2 bargain dividend stocks you’ve likely never heard of

Royston Wild runs the rule over two payout powerhouses.

| 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.

I reckon those on the hunt for delicious dividend yields need to take a close look at Low & Bonar (LSE: LWB), particularly as demand for the performance materials play’s products continues to head through the roof.

The company saw revenues shoot 16.4% higher during December-May, to £210.3m. Although favourable currency movements were responsible for this electric rise, sterling’s ongoing battle was not the only factor — at constant currencies the top line bulged 4.6%.

As a result, pre-tax profit powered 30.1% higher in the period, to £10.8m.

Although Low & Bonar is still battling challenging trading conditions — it noted in July that “we have seen little evidence of a sustained pick-up in demand in our markets” — the company’s ongoing drive to bolster product development and improve its sales processes continue to drive the top line.

And with the company broadening its global scope through vast organic investment and M&A activity, I fully expect sales to continue rocketing.

Hot forecasts

In a further boost to the manufacturer’s investment appeal, City forecasts suggest that Low & Bonar could be too cheap to miss at the current time.

In the year to November 2017, the London firm is predicted to keep its recent run of double-digit earnings increases rolling with an 18% advance. And an extra 14% improvement is predicted for next year.

As a consequence, Low & Bonar sports a forward P/E ratio of 10.7 times — well below the widely-regarded value yardstick of 15 times — as well as a corresponding sub-1 PEG readout of 0.6 times.

And there is also plenty for dividend investors to get excited about. The company’s progressive dividend policy is expected to keep rolling with a payout of 3.3p per share in the current period, up from 3p in fiscal 2016 and yielding an excellent 4.3%. And the yield chugs to 4.5% for 2018 thanks to predictions of a 3.5p dividend.

Transformation on track

Morgan Advanced Materials (LSE: MGAM) is another British stock delivering titanic value at current prices.

Despite predictions of a 6% earnings decline in 2017, the ceramic materials specialist still sports a compelling prospective P/E ratio of 14 times. The company is predicted to get the bottom line moving higher again from next year, and an 11% rise is forecast by the number crunchers.

What’s more, Morgan also offers share-pickers above-average dividend yields during the medium term. The estimated 11.1p per share payment expected this year yields 3.7%, while an 11.4p dividend anticipated for 2018 nudges the dial to 3.8%.

While sales are hardly ripping higher right now, the Windsor-based firm has seen business pick up more recently and organic revenues edged 0.2% higher in the six months to June. Factoring-in currency movements, turnover actually advanced 9.2% to £518.9m, a result that powered operating profit 11.8% higher to £61.6m.

And Morgan’s ongoing transformation strategy should offer plenty of cheer looking further down the line. The company advised in July that “operational improvements are ahead of plan and providing the funds for reinvestment in research and development, sales and infrastructure,” and it is therefore on track to plough an extra £6m into its R&D and sales processes, it declared.

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 companies mentioned. The Motley Fool UK has recommended Morgan Advanced Materials. 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

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

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 »