2 bargain dividend stocks you’ve likely never heard of

Royston Wild runs the rule over two payout powerhouses.

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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.

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