FTSE 250 recovery play

Before mid-March, shares in high-performance polymer producer Victrex (LSE: VCT) had been reluctant to take part in the recovery. Since then, they’ve climbed almost 30% in value as demand has bounced back. Based on last Friday’s Q3 management statement, I think this momentum should continue.

Last week, the FTSE 250 company said that it had “delivered a strong quarter” over the three months to the end of June. Group revenue now looks to be back on track after last year’s disruption in all of the company’s markets.

Looking ahead, the resurgence in business seen to date and a “robust” order book for Q4 now mean full-year numbers should be closer to “the upper end of market expectations”.

Naturally, there are potential bumps in the road ahead. According to Victrex, these include rising prices of materials, currency headwinds and the inevitable need for ongoing investment. Moreover, the shares aren’t cheap at 32 times FY21 earnings (falling to 27 times in FY22).

However, Victrex’s quality goes some way to justifying this valuation. It had £88.3m in cash at the end of June, has now reinstated dividends and consistently posts great margins and returns on capital. 

I’m also excited by the company’s growth potential via its ‘mega programmes’. These include the use of the company’s PEEK products in new applications such as knee replacements. Last Friday, it was announced that five patients had now been implanted with ‘PEEK Knees’ via its partner Maxx Orthopedics. Although still early days, no issues have been reported so far.

Still around 20% below its all-time price high, I see more upside for this stock and would be comfortable adding to my current stake.

Share price momentum

A trading statement from FTSE 250 soft drinks giant Britvic (LSE: BVIC) is due later this month. Based on its performance in 2021 so far, I don’t think investors should have much to fear. Those buying in January will have already enjoyed a gain of around 20%.

Sure, the share price won’t double overnight and there’s an opportunity cost to consider. It can be tempting for me to prioritise racier stocks over one that should provide steadier performance.

Nevertheless, Britvic strikes me as a great, defensive pick and one I’d buy regardless of what economists and analysts were saying about interest rates, inflation and the like. It’s got a portfolio of easily recognisable, ‘sticky’ brands that shoppers both like and will buy through habit. This makes earnings far more predictable than your typical tech stock. There’s also a 2.4% yield, easily covered by profits, to consider.

Back in May, Britvic reported that trading in the first weeks of H2 had been “encouraging“. As such, some of the Covid recovery is surely already priced in. Even so, I think a full return to normality in bars, pubs and restaurants should allow it to breach its previous record share price high before too long.

I’d be happy to add Britvic to my own portfolio today. 

The post 2 FTSE 250 stocks to buy now appeared first on The Twelfth Magpie.

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• 5 UK dividend shares with 7%+ yields

Paul Summers owns shares in Victrex. The Motley Fool UK has recommended Britvic and Victrex. 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.

Is this now a home run for investors? I’m not so sure.

Priced in? 

Having been so battered in 2020, the tilt to value stocks — particularly those operating in the travel and leisure space — makes sense. The question, however, is whether the recent good news is now priced-in. 

I think it might be. Even if air travel does rebound in 2021 as the market expects it to, easyJet will still face the same level of competition for passengers it did before the coronavirus reared its ugly head.

In the meantime, there’s a truckload of debt on its balance sheet to sort out. Tellingly, directors aren’t among those buying the shares either. This suggests they aren’t wholly confident about recent gains sticking. 

There’s also Brexit to think about. As I type, Boris Johnson is on his way to Brussels in a last-ditch attempt to strike a deal with his EU counterparts. The fact that negotiations are even still continuing is arguably encouraging, but I certainly wouldn’t want to gamble my money on a positive outcome. Even if an agreement is reached, only the most optimistic of investors would presume there won’t be further hurdles ahead.

All told, I think the easyJet share price could still see some volatility in the near term. That’s why, right now, I’m buying the shares of a different FTSE 250 company: polymer provider Victrex (LSE: VCT)

“Significant headwinds” 

Like the Luton-based airline, the coronavirus hasn’t been kind to Victrex. Today’s full-year numbers give some indication of the damage done.      

