Two dirt-cheap FTSE 100 high-yield stocks for bargain hunters 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 of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. 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.