2 ‘under the radar’ dividend stocks I’d buy right now

G A Chester discusses two dividend stocks you may not have considered.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares of Town Centre Securities (LSE: TOWN) are trading modestly higher at near to 300p after the company released its annual results today. It said its performance “belied the market backdrop of economic and political uncertainty following the Brexit referendum.”

Its outlook statement was bold. It said: “Increases in rental income and also in capital value [have] proved the pessimists wrong. We expect this to continue.”

Attractive NAV discount and yield

Town Centre Securities (TCS) reported a 0.6% increase in net asset value (NAV) to £191.1m, or 359p a share. So the shares are currently trading at a discount to NAV of over 16%.

Operating profit (before property valuation movements) increased 1.6% to £14.7m, underlying earnings per share (EPS) rose 6.7% to 13.2p and the dividend was lifted 4.5% to 11.5p. This gives a yield of 3.8%, rising to just over 4% on forecasts of a 12.1p payout for 2017/18. You’ve probably spotted that dividend cover (1.15) is on the low side, but this is because of payout rules for Real Estate Investment Trusts (REITs), such as TCS, as well as FTSE 100 giants like Land Securities and British Land.

TCS continues to intensively manage its portfolio, disposing of mature properties and reinvesting capital when it sees “the right opportunities.” It also has “extensive” development opportunities, while its growing car parks portfolio — £3.9m operating profit (up 11.8%) — provides useful diversification.

History of outperformance

Founded in 1959, TCS has a fine history of growing NAV and dividends over the long term. It has outperformed the FTSE All Share REIT index and forerunner FTSE All Share Real Estate market over one, three, five, 15 and 25 years. Shareholder returns over the quarter-century period are represented by a compound annual growth rate of 10.9% versus 8.3% for the index.

I see this £159m FTSE SmallCap firm as a great dividend stock for the long-term. And I’d be happy to buy a slice of the business right now, with the discount to NAV of over 16% and a prospective dividend yield of over 4%.

Attractive P/E and yield

Bloomsbury Publishing (LSE: BMY) is another FTSE SmallCap dividend stock that looks very buyable to me today. At a current share price of 160p, the company is valued at £121m. It offers a forecast dividend of 7p for its financial year ending 28 February 2018, giving a prospective yield of 4.4%.

In a Q1 trading update in July, the company reported revenues up 19% year-on-year (13% at constant exchange rates) and the board said it expects profit for the full year to be in line with its expectations. The analyst consensus is for EPS of 12.2p, giving decent dividend cover of over 1.7 times and putting the company on an undemanding price-to-earnings ratio of 13.1.

Impressive growth

Bloomsbury may be best known as the publisher of Harry Potter but it’s far from being a one-trick pony. For example, in its non-consumer division, its digital resource business is growing revenue fast from a low base.

Overseas growth is also progressing impressively, with 61% of sales now originating from customers outside the UK. Bloomsbury Australia grew revenues by 50% (26% at constant exchange rates) last year and revenues in Bloomsbury India grew 46% (30% at constant exchange rates).

The undemanding P/E, nice dividend yield and growth opportunity from digital resource and international lead me to rate the shares a buy today.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co. 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.

More on Investing Articles

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »