A cheap 7% yielder that could make you rich

Royston Wild looks at a white-hot yield superstar trading far too cheaply.

| 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.

A cocktail of rising inflation, stagnating wage growth and worsening consumer confidence has turned the screw on some of Britain’s largest pub operators as we have moved through 2017.

The impact of these triple troubles has been reflected in batches of data from researcher CGA in recent weeks, illustrating how takings across the UK’s leisure sector have suffered. Like-for-like takings across the country’s pubs, bars and restaurants fell 0.9% in September, the biggest drop for a year. A 0.3% sales rise in October was far from reassuring either.

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!

Concerns over the health of our listed publicans ramped up several notches last week after Mitchells & Butler said that it would not be paying out an interim dividend in the current year “pending assessment at year-end of capital allocation and prospects.” The All Bar One owner has been hit by tough business conditions, including what it called “unprecedented” cost headwinds.

Marston’s (LSE: MARS), for a long time a favourite among dividend chasers, sank to fresh five-and-a-half-year lows around 100p per share in the wake of the news. But a bubbly trading statement on Thursday has seen stock-pickers pile in with gusto again — it was last dealing 10% higher at pixel time.

Dividends still growing

Marston’s continues to largely brush off the difficulties affecting many of its rivals (including Greene King, which was last 3% lower today following a trading statement of its own), the company advising that underlying revenues improved 10% year-on-year to £992.2m. This helped shove underlying pre-tax profit 3% higher to £100.1m.

And as a result it elected to raise the full-year dividend to 7.5p per share, up 2.7%.

In a welcome divergence from the gloom seen across much of the sector, chief executive Ralph Findlay commented: “While political and economic uncertainty is likely to continue, we remain confident that our proposition founded on providing great customer experiences, the very best service and value for money, leaves Marston’s positioned to deliver further growth in the year ahead.”

Building for the future

The FTSE 250 business opened 19 pubs and restaurants, as well as eight of its lodges, in the last fiscal year (it acquired a cluster of pubs from Whitbread too). And in a sign of its confidence in the market, Marston’s has no plans to dial back its ambitious expansion plans, with an additional 15 pubs and bars and six lodges in the pipeline for the current year alone.

The Wolverhampton firm’s growing stable of pubs is not the only reason to be impressed as demand for its own-brewed ales continues to fizz. Its wide range of brands, which include favourites like Hobgoblin and Pedigree, continue to outperform the broader market and, with the firm having snapped up Charles Wells brewery last year, it can look forward to further healthy sales growth here.

City analysts agree that Marston’s remains in great shape to beat the murky sales outlook and rising cost considerations affecting the wider industry, and to keep its growth record going with a 1% rise in fiscal 2019. This may not be exciting but a projected 7.8p per share dividend, yielding a mighty 6.9%, certainly is.

Clearly Marston’s isn’t without its share of risk, but I reckon this is more than baked into its forward P/E ratio of 7.9 times. In my opinion the beer behemoth is a terrific stock selection today.

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

Royston Wild has no position in any of the 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

Tired woman sleeping on London underground
Investing Articles

5 steps to monthly passive income streams of £500

Aiming for regular passive income streams, our writer walks through five key steps he would take.

Read more »

Business people shaking hands
Investing Articles

Director dealings: HSBC, National Grid, Taylor Wimpey

Director dealings can indicate whether a company's doing well. So, here are this week's director dealings from three of the…

Read more »

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

2 lesser-known stocks with 10% dividend yields!

With sky-high inflation, sizeable dividend yields can help my portfolio grow. These two stocks are paying 10% on average.

Read more »

Businessman pulling out wooden brick from toppling stack
Investing Articles

Is the Woodbois share price a bargain – or a value trap?

The Woodbois share price has seen big swings recently. Our writer considers why and explains his response.

Read more »

Electric cars charging in station
Investing Articles

Here’s why NIO stock is my top EV pick!

NIO stock had been one of the worst-performing shares over the last year, but it appears to have bottomed out.…

Read more »

Risk reward ratio / risk management concept
Investing Articles

The JD Wetherspoon share price has fallen 45% — should I load up?

The JD Wetherspoon share price has shed almost half its value in the past year. Should our writer buy another…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

Down 50%, is the Scottish Mortgage share price a bargain in plain sight?

The Scottish Mortgage share price has lost half its value in recent months. Is it now a bargain for our…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

A cheap UK share for the cybersecurity boom!

I'm backing this UK share after its share price collapsed this week. In fact, I've recently added this cybersecurity stock…

Read more »