Revenue rockets

Today’s results for the full-year to the end of April were certainly nothing for holders to complain about. 

Having despatched over 50 million orders, Moonpig’s revenue rose 113% year-on-year to a little over £368m. According to the company, this was due to growth in new customers and people making more frequent purchases as a result of multiple Covid-19 lockdowns. I certainly count myself within the latter category. 

The good news continues. Adjusted earnings came in at just over £92m — at the top end of guidance issued by the company in February. Pre-tax profit came in only 3% higher than last year but this was due to costs associated with the IPO. 

All this sounds pretty positive. So, why is the Moonpig share price crashing back to earth today? It appears to be down to the company’s outlook. 

To the moon… and back

Despite the new financial year starting “moderately ahead of expectations” thanks to the delay in Boris Johnson’s road map out of lockdown, Moonpig said that it had noticed the number of orders on its site starting to normalise, albeit from “elevated levels“. Importantly, it thinks this drop will continue.

Ultimately, the company expects the frequency of orders to steady around 5% higher than pre-pandemic levels. As a result of this, Moonpig thinks this financial year’s revenue will fall to somewhere between £250m and £260m. That’s clearly a big step down from last year’s headline number. 

Another thing that may be spooking investors is news that management will “continue to prioritise additional investments in marketing and market share capture” rather than focusing on short-term profit. 

Where’s the moat?

There are things I like about Moonpig. In addition to boasting the sort of margins you’d expect from a pureplay online operator, the company’s “unique gifting dataset” should indeed allow it to personalise experiences for customers as management claims.

Speaking as a customer, however, I’m not sure that I would ever buy anything other than cards from the company. It may be adding hugely popular brands like Lego to its range, but a simple online search shows that I can get the same products far cheaper elsewhere. In other words, Moonpig is a convenience play. If I’m organised, I won’t need it. As a potential investor, that would trouble me.

I’m also struggling to find an economic moat here. FTSE 250 peer WH Smith has rival Funky Pigeon in its greetings card arsenal. What would keep me loyal to Moonpig? And will we still be sending greetings cards in, say, 2031 anyway?

No for me… yet

As investments go, I’m torn. While the fall in the Moonpig share price back to near its initial offer price makes it more attractive, I’m not totally convinced the company will grow market share as easily as it thinks.

With this in mind, I wouldn’t feel comfortable buying yet. Expectations have been reduced, but the shares could drift for a while.

The post What’s going on with the Moonpig share price? 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 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.

Greggs shares: too dear? 

It would seem the UK can’t get enough of its sausage roll fix. Having already said it had seen a big recovery in sales as shops reopened, Greggs announced in June that sales were even better than expected. This could have a “materially positive impact” on full-year numbers. This is significant news considering the company was expecting demand to moderate as more cafes and restaurants opened and shoppers’ enthusiasm (and savings) dropped. 

We’ll get a further update on current trading when Greggs reports its half-year numbers at the beginning of August. Unless the share price gets silly, I doubt I’ll be selling before then. 

Yes, the valuation — at 29 times forecast earnings — is high. In normal times, this is something we might see attached to a promising tech stock. It’s certainly prompted me to question whether a lot of good news is now priced in to Greggs shares. Should it fail to live up to investors’ revised expectations, there could be volatility ahead.

Nonetheless, I remain optimistic. Frequent changes to the rules surrounding foreign travel lead me to think that many of us will throw up our hands and just stay within the UK for another summer. With its presence at motorway service stations and in big cities, this should be good news for Greggs. But even when I factor in the possibility of improving sales from those finally returning to offices, the frothy valuation puts me off buying more now but I don’t think I’ll be taking profits just yet.

“Small improvement”

Of course, Greggs isn’t the only well-known high street name seeming to have turned a corner. Today saw an update from newsagent WH Smith (LSE: SMWH) on trading for the 18 weeks to 3 July. 

It wasn’t too bad. Revenue from its UK high street stores was back to 86% of what it had been over the same period in 2019. Footfall is still below pre-pandemic levels and it’s going to take a while for full confidence to return.

Having said this, revenue at travel sites continues to suffer. Sales at airports, for example, were only at 10% of what they once were. All told, sales in this part of the business were at 62% of 2019 levels.  

