Reaching the magic million milestone may feel like a distant dream to many. But buying stock in companies offering juicy dividends (and then re-investing them) is as good a way as any for getting there, albeit slowly.
Today, I’m taking a look at three less-well-known stocks, all of whom provide a great source of income to their owners at the current time.
Under the radar
Small-cap ceramic tableware, cookware, giftware and tabletop accessory provider Portmeirion Group (LSE: PMP) might not raise pulses, but it’s done no harm at all to the wealth of its owners. Those who purchased the stock just one year ago would now be sitting on a 26% capital gain.
Having delivered a “strong first half trading performance” — during which revenue and pre-tax profit grew by 11.4% and 29.1%, respectively — it looks likely this positive momentum will continue.
But Portmeirion is also no slouch when it comes to returning cash to its owners. While the forecast 3.3% yield for 2019 isn’t the biggest, it’s worth highlighting that the business boasts a solid history of hiking its payouts. As seasoned Fools will know, a consistently rising dividend is usually preferable to a large but stagnant one.
At 16 times forecast earnings, Portmeirion isn’t cheap, but returns on capital are invariably high, its finances look sound, and the decision to diversify into new markets should mean it continues growing. One to capture on general market sell-offs, perhaps.
Next up is fellow AIM-listed stock Character (LSE: CCT) — a designer and distributor of toys for a number of established brands including Peppa Pig and Teletubbies.
Earlier this month, the market minnow released a reassuring trading update in which it highlighted “a return to its previous growth pattern during the second half.” Having recovered quickly from the administration of Toys R Us (a big customer), sales in the UK are at record levels, allowing the company to state that it will “comfortably reach market expectations” for the full year.
Like Portmeirion, Character also generates high returns on the capital it invests. Unlike Portmeirion, its stock is on sale for a more-than-palatable 10 times forecast earnings. For those who dislike firms loaded with debt, the £110m-cap boasts a net cash position.
Character’s shares come with a fairly tasty forecast 4.5% yield at the current share price. With a habit of raising dividends by double-digit percentages, I suspect it will continue to be a reliable source of income going forward.
A final stock that would likely pass many dividend hunters by is supply chain solutions provider Wincanton (LSE: WIN).
Never one to shout from the rooftops, things have been fairly quiet on the news front since the company last reported on trading in late June. Back then, it was revealed that the £278m-cap continued to perform in line with expectations, with a new contract win with EDF Energy complementing a number of renewals.
While the business appears to be ticking along nicely, it’s the dividend stream I like most.
Wincanton is likely to return 10.5p per share this year — equating to an attractive 4.7% yield at its current share price. Having now resolved issues relating to its pension fund, there appears to be little preventing management from increasing payouts in the future.
The stock currently trades on an inviting price-to-earnings (P/E) ratio of 7 for the year ending 31 March.
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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Portmeirion Group. 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.