Sales volumes and revenue declined 7% and 10% respectively over the 12 months to the end of September thanks to “significant Covid-19 headwinds in H2″ having a “material impact” on the business.

Unsurprisingly, this has filtered down to Victrex’s bottom line. Reported pre-tax profit tumbled to £63.5m — 39% lower than the previous year.

It doesn’t look like trading will bounce back soon either. Today, Victrex said that “overall performance remains subdued” thanks to end-markets such as Aerospace and Energy continuing to be weak.

Buying opportunity

Based on today’s muted reaction, it would seem that none of this is a surprise to the market.

In contrast to the easyJet share price, Victrex’s valuation was down slightly in early trading. This suggests to me that now might be time to load up. But I think there are other reasons to be optimistic.

For one, its finances look strong enough to withstand this problematic period. The FTSE 250 firm had £73.1m in cash at the end of the last financial year.

The reinstatement of dividends — a final payout of 46.14p per share will now be paid — is another positive. I doubt management would be making this decision unless it was confident about trading picking up in 2021.

Third, Victrex continues to invest in growth opportunities, including a new manufacturing facility in China. On top of this, you have the traditional hallmarks of a quality company: high margins, high returns on capital employed, and a market-leading position. 

The easyJet share price has done well over recent weeks but, like Terry Smith, I’m more interested in what happens to valuations over decades. Victrex remains a better buy-and-hold pick for me.

The post Forget the easyJet share price. I’m buying this FTSE 250 stock for the next bull market! appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Victrex. The Motley Fool UK has recommended Victrex. 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.

FTSE 250 contrarian play

Like most in the market, online price comparison site Moneysupermarket.com (LSE: MONY) hasn’t had the easiest 2020 so far. In its most recent update, the FTSE 250 member revealed a 16% decline in revenue over Q3, due to travel restrictions and banks pulling products from the market.

But let’s not get distracted by a temporary period of troublesome trading — Moneysupermarket still ticks many boxes on a quality-focused investing checklist:

• Sky-high returns on capital employed? Check.
• Huge operating margins? Check.
• A strong brand? Check.
• Net cash on the balance sheet? Check (£5m).
• Still paying dividends? Check.

In addition to all this, Moneysupermarket should benefit from a rush for travel insurance when people start flying again. Even those that aren’t so inclined to travel will still be wanting to use the site to save money on monthly bills. 

Could I make greater gains buying battered travel and leisure stocks? Quite possibly. The issue with this strategy, however, is that many of these simply aren’t very good businesses when it comes to making money for their shareholders. And, as Warren Buffett would surely attest, it’s the quality of a business that really matters in the long run.

Assuming things do get back to normal next year, Moneysupermarket shares trade at 17 times forecast FY21 earnings. That still looks great value to me, considering the five-year average PE of 22.

Down but not out

A second battered FTSE 250 stock I’ve bought more of in November is high-performance polymer supplier Victrex (LSE: VCT). Like Moneysupermarket, recent trading hasn’t been great, due to the chaos caused by the coronavirus.

Last month’s update spoke of end markets remaining “subdued” after sales volume and revenue fell 26% (to 695 tonnes) and 27% (to £55,7m) respectively in Q4. Job cuts will help mitigate the company’s high fixed costs, but it’s hardly the sort of news to make investors bullish. There’s also Brexit to ponder.

As negative as this sounds, Victrex remains a classy operator. Let’s look at some of the attractions: 

• High returns on capital employed? Check.
• High operating margins? Check.
• Operating in multiple industries. Check.
• A market leader in what it does? Check.
• Lots of net cash on the balance sheet? Check (£67.4m).
• Dividends? Check (a dividend for FY2020 is expected).
• Growth opportunities? Check.

Thanks to its exposure to the aerospace industry, I also think Victrex is another good ‘picks and shovels’ play on the recovery in travel. Tapping into the growing trend for green investments, the company’s lightweight thermoplastics help make aircraft more fuel-efficient and environmentally friendly.