Based on trading at Smith’s North America business, however, the worst appears to be over. Revenue here was 74% of 2019 levels over the same 18-week period. However, this jumped to 88% in June as passenger numbers increased. As a result, there’s been “a small improvement to management’s expectations for the current financial year“, although no numbers were given.     

I suspect WH Smith will fully recover, albeit probably not at the same pace as Greggs shares. More Travel stores are planned and it will shortly bring its US tech brand InMotion to UK airports, including London Heathrow.

Nevertheless, I probably wouldn’t rush to buy the stock today, given its greater dependence on international travel getting back to normal. 

The post Are Greggs shares now too expensive? appeared first on The Twelfth Magpie.

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Paul Summers owns shares in Greggs plc. 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.

Next month, the company will provide investors with final results for its 2019/20 financial year. Now, no one expects the numbers to be good. Indeed, easyJet has already warned that its first-ever annual loss could hit £845m! Nevertheless, the possibility of another lockdown and further travel restrictions could result in more investors deciding to jettison the stock in November.  

The company is doing what it can to mitigate things. Most recently, easyJet reported that it had raised almost £306m through the sale and leaseback of nine Airbus 320 aircraft. This will help shore up the balance sheet but it’s unlikely to be enough. Indeed, the mid-cap has called on the UK government to provide more support to the sector in October.  

Clearly, easyJet shares could do very well in the event of a sudden vaccine breakthrough or reduction in infections. Right now, this looks like wishful thinking. With industry peer IAG warning that passenger numbers won’t recover to pre-coronavirus levels until 2023, the runway to recovery looks long and hard. 

This is not to say that the Luton-based airline is the only company whose owners face a nightmare November. 

Time at the bar?

Holders of JD Wetherspoon (LSE: JDW) may want to look away from the pub chain’s share price when it provides a trading update on the morning of 11 November.

I can’t see the numbers and outlook as being anything but bleak. After all, JD Wetherspoon already announced its first annual pre-tax loss since 1984 earlier this month. The recent introduction of curfews across many parts of the UK is unlikely to have improved the situation. News of the company needing to slash jobs, while not unexpected, doesn’t bode well either. 

Like easyJet shares, the question to ask is how much of this is priced in. At half the price they were at the beginning of 2020, you might think ‘quite a lot’. Moreover, analysts are expecting earnings to rebound massively in FY22, leaving the shares on a P/E of 13 (if you still pay any attention to forecasts). 

Nevertheless, I’d be inclined to look elsewhere, at least until the crucial coronavirus ‘R rate’ is on the retreat. On a risk-reward basis, JDW still doesn’t tempt me. 

Double-whammy

A final share that could face selling pressure next month is high street retailer and travel concession operator WH Smith (LSE: SMWH). The company is due to announce its latest set of full-year numbers on 12 November. 

Before the coronavirus reared its ugly head, it was a quality business generating excellent returns on capital employed. Since then, we’ve had the double-whammy of deserted high streets and a myriad of travel restrictions. The latter is particularly problematic since this was the main growth driver for the FTSE 250 member. 

With Boris Johnson’s fingers hovering over the ‘lockdown’ button, it does feel like things could get worse before they get better. More restrictions would likely have a severe impact on pre-Christmas high-street sales for the company. I wouldn’t like to bet on it being able to compete with the likes of Amazon for online book sales either.

For now, WH Smith is treading water. Next month could see it sink. Now is not the time to be getting involved, I feel. 

The post I think easyJet and these other UK shares could be in for a nightmare November 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 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.

Last time I looked at the retailer in January, it was flying high due to its booming global travel business. Since Covid-19, the WH Smith share price has crashed by around two thirds, from around 2,500p to today’s 906p. This pushes it deep into bargain territory. While risky, I think it looks a tempting long-term buy-and-hold.

Today’s half-year results only ran to 29 February, and show little impact from the pandemic. Group revenue rose 7%, but fell 1% on a like-for-like basis. Travel revenue rose 19%, following the takeovers of US retailers InMotion and MRG, or 2% like-for-like. That’s ancient history though.

I’d buy FTSE 250 shares

In April, group total revenue unsurprisingly fell 85%. Travel revenue crashed 91% and high street revenue dropped 74%, despite continuing to trade in 130 hospitals and many post offices. The closure of its airport stores will continue to hurt, until the world starts flying again.

The one bright spot is that online revenues have grown, with book sales up 400% in April. After recent fundraising, its liquidity reserves stand at around £400m, giving it some security.

The crashing WH Smith’s share price may be an opportunity for investors who baulked at its shabby high-street outlets and overlooked its whizzy travel business. Management has the funds to sit out the slump, but the big question now is when does the recovery come?

That’s out of management’s hands of course. The hope is that people will start travelling, as soon as they’re free to do so. Some will be nervous, others will be desperate to get away. Train station outlets should see some pickup, as people edge nervously back to work. When the recovery comes, WH Smith could fly again. This could prove a tempting contrarian buy for brave, long-haul investors. Just remember there’s no dividend right now.

Tasty but pricey

High street baker Greggs (LSE: GRG) is still closed for business, which is bad news for fans of its sausage rolls and Steak Bakes. It had planned to open multiple stores in the first half of this month, but shelved them over fears of crowding.

Greggs is trialling reopenings as customers creep out of lockdown and they’ll be hungry for they’re old favourites.

The Greggs share price has roughly halved since January, although it picked up during the recent stock market rebound. This suggests investors haven’t lost faith. Obviously, the pandemic is a disaster and the after-effects could rumble on. Sales could take a double hit from job losses, as incomes fall and commuter numbers shrink.

I’ve almost stopped looking at P/E values because the crisis has rendered so many meaningless, but I’m worried to see Greggs trading at a pricey 16 times earnings. Those earnings will take time to recover. It’s a long-term buy, but possibly an even braver one.

The post Looking to buy FTSE 250 shares for the recovery? I like these two stocks appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended WH Smith. 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.

Dire as the situation may be however, I do think there is the potential for some to recover once the coronavirus storm has passed.

On sale?

Considering its staid-looking high street stores, I’ve long thought the valuation attached to WH Smith (LSE: SMWH) to be frothy. Having now fallen a little over 60% from the all-time highs achieved back in January, this may no longer be the case. 

This is, after all, a company that’s seen its travel concessions business become very lucrative over the last few years. Further evidence of this came in January. The FTSE 250 member reported a 19% rise in revenue. This included contributions from recent US acquisitions InMotion and Marshall Retail Group.

Of course, the next few months are likely to prove very tricky. For as long as travel is restricted and high streets are deserted, WH Smith won’t make any money. Units operating in hospitals are an exception though.

Nevertheless, I’m a big fan of businesses that serve a captive audience and the company now operates 1,200 travel stores in 32 countries. There’s also a lot to be said for the fact that WH Smith generates superb returns on the money it invests when it is functioning at full steam. Margins aren’t massive but they’re still better than a lot of other retailers out there. The debt it carries isn’t excessive either.

I’m not sure I’d be pulling the trigger and buying a few shares just yet. But I’m definitely sensing an opportunity. 

Debt-free

Stockport-based holiday firm On the Beach (LSE: OTB) is another company that could rise from the ashes of the coronavirus-induced market crash. Like WH Smith, a lot of this depends on how quickly the virus is tackled and the lockdown lifted. 

For On the Beach, it also depends greatly on how the UK general public respond once the full financial impact of the crisis is known. The possibility of a prolonged recession will surely mean that discretionary purchases like a stay in the sun will be the first to go.

Seen from this perspective, On the Beach could certainly suffer more than the newsagent. The latter will benefit merely from commuters returning to the office after the enforced break. That said, there are still reasons to be optimistic.

For one, there’s no debt on its balance sheet. This is not to say that even previously financially sound businesses won’t go to the wall in 2020. It should provide investors with some hope going forward though.

Second, On the Beach has an asset-light business model. This means it’s not burdened by massive fixed costs like other businesses in the sector. Marketing spend can be (and has been) cut quickly. For me, this makes it a safer bet than, say, TUI, which operates a portfolio of hotels, cruise lines and airlines.

On the Beach’s share price is now back to levels not seen since 2016. Does this make it a ‘bargain’? I still think it might be too early to say. But it’s worth keeping an eye on, I feel. 

The post The coronavirus has battered travel stocks but I’d back these growth stars to recover 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 On The Beach and WH Smith. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

This stock is flying

The group’s growing global travel retail business has driven the WH Smith share price higher and higher. It is up almost 20% in the last six months, and by 87% over five years.

The FTSE 250 stock has dipped slightly today, down 2.76% at time of writing, following publication of its trading update for the 20-week period to 18 January, but this might even be a buying opportunity.

