2 growth and dividend bargains that could help you retire a millionaire

Royston Wild looks at two shares expected to deliver exceptional earnings and dividend growth now and in the future.

| 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.

An exceptional trading update provided shares in Morgan Sindall Group (LSE: MGNS) with an extra shot of juice in Wednesday business.

The share was last dealing 4% higher on the day after advising: “Trading in the second half of the year has continued to be strong” and, as a result, “the group is on track to deliver a full year performance slightly ahead of its previous expectations.” The firm said that margin improvements at its Construction & Infrastructure and Fit Out divisions were responsible for the upgrades.

In other good news, it advised of a further improvement in its committed order book. This stood at £3.8bn at the close of September, up 5% from the start of the year, and up 1% from three months earlier. Its regeneration & development pipeline was up 2% from the first half, it added, at £3.3bn.

And to round things off, the construction and regeneration giant said that it expected average daily net cash for the full year to come in above £100m, smashing its prior forecasts of not less than £75m.

A growth and income superstar

Yet despite its strong trading momentum Morgan Sindall remains undervalued by the market right now.

Earnings at the London business have been growing by strong double-digit percentages in recent years, and a further impressive advance, this time by 29%, is predicted by City brokers for 2017. And Morgan Sindall is anticipated to follow this with an extra 8% advance next year.

But despite its relentless share price ascent — today’s release sent Morgan Sindall to fresh record tops above £15 and means it has now doubled in value since the start of 2017 — a forward P/E ratio of 13.8 times, and a corresponding PEG multiple of 0.5, shows that the construction colossus remains brilliantly cheap.

And offering up another reason to invest, dividends are expected to keep rolling higher at a blistering rate too. Last year’s 35p per share payment is anticipated to rise to 43p in 2017, and again to 46.9p in 2018. Yields for these years clock in at a healthy 2.9% and 3.1% respectively.

I reckon Morgan Sindall is a share that could make you brilliantly rich in the years ahead.

Another scintillating share

Macfarlane Group (LSE: MACF) is another terrific all-rounder that could deliver stunning shareholder returns now and in the future.

The Glasgow business, which has also taken flight in recent weeks and struck its own record tops above 73p on Wednesday, saw turnover rocket 10% in January-July to £89.3m and pre-tax profit 27% to £2.5m. And it advised the seasonal uplift in the fast-growing e-commerce marketplace should underpin further progress in the second half of the year.

Reflecting these favourable conditions, City brokers expect the packaging specialist to record earnings jumps of 31% and 13% in 2017 and 2018 respectively. And as a result the business also emerges as a brilliant value play, sporting a prospective P/E multiple of 12.1 times and a sub-1 PEG reading of 0.4.

Meanwhile Macfarlane’s progressive dividend policy is expected to dish out rewards of 2.1p per share this year and 2.3p in 2018, meaning that yields for these years stand at a chunky 2.8% and 3.1%.

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.

Royston Wild 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.

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 »