Play the long game

Naturally, big gains won’t come overnight. As an investor however, it pays to distinguish between short-term hurdles and game-changing problems. The coronavirus, I submit, is the former.

A valuation of 24 times forecast earnings does look dear, given current headwinds, but this should reduce as profits recover over the next couple of years. Just like star UK fund manager Terry Smith, I think price is of secondary importance compared to buying a great company with solid growth prospects. This belief certainly hasn’t adversely affected the performance of his Fundsmith Equity Fund.

Victrex’s eventual rebound should be worth the wait.  

The post Stock market rally! Here are 2 FTSE 250 shares I’ve been buying for the next bull run appeared first on The Twelfth Magpie.

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Paul Summers owns shares of Moneysupermarket.com and Victrex. The Motley Fool UK has recommended Moneysupermarket.com and Victrex. 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.

One example of the former, at least in my view, is FTSE 250 member Victrex (LSE: VCT). It might not be a company on the lips of most retail investors but its track record more than speaks for itself. 

Victrex supplies a high-performance (but also very light) polymer called PEEK that’s employed in a huge variety of products we use everyday without even knowing it. PEEK is, for example, very likely to be in your smartphone, car and vacuum cleaner. It’s even used in hip replacements. 

Despite the original patent expiring many years ago, Victrex remains the product’s market leader and has few competitors able to match its resources and expertise. It’s also been a big winner for investors with its share price rising a staggering 2,400% between early 2000 to late-2018.

That said, Victrex is susceptible to the odd sticky patch, as evidenced by today’s full-year results. 

Profits down

Despite logging decent growth in the Aerospace, Energy and Medical markets over the 12 months to the end of September, performance was offset by what the company regarded as “a deterioration in the second half in Automotive, Electronics and Value Added Resellers (VAR).”

Group sales fell 15% to 3,751 tonnes over the year, leading revenue to fall 11% to £294m. Pre-tax profit also declined 18% to £127.5m.

Notwithstanding, CEO Jakob Sigurdsson said the company’s full-year performance had been “in line with expectations,” which probably explains why the share price fell initially in early trading only to recover later in the morning.

As far as the outlook is concerned, Victrex believes the Automotive and Electronics markets are now “showing signs of stability” even though it expects “current trends will continue” for a while yet.

Encouragingly, it also reported making progress with its “mega-programmes” and product pipeline, including a first commercial order for Aerospace composite parts, the signing of a long-term alliance with Airbus, and “strong growth” in its products for the Spine market.

So, is it worth buying now?

Based on analyst estimates, Victrex’s shares change hands at a little over 20 times forecast FY20 earnings right now. That’s clearly not cheap, relative to the general market (and its own five-year average valuation of 18), but nor does it seem ludicrously expensive, considering the company’s potential to enter new markets and its record of delivering consistently stellar returns on the capital it invests. Margins are reliably high and the £2bn-cap has a squeaky-clean balance sheet. 

On top of this, Victrex is also a decent source of income. Despite recent headwinds, today’s final dividend was maintained at 46.14p per share, giving a total return of 59.56p per the whole year or a trailing yield of 2.55%. Considering the business’s cash-generative nature, I’ve no concerns over the security of payouts going forward.  

So, while today’s numbers might have been greeted with a collective shrug by investors, I remain firm in the belief the company is a worthy addition to most portfolios with a long-term perspective. 

The post Have £2k to invest? I think this FTSE 250 growth stock could be great ISA addition appeared first on The Twelfth Magpie.

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• Could a portfolio of dividend shares turn £10,000 into £20,097 in 10 years?
• This dividend stock yields 9.8% and is potentially 44.3% undervalued!
• 5 UK dividend shares with 7%+ yields

Paul Summers owns shares of Victrex. The Motley Fool UK has recommended Victrex. 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.

In fact, it’s possible to generate a robust dividend yield from a number of stocks right now, with the potential to benefit from rising dividends in the long run.