While total revenue rose a healthy 7%, like-for-like sales fell 1%. The high street operation was the culprit, with revenue down 5% over the period. Management is responding by identifying £3m of additional cost savings, bringing total cost savings for the year to £12m.

In sharp contrast, travel business revenues jumped 19%, boosted by its Marshall Retail Group acquisition, and further significant contract wins in the US. Its UK travel business also did well, “with strong sales per passenger driven by our initiatives and ongoing investment.”

A growing global operation

WH Smith completed the acquisition of “leading and fast growing US travel retailer” MRG, ahead of plan on 20 December and is pursuing further growth opportunities in the US and beyond. It has recently won a tender at Berlin Brandenburg Airport to open three units, while lining up a flagship pharmacy at Heathrow Terminal 2 for the summer.

The £2.4bn group looks a little pricey, trading at 21.4 times earnings, but you pay a premium for success. Recent steady earnings growth looks set to continue, with a forecast 5% this year and 9% in 2021. So now could be a good time to hop on board this expanding global business.

I like this FTSE 250 stock even more

Here’s another FTSE 250 stock that’s really flying, defence-focused engineering contractor Babcock International Group (LSE: BAB). It’s moved into recovery mode after a rough five years when the share price collapsed more than a third, from 1143p to 428p, which has left it looking like a real bargain.

I examined the Babcock share price in November and concluded it was too cheap to ignore, even though it was under a shorting attack from a mysterious group called Boatman Capital Research at the time.

I labelled it a high-yield bargain that you should buy before its share price recovers sharply. Consequently, it’s up 13% since then, helped by subsequent news it had won a £1bn contract to design and build the weapons handling system for Australia’s new Attack class submarines.

The £3.1bn group still looks dirt cheap, trading at just 8.6 times forward earnings, with a generous forecast yield of 4.4%, covered 2.6 times. Earnings are forecast to drop 15% this year, but start growing steadily thereafter. I said buy it in November, and I still reckon it’s a buy today.

The post I’d invest £2k in these 2 fast-growing FTSE 250 stocks in an ISA today appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended WH Smith. 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.

Smiths shines

The books, stationery, magazines, newspapers, gifts and toys retailer has been a winner for investors lately, with the stock up 98% over five years. That’s good going for a high street and railway station fixture that many investors may view as fusty and unglamorous.

Today’s preliminaries for the year to 31 August showed group revenue up 11%, albeit just 1% up on a like-for-like basis, while its Travel division did particularly well with total revenue jumping 22%. That falls to 8% once you exclude the recent InMotion acquisition, and 3% on a like-for-like basis.

WH Smith has just won its first stores in a major US airport, and now boasts a record number of international units, 433 at the end of August. It operates across 30 countries and over 100 airports, with “significant wins” recently across Europe, the Middle East and Australia. High street profits of £60m were the same as last year, but up £2m in the second half.

It’s good to travel

Group CEO Stephen Clarke, who exits at the end of this month, is pleased with the progress despite “uncertainty in the broader economic and political environment,“ and said the group will continue to focus on profitable growth, cash generation, and delivering value for shareholders.

It also announced a proposed 8% increase in the final dividend, which Clarke said reflects the group’s cash generation and confidence.

My only concern is that the £2.4bn FTSE 250 group isn’t cheap, trading at 18.2 times forward earnings. But its prospects remain strong, with analysts expecting earnings to rise 10% next year. The yield is 2.8%, covered exactly twice, but the payout has risen regularly.

What I particularly like is it offers further growth prospects as it spreads its wings internationally, while its travel business makes it more than just a magazine stockist. Management has also completed a £31m share buyback. Definitely one to watch and, maybe, even buy.

Rentokil cleans up

FTSE 100 listed Rentokil Initial (LSE: RTO) is also in investors’ good books today, up around 2% after its Q3 trading update hailed “another strong quarter.” Ongoing organic revenue growth of 5.5% is also its best in more than 10 years.

Revenues from pest control look particularly healthy, up 12.3%, or 5.9% on an organic basis, with its North American, UK & Rest of World, and Latin American operations doing well. Its global reach helps to make it Brexit proof.

Rentokil is acquisition hungry, ​buying 15 businesses in the quarter, with annualised revenues of around £15m. Loyal investors have been well rewarded, with the share price soaring by 292% over the past five years, and almost 45% this year alone. It’s absolutely thumped the FTSE 100, whose comparative figures stand at 13% and 1.8%, respectively.

Unfortunately, all this growth comes with a price tag. The £8.3bn group now trades at a whopping 31.7 times forecast earnings, while the yield is just 1.1%, although nicely covered 2.8 times. Rentokil needs to keep powering ahead, to justify its valuation. That may explain the relatively cool response to today’s numbers.

The post These 2 growth stocks have thrashed the index but there’s one thing that worries me appeared first on The Twelfth Magpie.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended WH Smith. 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.

WH Smith (LSE: SMWH) isn’t having things all its own way. An increasing reluctance from shoppers to part with their cash is adding to the sales pressure at retailer’s long-troubled high street stores. Because of this, I’m not expecting a standout set of results when the  group unveils pre-close trading details on August 28.

That’s not to say I don’t think the FTSE 250 firm could prove a cracking buy right now, however. I’m expecting more signs of margin progression at these troubled stores but this isn’t why I think it could rise. Indeed, I reckon more great news surrounding its Travel division could be in the offing.

Its programme of store openings and outlet expansion in airports and train stations the world over has truly turbocharged revenues of late. Indeed this strategy, combined with the acquisition of US electronics retailer InMotion (a move which doubled the size of its footprint outside the UK), drove Travel revenues 26% higher in the 11 weeks to May 18, according to most recent financials.

Moving into America

It’s no surprise WH Smith is adding aggressively to its global store network. Traveller numbers through the world’s major airports and other significant travel hubs are surging, bringing with them booming demand for confectionary, magazines and all sorts of other travel aids.

Last year, the business added more than 50 travel outlets to its British portfolio, bringing the total to 867, and increased its overseas network spanning Europe, Asia, Australia and the Middle East by a similar number to 286.

WH Smith has also identified the US as the next important step for its growth strategy, hence its move for InMotion late last year. And what an acquisition it’s likely to be — its stores can be found in 22 of the busiest 25 airports in the States, and in 43 aviation hubs in total.

Dividends set to soar

It’s little wonder, then, that despite the prospect of ongoing sales stagnation for its High Street unit, Smith’s annual earnings will keep growing for some time yet. Those aforementioned Travel outlets generate a share under two thirds (or 63% to be exact) of trading profits at group level after all, so this shouldn’t come as a shock.

That said, the cost of heavy investment in its global store network means solid rather than spectacular profits rises of 7% and 9% are predicted for the fiscal years ending August 2019 and 2020, respectively.

However, what this does mean is WH Smith — which raised the full-year dividend a chubby 12% to 54.1p per share last year — is predicted to keep raising payouts at a healthy rate. Rewards of 57.7p and 63.1p are predicted for this fiscal period and the next, resulting in inflation-beating yields of 2.8% and 3%.

In my eyes, WH Smith offers the perfect blend of earnings growth and dividend expansion for long into the future. And yet its current price doesn’t quite reflect this, as illustrated by an undemanding forward P/E ratio of 18 times.

I reckon the retailer is worthy of a serious re-rating by the market and next month’s pre-close statement could well provide the fuel for such an occurrence.

The post Have £5k to spend? A FTSE 250 dividend growth stock I think could boom in August 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 WH Smith. 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? Well I consider it to be far too cheap right now. It’s forward P/E ratio of 12.7 times, falling well below the accepted value watermark of 15 times and below.

As we all know, broadcasting is changing at a rapid pace too. Whether it’s because of the growing army of vloggers communicating to their growing audiences via YouTube, traditional broadcasters looking to bring watchers into the heart of the action, or virtual reality taking over as the next big thing in the viewer experience.

Vitec is a company that’s in great shape to exploit these trends. Its broad range of cameras, lighting, monitors and other technologies, capture the imagination of both independent content creators and broadcasters, paying testament to the vast investment this small-cap dedicates to R&D as well as the expertise of its product design teams.

Tech titan

There’s a reason why Vitec’s profits hit record peaks in 2018 and, judging by commentary last week, it remains on course to keep delivering all-time highs. It said its previous forecast for further progress in 2019 “remains unchanged” and that it expects “a strong 2020,” with sales likely to be supported by the Summer Olympics and the US Presidential election.

