Two unpopular dividend stocks I’d buy today

These two shares could have bright futures from an income perspective.

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Despite the FTSE 100 having risen significantly in recent months, there are a number of shares which remain unpopular among investors. This could be for a variety of reasons. For example, they may have relatively downbeat forecasts, could operate in an unfavourable industry, or be subject to an uncertain long-term outlook. Whatever the reason, such companies could present investment opportunities for long-term investors. Here are two stocks which could offer just that.

Improving outlook

Reporting on Monday was residential property services specialist LSL Property Services (LSE: LSL). The company’s share price jumped 11% after it announced a strong trading performance for the first half of the year. It expects to report half-year results which are ahead of the board’s expectations, and which are a major improvement on the same period of last year.

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In particular, the Estate Agency division has performed well and delivered strong growth in Lettings and Financial Services income. There has also been a sound performance from LSL’s Surveying division, while a smaller number of non-recurring items versus the same period of last year has also boosted the company’s performance.

Overall, operating profit for the first half of the year is due to be ahead of prior expectations. This could push the company’s share price even higher in the short run, although LSL continues to be a relatively unpopular share. Evidence of this can be seen in its valuation, with it trading on a price-to-earnings (P/E) ratio of just 10.8 and having a dividend yield of 3.6% from a payout which is covered 2.6 times by profit. This suggests there is upside potential – especially with the company forecast to record a rise in earnings of 8% next year.

Growth potential

Also relatively unpopular among investors at the present time is Foxtons (LSE: FOXT). The London-focused estate agency has endured a difficult period of late, with its profitability coming under pressure at least partly because of weakness in the London property market. In the short run, those pressures could continue and the company may experience difficult trading conditions. However, in the long run there could be a buying opportunity for dividend investors.

Although Foxtons currently yields just 2.1%, there is scope for significant growth in shareholder payouts. One catalyst for this could be a rising bottom line, with earnings expected to rise by 15% in the next financial year. This could put the company on a dividend coverage ratio of 1.9, which suggests a much higher dividend is affordable.

In addition to dividend growth potential, it remains unpopular among investors. It trades on a price-to-earnings growth (PEG) ratio of just 1.5, which suggests there is capital growth potential. Certainly, the outlook for London property and estate agents is uncertain as a result of Brexit, but with a low valuation and dividend growth potential, the company could prove to be a sound buy.

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