With that in mind, here are two mid-cap shares which could offer superior income returns than buy-to-let investing over the long run.

Victrex

High performance polymer solution specialist Victrex (LSE: VCT) released its first-half results on Monday. They showed its performance has been relatively weak, with challenges in its Automotive segment and continued headwinds in Consumer Electronics weighing on its performance. As a result, sales volumes moved 16% lower, although there has been an improving trend in the second quarter of the year.

Although the company’s dividend yield stands at around 2.8%, this excludes its special dividends. It will seek to pay these when it’s able to, given investment requirements, it said. Although special dividends are therefore not guaranteed, there’s the potential for its income return to be significantly higher than many of its FTSE 250 index peers.

Since Victrex trades on a price-to-earnings (P/E) ratio of around 16, it seems to offer fair value for money. With the prospect of dividends moving higher at the same rate as its bottom line, the company could offer an improving income investing outlook over the long run.

The company has structural growth opportunities and a healthy new product pipeline which could act as catalysts on its financial performance. As such, it could offer a superior income return compared to other assets such as buy-to-let property.

Tritax Big Box

Although the prospects for UK commercial property are uncertain at present, logistics facility specialist Tritax Big Box (LSE: BBOX) could have an improving financial outlook. The company is expected to post a rise in earnings of 7% in the current year, with demand for its warehouses proving to be high.

One reason for this is the transition of the retail sector towards online, as consumers are becoming increasingly comfortable in using their mobile phones to buy a variety of goods for home delivery. This is causing demand for large-scale warehouses to remain high, and means the company could enjoy a significant tailwind over the long run.

With Tritax Big Box having a dividend yield of 4.8%, it appears to offer an impressive income outlook. Although Brexit may have an impact on its shares in the short run, in the long-term changing trends within the retail industry look set to continue. Therefore, now could be a good time to buy a slice of the stock, with its income growth potential likely to be higher than that of buy-to-let given the tax changes that are ongoing within the industry.

The post Forget buy-to-let! I’d generate a passive income from these FTSE 250 dividend stocks appeared first on The Twelfth Magpie.

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• With a 9.5% yield, this FTSE 250 dividend share could climb up to 40%!
• Could a portfolio of dividend shares turn £10,000 into £20,097 in 10 years?
• This dividend stock yields 9.8% and is potentially 44.3% undervalued!
• 5 UK dividend shares with 7%+ yields

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has recommended Tritax Big Box REIT and Victrex. 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.

A truly great business?

Two companies have caught my eye. The first of these is specialist plastics manufacturer Victrex (LSE: VCT). This firm’s PEEK and PAEK polymers-based parts are used in thousands of applications, including cars, aeroplanes and orthopaedic surgery.

Victrex has a strong track record of growth. Over the last five years, sales have risen by 29% to £326m. Pre-tax profits climbed 24% to £127.5m. The dividend has risen 32% over this period and shareholders have also received three generous special dividends.

As these figures suggest, this is a very profitable business, with an average operating profit margin of about 40% over the last five years. Such high margins suggest to me Victrex products are hard to substitute and have strong pricing power — good news for investors.

One final attraction is this business generates a lot of cash and has no debt. At the end of last year, net cash stood at £144.4m.

Is this the right time to buy?

Victrex shares have fallen 30% over the last six months, after management warned that weaker demand from car manufacturers and consumer electronics firms could slow growth this year.

The outlook is expected to improve during the second half of the year, although it’s too soon to be sure. Personally, I’m not too worried. I see this as a high quality business with good long-term prospects.

Although the shares still look pricey on 17 times 2019 forecast earnings, they offer a forecast yield of 5.2% that’s supported by the firm’s cash generation. In my view, now could be a good time to build a long-term holding in this company.

I’ve bought this 8% yield

My next pick is financial spread betting and CFD trading group IG Group Holdings (LSE: IGG). This sector has fallen out of favour with investors over the last year, due to the impact of new regulations limiting the amount of leverage that can be offered to non-professional clients.

