In a recent article, my Foolish colleague Ian Pierce identified two great small-caps that could make you a million.
If this whetted your appetite then step this way: the two tiddlers I’m looking at could also make you a fortune in the years ahead, and have the added bonus of offering above-average dividend yields.
Making an entrance
It didn’t surprise me when the Tyman (LSE: TYMN) share price spiked last week in response to its latest financials.
In the statement covering the six months to June, the window-and-door-component-builder noted that revenues swept 6% higher, to £274.9m, a result that drove underlying pre-tax profit up by the same percentage to £33.3m.
Tyman is reaping the fruits of strong North American markets and the ongoing recovery in the Europe, Middle East, Africa and India (EMEAI) block, conditions that look set to underpin solid earnings growth in the near term and beyond. And investors should also be encouraged by the company’s ability to spot exceptional takeover targets and get them firing from the first day. Its purchase of Dallas-based Ashland for $101m in March is already performing better than expected, and is predicted to be profits-enhancing in 2018, a full year ahead of schedule.
City analysts agree with my positive take, pencilling in profits increases of 5% in 2018 and 10% in 2019, meaning Tyman can be picked up on an undemanding forward P/E multiple of 12.3 times. An added bonus is that these predictions provide the bedrock for them to predict further dividend growth to 12p and 12.8p for this year and next respectively, numbers that yield a chunky 3.5% and 3.7%.
That 9% yielder
While much of the high street is under pressure as consumer spending power wilts, I am convinced that N Brown (LSE: BWNG) has the substance to ride through these troubles and deliver excellent long-term returns.
The revenues rise in the three months to May was reassuring rather than rambunctious, up 0.4%, but it goes to show how its plus-size and over-50s ranges remain in demand even in extremely challenging retail conditions. Its sales resilience also owes a debt to the success of its advertising campaigns, not to mention the results of its ‘Fit 4 the Future’ IT transformation projects, like creating a more personalised service for its website users.
Indeed, I’m really interested in how the company is doubling-down on the online shopping segment and what this means for the future of its key labels. Internet sales of its so-called Powerbrands like Jacamo and JD Williams rose 9% in the last quarter.
So City analysts are expecting N Brown to bounce from a predicted 1% earnings decline in the year to February with a 5% rise the following year. This should give the firm the confidence to keep the dividend locked around current levels at 14.23p per share meaning share-pickers can enjoy a staggering 9.6% yield.
What’s more, at current prices, N Brown changes hands on a dirt-cheap forward P/E ratio of 6.5 times. This factors-in the possibility that tough retail conditions drag out longer than expected. Indeed, I reckon this low valuation leaves plenty of upside as the company’s online operations go from strength to strength.
