This small-cap and 7%+ FTSE 100 dividend stock could be unmissable bargains

This small growth stock and FTSE 100 (INDEXFTSE: UKX) dividend hero are both trading at bargain prices, says Harvey Jones.

| 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.

Home shopping and education supplier Findel (LSE: FDL) is up a modest 1.23% at time of writing after reporting a 4.8% rise in group revenue to £479m and adjusted operating profit up 15.4% to £36m.

Retailer therapy

Management heralded a year of growth and strategic progress” in the 12 months to 30 March and the response would probably have been more enthusiastic, if investors had not already been primed to hear some good news today. In April, the group announced that its full-year performance would be “at the upper end of market expectations”, thanks to strong growth in customer numbers. 

Findel’s Express Gifts division, which provides a personal shopping service to around 1.8m active customers through direct marketing and its Studio.co.uk and Ace.co.uk websites, reported strong revenue growth of 9.6% to £285m, with clothing sales particularly strong, up 14.2%.

Back to school

The group has transformed online sales and cut base costs at its Findel Education division, which provides resources to nurseries, schools and other educational establishments. It has cut prices across 800 best-selling products for customers who switch to online ordering. Revenues dropped 6.2%, partly as a result, although customer numbers did grow 5%.

This £212m company recently appointed Phil Maudsley its chief executive and he’s turning it round after the group issued two profit warnings in two years. Past problems continue to weigh on its valuation, which is a tempting 8.6 times earnings. However, City analysts are sceptical, forecasting a 5% drop in earnings per share (EPS) in the year to 31 March 2019, then another 3% drop the year after. Its share price may be up 18% in the past year but retail is a risky sector. Findel’s price is right, but its future could be patchy.

Imperial power

As far as bargains are concerned, I think this one looks a little more addictive. Tobacco manufacturer Imperial Brands (LSE: IMB) currently trades on a cut-price forward valuation of just 10.2 times earnings after a tough year that has seen its share price drop 26.3%.

This is a tough sector to invest in as the number of smokers continues to fall in the developed world. That’s a trend I think will spread across emerging markets as better off, better educated consumers place a greater priority on their health.

Dividend winner

However, the market is not going to collapse overnight, and one major benefit of the Imperial Brands share price crash is that it now offers a whopping forecast yield of 7.2%, covered 1.4 times. It’s now the 11th cheapest stock on the FTSE 100, as measured by its P/E, while offering the fifth highest dividend yield. Better still, as my Foolish colleague Alan Oscroft points out, it has now posted nine consecutive years of 10% dividend growth.

Yes, tobacco sales volumes and net revenue fell 2% at constant currencies in the six months to 31 March, but these were within expectations. It plans to cut £100m worth of costs this year and is making progress in the nascent vaping market (I see more vapers every day). Forecast EPS growth is negligible, but I still feel the yield and valuation are too tempting to ignore.

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.

harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands. 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

How much does an investor need in a Stocks and Shares ISA to earn £1,000 a month in passive income?

A Stocks and Shares ISA's a valuable asset for investors. Not having to pay dividend tax can be a big…

Read more »

Investing Articles

9% dividend yield! Could buying this FTSE 250 stock earn me massive passive income?

Assura looks like an outstanding stock for dividend investors to consider. But is the 9% dividend yield the passive income…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Why I think this month could be critical for the Lloyds share price!

Our writer explains why he thinks the bank's 2024 results will have a significant impact on the short-term direction of…

Read more »

British Pennies on a Pound Note
Investing Articles

This former penny share has soared 168%. Is the best yet to come?

When Christopher Ruane saw a penny share as a potential bargain last year, he was spot on. So having not…

Read more »

Mature couple at the beach
Investing Articles

£20k in an ISA? Here’s how it could generate £1 of passive income every hour — forever

With a long-term approach, Christopher Ruane explains how an investor could aim to earn a pound per hour in passive…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

FTSE shares: overpriced or still a bargain?

Christopher Ruane reckons a storming FTSE 100 performance of late doesn't tell us much about whether there are still possible…

Read more »

Blue NIO sports car in Oslo showroom
Investing Articles

Would an investor have made money investing £2k in NIO stock 5 years ago?

Our writer looks at how NIO stock has performed over recent years and weighs the bull and bear cases as…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

5 steps to start buying shares with £5 a day

In a handful of steps, our writer explains how someone new to the stock market could start buying shares for…

Read more »