This has had the effect of forcing traders to scale back their positions or provide more cash up front. As a result, IG’s revenue is expected to fall 12% to £503m during the current financial year.

IG shares have fallen 35% in 12 months and some investors have questioned whether the dividend is sustainable. However, like Victrex, IG is extremely profitable and has a cash-rich balance sheet.

The board says the payout will be left unchanged at 43.2p per share until earnings return to growth. That sounds reasonable to me, at least for a couple of years. In that time, I expect performance to improve as the group’s international growth and diversification continues.

IG shares currently trade on 11 times forecast earnings, with an 8% dividend yield. I’ve added some shares to my portfolio and rate this stock as a buy.

The post 2 FTSE 250 dividend stocks yielding 5%+ that I’d buy with £2k today appeared first on The Twelfth Magpie.

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Roland Head owns shares of IG Group Holdings. The Motley Fool UK has recommended Victrex. 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.

In addition to protecting you from paying capital gains tax on any profits you make, this kind of account also prevents you from being charged income tax on any dividends that companies might distribute to you. 

The only slight drawback is that you can’t carry over your £20,000 allowance. That means you must either use it or lose it by the end of every tax year (5 April). 

Of course, once you’ve transferred whatever spare cash you have to this account, you then need to think about what to buy. 

With this in mind, here are just two examples of quality stocks that should interest those looking for a combination of growth and income from their investments.

Outstanding performer

Fantasy miniatures retailer Games Workshop (LSE: GAW) is one of those stocks that will continually haunt investors who once hovered over the buy button back in 2016 but never actually made a purchase. I know this because I was one of them.

Since then, of course, the Nottingham-based business has become something of a market darling, rising from 500p to hit 4,000p in 2018. It’s dropped back since then — many sold out to protect their gains as markets began to wobble last October — but the company is still doing a fine job of raking in the cash from its devoted followers.

Back in January, Games Workshop reported a 14% rise in revenue (to £125.2m) with operating profit and pre-tax profit up 7% (to £40.8m).

With stonking margins and returns on capital employed, there’s little doubt that this is a quality business. Whether it’s worth buying right now, however, is another thing. 

The stock is currently changing hands for 18 times earnings — far more than its five-year average of 13 — so anyone considering a purchase is betting on the good times continuing and investment in a new factory paying off. As a leader in its very niche market, I think this might be a risk worth taking.

And even if the share price doesn’t return to previous highs for a while, a yield of 4% is certainly worth collecting. 

Reasonably priced

If Games Workshop doesn’t take your fancy, then perhaps FTSE 250 constituent Victrex (LSE: VCT) will.

The £1.9bn cap has been producing PEEK — its “high performing engineering thermoplastic” — for the last 40 years. Light and strong, the material features in airplanes and medical implants.

Like Games Workshop, Victrex has a lot of the qualities I look for: debt-free, high margins, great returns on the money it invests, and a leader in its field. 

Like Games Workshop, shares have also been under pressure since peaking at the end of September last year.

Trading over the first half of FY19 is expected to be “much weaker” compared to the prior year due to a tricky first quarter, but things should recover in H2 thanks to “new projects and reduced headwinds“.

Having fallen a third in value, the stock is now available for 17 times forecast earnings. That’s not cheap relative to the market as a whole, but it does seem a reasonable price to pay given its excellent geographical diversification and great dividends.

Assuming analysts are correct in predicting a cash return of 115.9p per share, Victrex yields 5.3% at the time of writing.

The post I think these 2 quality dividend and growth stocks could be perfect ISA additions appeared first on The Twelfth Magpie.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Victrex. 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.

Four-fifths of group revenues are generated at its physical sites, and consequently adjusted pre-tax profit at Rank dropped 27.6% year-on-year to £29.1m. Particularly disappointing was news that performance at its Grosvenor casinos deteriorated because of “reduced contribution from major players, a weather-impacted first quarter and [a] challenging consumer backdrop.”

