2 dividend heroes you’ve probably never heard of

Royston Wild looks at two little-known stocks that could make your fortune.

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I believe that an improving revenues outlook, helped by its exciting acquisition drive, makes electronics specialist  Acal (LSE: ACL) one to watch for both growth and income chasers.

Group sales rocketed 21% higher during October-December, the company announced in January, resulting from rising demand as well as helpful exchange rates.

And, critically, the manufacturer is seeing sales pick up following recent rare weakness. Flat organic sales growth was seen in the final quarter of 2016, versus a 7% decline in April-September. And the company said that it “remains on track to deliver positive organic growth in the final quarter.”

Acal has a prestigious history of churning out double-digit earnings growth, although the City expects recent market choppiness to see expansion slow in the current period — a rise of just 2% is predicted for the year to March 2017.

But this is anticipated to mark a temporary setback for the Surrey-based business, and rises of 15% and 10% are chalked in for fiscal 2018 and 2019, respectively. And this bright long-term outlook is expected to keep driving dividends at Acal to the stars.

Last year’s 8.05p per share payout is predicted to leap to 8.5p in the current period, yielding 3.9%. And anticipated dividends of 9p and 9.6p for 2018 and 2019 jolt the yield to 4.1% and 4.4% respectively.

These projections are also well protected, with Acal boasting robust dividend coverage of 2.1 times for this year and 2.3 times for the following two. The widely-regarded safety benchmark stands at 2 times or above.

Tasty dividends

Like Acal, City brokers are also optimistic about the earnings prospects of recruitment giant SThree (LSE: STHR), and expect this to feed into increasingly tantalising dividends.

For the year to November 2017, SThree is predicted to defy predictions of a slowing employment market and enjoy a 2% earnings bump. And this is expected to feed into a 14p per share dividend, matching last year’s payout and yielding a brilliant 4.3%.

And looking further out, predictions that revenues should rev higher beyond the current period are expected to get shareholder rewards moving higher again from next year. An anticipated 14% bottom-line bounce in 2018 should push the dividend to 14.1p per share, according to the Square Mile, nudging the yield to a delicious 4.4%.

It could be argued that SThree is more of a risky income pick than Acal, however, with predicted payouts covered just 1.5 times by estimated earnings in 2017, and 1.8 times next year. However, I believe the company’s brilliant cash generation should give it the necessary firepower to meet current forecasts — Acal saw net cash rise to £10m last year from £6.2m in 2015.

And with SThree concentrating on the contract market to offset the impact of any economic choppiness at home or abroad, I reckon the business should remain stale enough to dole out market-beating dividends long into the future.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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