6 small-cap dividend stocks that could be millionaire-makers

Royston Wild identifies a handful of small-cap superstars that could supercharge your investment income.

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In a recent article I looked at two little-known stock stars that could make you an absolute fortune in the years to come.

Britain’s small-cap index is jam-packed with exceptional income shares so I’ve picked out even more for you to consider, placed in no particular order. Count them down; you won’t be disappointed.

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6. International Personal Finance

International Personal Finance’s (LSE: IPF) share price has spiked in recent sessions amid news of better-than-expected collections in its European marketplaces in the first six months of 2018, a situation that prompted the doorstep lender to advise that full-year profits would beat all forecasts.

While impressive, it is the huge revenues possibilities over at its Mexican home credit and IPF Digital arms that I am really excited about — the amount of issued credit in these areas rose 13% and 44% respectively during January-June, and demand here looks set to continue booming.

Now City analysts are expecting the dividend to remain on hold at 12.4p per share yet again in 2018. The good news is that this figure still yields 5.2%, however.

To put an even bigger smile on your face, International Personal Finance is expected to bounce back into earnings growth in 2019, meaning that the Square Mile is confident that the firm should lift the dividend to 12.6p. This means that the yield stomps to a staggering 5.3%.

5. 4Imprint Group

The yields at 4Imprint Group (LSE: FOUR) may not be as mesmerising as those of International Personal Finance. But the rate at which dividends are growing (up 111% over the past five years alone) should make income-seekers sit up and take notice.

It’s not likely that dividend expansion is set to slow any time soon either, given the rate at which its cups, bags and other promotional products are being snapped up. Revenues grew 16% and order intake jumped 15% year-on-year during the first four months of 2018, and a strong US economy should help sales to keep spiralling skywards.

Earnings at the firm are expected to continue swelling by double-digit percentages through to the close of 2019, keeping City brokers expectant of further dividend leaps too. Last year’s 58.1 U cents per share reward is expected to skate to 63.5 cents this year and 72 cents next year, resulting in handy-if-unspectacular yields of 2.5% and 2.8% respectively.

4. Bloomsbury Publishing

The publisher of the Harry Potter series of books, Bloomsbury Publishing (LSE: BMY), can always rely on the evergreen popularity of the boy wizard to keep driving dividends higher.

It may be two decades since the Hogwarts hero first hit bookshelves, but his popularity with young and adult readers alike remains undiminished. The franchise ranked amongst Bloomsbury’s hottest sellers in the four months to June, and the publisher continues to capitalise on its broad acclaim by bringing out new editions on a regular basis.

Harry Potter isn’t the only reason to expect profits and dividends to keep growing, however. The small-cap is also in a good place thanks to the vast amounts it is investing in building its position in the academic and professional digital resources sphere.

With earnings expected to keep rising City brokers are predicting dividend growth to hit as much as 8p per share in the 12 months to February 2019, from 7.51p last year, and again to 8.4p next year. This means that yields stand at an inflation-topping 3.6% and 3.8% for these respective years.

3. Devro

Sausage-casings manufacturer Devro (LSE: DVO) has been forced to keep the dividend locked at 8.8p per share for what appears to be an age. A lengthy period of earnings fluctuations has seen it lack the confidence (and the balance sheet strength) to hike payouts, but things could be about to change.

City analysts expect the firm to deliver robust profits growth through to the end of next year, meaning that Devro is expected to raise the dividend to 9p this year and again to 9.3p in 2019. Subsequent yields clock in at 4.5% and 4.7%.

There’s a lot of reason for the number crunchers to be optimistic. Devro is a rare firm in that it’s seeing its costs dropping through the floor (down £7m in 2017, beating forecasts), at the same time as its sales are marching on, particularly in hot growth territories like Russia and China. There’s a lot to like about Devro and its self-help strategy right now.

2. MJ Gleeson

News that MJ Gleeson (LSE: GLE) remains on course to supercharge home sales over the next five years has got me very excited.

The urban regeneration specialist sold 1,225 properties in the 12 months to June, up by a fifth (or 20.9% to be exact) from a year earlier. It’s well on track to hit its target of 2,000 homes per year within the next five years, it said, and I wouldn’t bet on it missing expectations as it ramps up production (it aims to be active on 70 sites in the course of fiscal 2019 versus 65 today).

Dividends at the firm have jumped 860% over the past five years as earnings have shot through the roof, culminating in last year’s 24p per share reward. Payout expansion is expected to slow in the medium term, however, to 27.1p in the year just passed and 29p in the current year. But the builder and its meaty forward yield of 3.8% are not to be scoffed at, particularly as cash flows burst through the roof and profits look set to keep growing.

1. Headlam Group

Those hunting for blowout yields now and in the future could do a lot worse than splashing the cash on Headlam Group (LSE: HEAD).

A 26p per share dividend is anticipated for 2018, up from 24.8p last year and yielding 5.6%. The yield for next year moves even higher to 5.9%, thanks to the firm’s estimated 27.4p payment.

The floorcoverings giant has been hit more recently by tough conditions in its UK marketplace in 2018 so far, but its divisions in continental Europe continue to perform well. Like-for-like sales in Europe edged up by 1.8% in the six months to June. And it is a combination of robust economic conditions on the continent, plus the completion of Headlam’s shrewd acquisitions at home and abroad, that make me confident that this is one business that could provide you with a packet to retire on.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Devro. 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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