On the plus side…

However, there were two big pieces of news that sent investors piling back into the share following Thursday’s results, firstly news that business picked up in the final quarter of the interim period and helped the FTSE 250 firm reiterate its full-year guidance.

And secondly, the release showed that its online services continue to go from strength to strength. Like-for-like sales among Rank’s digital operations leapt 5.1% in the six months, with customer volumes at both Mecca and Grosvenor rising in the period. Including the contribution of its recently-acquired Spanish bingo arm YoBingo! total digital turnover rose 15.8%.

In light of these two factors, City analysts expect Rank to bounce from an estimated 6% earnings drop in the 12 months to June 2019 with a 5% increase in fiscal 2020. And this encourages the Square Mile to anticipate that Rank will have the confidence to keep growing dividends too.

Last year’s 7.45p per share dividend is predicted to rise to 7.7p in the current period and to 8.1p next year. Consequently Rank carries big, big yields of 4.8% and 5% for fiscal 2019 and 2020 respectively.

Another big dividend star

Clearly performance at the company’s venues remain problematic and could still yet throw up some nasties in the months ahead. In my opinion, though, these troubles are baked into the firm’s low valuation, a forward P/E ratio of 11.5 times. Indeed, I reckon this low base could provide more share price strength should Rank carry over the better momentum of the second quarter.

Now Victrex (LSE: VCT) may not be packing the same sort of value as Rank — the firm carrying a prospective P/E multiple of 17.9 times — though I believe that it’s still a name worthy of investment. And not just because of a predicted 124p per share dividend for the year to September 2019, a projection which yields a giant 5.4%.

The plastics manufacturer never recovered from the October share market sell-off after a blistering first nine months of 2018, a drop which I consider a prime buying opportunity. Indeed, while conditions have been difficult for its Automotive and Consumer Electronics units of late, these  are expected to swing back into action during the latter half of the current fiscal year.

On top of  this, there are some lucrative sales opportunities for Victrex’s Gears and Aerospace divisions, helped by its new aero facility in the States as well as the likely creation of additional long-term alliances with aerospace OEMs. The earnings outlook is very strong at the FTSE 250 firm, then, and I think that this should keep translating into great dividend growth.

The post Dividend klaxon! Two FTSE 250 5%+ yielders I reckon could help you to retire rich appeared first on The Twelfth Magpie.

More reading

• With a 9.5% yield, this FTSE 250 dividend share could climb up to 40%!
• Could a portfolio of dividend shares turn £10,000 into £20,097 in 10 years?
• This dividend stock yields 9.8% and is potentially 44.3% undervalued!
• 5 UK dividend shares with 7%+ yields

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

Of course, Persimmon is not the only share which has experienced a difficult period in recent months. Reporting on Tuesday was a FTSE 250 stock which has delivered significant falls of late. Could it offer better recovery potential than the house-builder?

Improving performance

The stock in question is high-performance polymer solutions business Victrex (LSE: VCT). It released its preliminary results for 2018, showing a rise in revenue of 10% to £326m. Gross margin increased by 50 basis points, which helped to boost gross profit by 13% to £208m. The company’s improving financial performance was driven by core growth, as well as mega-programme progress. Its Industrial markets recorded strong growth, while Medical revenue increased by 3%.

The company expects continued momentum in its core polymer business in 2019. However, it anticipates that recent market softness in Automotive may hold back its ability to generate significant growth, while no expected volumes in Consumer Electronics may hold back its overall performance.

Looking ahead, Victrex is expected to post a rise in earnings of just 1% in the current financial year. Given that it trades on a price-to-earnings (P/E) ratio of 19.2, this suggests that it may be overvalued at the present time.

Recovery prospects

Having fallen heavily in the last six months, Persimmon now has a P/E ratio of 6.8. This suggests the company is about to experience an extremely challenging period, with investors seemingly pricing in falling profitability.

However, the house-builder is expected to report a rise in net profit of 7% in the current year, followed by further growth of 3% next year. As a result, it could be the case that the stock market is overly-cautious about its financial outlook at a time when demand for new homes remains healthy.

Of course, political and economic risks are high at the present time. There could be further twists and turns over the coming months in terms of the Brexit process. However, the fundamentals for the housing market appear to be sound. High demand for new homes is being backed by low interest rates, high levels of employment and the Help-to-Buy scheme. Meanwhile, there’s a limited supply of homes which is unlikely to be addressed in either this parliament or the next one.

Clearly, further falls could be ahead for the Persimmon share price after what has been a tough period for its investors. In the long run though, this could prove to be a buying opportunity which delivers significant total returns for investors. 

The post Is the Persimmon share price a bargain or should I buy this FTSE 250 turnaround stock? appeared first on The Twelfth Magpie.

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Peter Stephens owns shares of Persimmon. The Motley Fool UK has recommended Victrex. 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.

In a recent article I took a look at two of the worst-performing FTSE 100 dividend shares so far in 2018, and considered whether or not they’re worthy of investment right now.

This time around I’ve scoured the FTSE 100 and FTSE 250 for shares that have been making headlines for all the right reasons. Here is what I’ve found.

Plastic fantastic

A stream of strong trading updates has allowed Victrex’s(LSE: VCT) share price to bulge in 2018, up 21% since the bells rang in New Year’s Day.

In its latest release in July, the FTSE 250 plastics manufacturer advised that group sales volumes in the nine months from last October were up 19% year-on-year, reflecting in part positive market conditions. Although sales are expected to cool in the fourth quarter Victrex remains positive that it can meet current projections.

Speaking of which, City analysts are forecasting a double-digit profits improvement in the 12 months to September, an estimate which supports predictions of a 124.9p per share dividend, up from 121.8p last year.

A prospective P/E ratio of 26.4 times might be toppy on paper. But a corresponding dividend yield of 3.9% helps to take the edge off. I wouldn’t be surprised to see Victrex maintain its momentum in the months ahead.

Paper champion

Smurfit Kappa (LSE: SKG) is another tasty dividend share that has flown in 2018, its share price expanding by 28% since the turn of January.

The paper packaging giant jumped in March when news emerged that International Paper was circling it. Smurfit Kappa may have fought off its US rival’s takeover bid, but its share price has remained stable, the FTSE 100 business helped by a slew of positive updates. Just last week it announced that operating profit before exceptionals jumped 48% during January-June.

Yields might be lagging those of Victrex, but the rate at which Smurfit has raised dividends in recent years — and is likely to continue doing so — makes it a genuinely great pick for income-chasers in my opinion.

In the immediate term, a payout of 94 cents is forecast, up from 87.6 cents last year and yielding 2.6%. This, allied with an undemanding forward P/E ratio of 14.2 times, makes the Irish firm a terrific buy today.

Poised to reverse?

BCA Marketplace’s(LSE: BCA) value has also swelled in the year to date, up 16% to be precise. But I am a lot less optimistic over the car auctioneers’s share price prospects going forwards than those of Smurfit Kappa’s.

The FTSE 250 company — most famous as the UK’s largest auction house as well as the owner of online vehicle buyer WeBuyAnyCar.com — has accelerated on the back of its resilience in a tough marketplace. It has also been the subject of takeover action in recent months, attracting the wistful glances of Apax Partners, although it has also been quick to bat away the interest.

I’m worried about the firm’s ability to keep earnings on an upward slant as the UK economy toils, even though City forecasts suggest further growth in the year to March 2019. The dividend is also expected to expand from 8.55p per share to 9.1p, resulting in a large 3.9% yield. In my opinion, though, a forward P/E ratio of 19.4 times doesn’t fully reflect the risks to earnings growth, in the current year and beyond. I would give the share a wide berth today.

The post The 3 best dividend stocks of 2018 (so far) appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Victrex. 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.