The camera colossus has proved a hit with income chasers in recent years and, in 2018 alone, hiked the full-year dividend by more than 20% to 37p per share. City analysts are currently predicting a 39.3p reward for 2019, one which yields a chubby 3.4%. But I reckon this is looking a bit light.

I fully expect, given Vitec’s bright profits outlook for the near-term and beyond, not to mention its stunning ability to build cash (free cash generation swelled by £10m to £33.5m last year) for the actual payout to storm past current consensus estimates.

Travel tsar

WH Smith (LSE: SMWH) is another top dividend grower where I think payouts may surprise to the upside, a factor which makes it a great income stock despite its modest forward yield of 2.9%.

The retailer raised the full-year dividend 12% in the year to August 2018 to 54.1p, and City forecasts currently suggest a smaller rise, to 57.9p payout, is on the cards for fiscal 2019.

Like Vitec though, a bright profits picture stretching long beyond the near term should give WH Smith the confidence to introduce another hefty dividend hike.

This was laid bare in newest trading details last week in which it advised sales at its Travel business were up 26% in the 11 weeks to mid-May. That reflects the massive investment made in its UK and international operations, and the vast revenues potential here as the number of global travellers booms.

The FTSE 250 firm certainly has the balance sheet strength to effect another meaty change too.

So while WH Smith deals on a not-exactly-cheap forward P/E multiple of 17.4 times, I reckon its sudden price slump over the past six weeks makes it a highly-attractive dip buy today.

The post These top dividend stocks are on sale! I reckon now’s a great time to buy them appeared first on The Twelfth Magpie.

More reading

• My friend says this is the best cheap share in the market. Is he correct?
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Vitec Group and WH Smith. 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 my view, it makes more sense to use a Stocks and Shares ISA for long-term savings — five years or more. Today I want to look at two FTSE 250 companies whose past performance has delivered outstanding shareholder returns.

I’ll explain why I think there’s a good chance these firms’ winning behaviours will be repeated over the coming years.

227 years of success

The WH Smith (LSE: SMWH) share price has doubled over the last five years, as strong growth in the group’s travel business has offset weaker performance on the high street.

The travel business is almost certainly the key to future growth, but it’s no new venture. The company opened its first travel branch in London’s Euston railway station back in 1848.

What does all of this have to do with buying shares today?

Firstly, the firm’s 227-year history and continued evolution suggests to me that this business is a long-term survivor. Unlike some other high street stalwarts — such as Debenhams — WH Smith has adapted and remained highly profitable.

Secondly, the latest figures from the company suggest that management is continuing to make smart, forward-looking decisions.

Solid results

Sales at WH Smith rose by 8% to £695m during the six months to 28 February. This growth was led by the travel division, where sales rose by 18% in total, including a 10% contribution from recent US acquisition InMotion.

Trading profit from the travel business rose by £3m to £44m. This was enough to offset the fall in high street profits, which fell by £2m to £48m.

Although the future of the high street business is often questioned, it’s worth remembering that it remains very profitable. One reason for this is that the firm’s high street rent costs are falling by an average of 33% on each lease renewal.

Super shareholder returns

WH Smith has returned £1bn to shareholders since 2007 via dividends and buybacks. The shares have risen by more than 400% over the same period.

The group’s current performance suggests to me that these strong returns could continue. Although the shares look pricey on 19 times earnings and with a 2.7% dividend yield, I continue to rate WH Smith as a long-term buy.

I think this is a great business

Another business that’s delivered outstanding returns to patient shareholders is Howden Joinery Group (LSE: HWDN). This business sells kitchens direct to tradesmen from its network of depots all over the UK.

By focusing on local trade buyers only, Howden gains a loyal army of expert, repeat customers. The company is also able to avoid the showroom, staff and support costs that would be needed for a retail operation.

Sales have risen by 47% since 2014, while profits have climbed 70%. This has been achieved with an increase of just 20% in the number of depots.

Even in a recession, this is a stock I’d be happy to hold. My strategy would be to buy more shares at lower prices, in order to enjoy bigger gains when the market recovered.

With a 2019 P/E of 15 and a 2.4% yield, I rate Howden as a long-term buy.

The post Forget the Cash ISA, here are 2 FTSE 250 dividend stocks I’d buy and hold forever appeared first on The Twelfth Magpie.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Howden Joinery Group and WH Smith. 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.