2 cheap dividend stocks for patient investors

If time is on your side and income is your goal, these mid-caps could be just the ticket.

| 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.

Times have been tough for holders of stock in mobile power solutions provider Aggreko (LSE: AGK) and bookmaker William Hill (LSE: WMH). However, for those with long investing horizons and a penchant for dividends, I think both companies warrant attention.

Power-saving

Since August last year, FTSE 250 constituent Aggreko’s shares have lost almost 20% of their value. While today’s interim numbers are unlikely to see the stock rocket any time soon, the fact that full-year guidance remained unchanged does suggest that the company may be starting to turn the corner.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Excluding the impact of currency and pass-through fuel, the Glasgow-based company recorded revenue of just under £800m in H1. If problematic legacy contracts in Argentina aren’t counted, this amounts to a rise of 6%.

While lower pricing on the aforementioned contracts caused pre-tax profits to come in 11% lower (at £63m) than that reported over the same six-month period in 2016, these figures were nevertheless in line with market expectations.

Thanks to its efforts to reduce working capital, Aggreko reported “strong” operating cash inflow of £184m over the interim period, comparing favourably with £100m in H1 2016. CEO Chris Weston also remarked on his confidence that recent changes to the business (the enhancement of its products, customer experience improvements and £100m in cost reductions) would allow Aggreko to grow this year.  

While it may take some before the £2.2bn cap fully recovers, its status as a market leader should not be forgotten. In the meantime, its shares come with a decent 3.2% forecast yield, fully covered by profits. At 15 times forecast earnings for this year, reducing to less than 14 in 2018, I think the shares look good value.

Ready to recover?

I’ve not been a fan of William Hill for some time. A combination of failed mergers and apparent lack of strategy reduced my confidence in the company and its management. Based on the performance of its share price, it seems I wasn’t alone. Before today, Hill’s shares were down 24% since last August.

Today’s interim numbers were an indication that the company is beginning to step in the right direction, however. Over the 26 weeks to 27 June, revenue at the bookmaker grew 3% to £837m, with a rise in new customers leading CEO Philip Bowcock to declare that the company’s focus on improving its products and marketing had been successful.

While a 7% fall in pre-tax profit to £93.5m (blamed on “poor football results” and a lack of major tournaments) wasn’t pretty, Hill’s online offering continues to show positive momentum with amounts wagered rising 13% and UK gaming net revenue climbing 9%. Modest revenue growth of 3% was also seen in its retail division.

Like Aggreko, it’s clearly going to take time for William Hill to bounce back. Nevertheless, I’m encouraged by the fact that it remains on track to deliver £40m of annualised efficiency savings by the end of December. As a company, Hill still generates a huge amount of cash (operating cash flow of just over £115m at period end) and debt levels look under control. A possible relaxation of US gambling laws could also transform the company’s prospects over the pond.

Trading at just 11 times predicted earnings, shares in the company still look very fairly priced, even after today’s encouraging 10% rise. Perhaps most importantly for income hunters, there’s also an enticing forecast 5.3% yield on offer, reasonably covered by profits.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Paul Summers has no position in any 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

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

This cheap share fell 30% last week. I’d buy now

This huge US corporation saw its shares crash by 30% last week. But I'd buy this surprisingly cheap share now…

Read more »

Various denominations of notes in a pile
Investing Articles

These 7 shares produce passive income of 7% to 11% a year!

Passive income is extra money I make without working. By buying these seven shares, I could earn 8.9% a year…

Read more »

A person holding onto a fan of twenty pound notes
Investing Articles

6.6%+ dividend yields! 2 FTSE 100 dividend stocks to buy

Finding the best dividend stocks to buy requires extra care today as soaring inflation takes a bite out of shareholder…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

At 85p, are Rolls-Royce shares a slam-dunk buy?

The Rolls-Royce share price is in penny stock territory. Roland Head explains why he thinks this FTSE 100 stalwart looks…

Read more »

Business development to success and FTSE 100 250 350 growth concept.
Investing Articles

‘Big Short’ investor Michael Burry is buying this quality growth stock! Should I?

In the first quarter, Michael Burry bought more of this growth stock. Is this a hint that I should also…

Read more »

A beach at sunset where there is an inscription on the sand "Breathe Deeeply".
Investing Articles

Stock market crash: here’s why falling prices is good news

Over in the US, a stock market crash is battering high-priced stocks. But I see falling shares as an opportunity…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

These 5 FTSE 100 shares crashed in 2022. I’d buy 1 today

Although the FTSE 100 index is flat in 2022, some Footsie shares have crashed hard this year. But I see…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

How investors can boost their passive income when the FTSE is falling

Stock markets are plagued with fears right now. Here's why I firmly believe those fears improve our passive income prospects.

Read more »