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Have £2,000 to invest? An unknown but amazing growth stock with a fast-rising dividend

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The Vitec Group (LSE: VTC) isn’t one of those companies you’ve likely heard of, although chances are you’ve viewed the world through the lens of one of its cutting-edge products.

The business, you see, is an expert in the manufacture of broadcasting cameras and their associated hardware, not to mention the development of photography equipment for the general public. And the small-cap continues to make exceptional progress in both areas.

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Half-year results released in August showed group revenues boomed 11.2% during the six months to June, to £183.3m, and this gave adjusted pre-tax profit a whopping 24.4% year-on-year boost, the bottom line ringing in at a record £24.5m for the period.

It shouldn’t shock readers, therefore, that City analysts expect earnings to keep growing by double-digit percentages. An 18% rise is anticipated for 2018, and although a more modest 7% advance is predicted for 2019, I can see this figure being upgraded significantly as the months roll on.

There are a couple of reason why profits have stomped higher at Vitec in recent history. The steady stream of market-leading, premium-priced products that have been rolled out in recent months and years continue to strike a chord with its customers, the firm commenting in its latest release that a “significant number of market-leading new products launched at end of 2017 are selling well.”

Flash photography

You see, Vitec has its finger on the pulse of the latest trends which govern how broadcasters, independent content creators and photographers go about their business. For example, new products that have been developed in fast-growing areas like sports broadcasting and out-of-studio transmissions have simply flown off the metaphorical shelves.

The business isn’t just content to deliver exceptional organic sales, though, and it remains busy on the acquisition trail to keep profits bulging. Sating its well-publicised hunger for “carefully-targeted acquisitions in core and adjacent niche markets” Vitec splashed out on Rycote Microphone Holdings just last week for a fee that could eventually rise to £8.5m. The Stroud-based company manufactures noise reduction equipment for the audio capture market, giving Vitec the chance to sell complementary products to its clients.

And thankfully, the company has plenty of financial firepower to keep growing the size of the group. It is massively cash-generative and its debt pile continues to shrink, its net debt-to-adjusted EBITDA ratio falling to a meagre 0.7 times as of June from 0.9 times a year earlier.

A genuine dividend bargain

Its ability to kick out shedloads of cash, allied with its solid growth outlook means that City analysts are confident that Vitec can keep on raising the dividend at quite a pace. And so last year’s 30.5p per share reward is anticipated to step to 33.3p in 2018 and 35.4p in 2019, forward figures that yield a chunky 2.4% and 2.5% respectively.

A prospective P/E ratio of 16.9 times may not suggest that Vitec offers scintillating value for money. Its corresponding PEG reading of 0.9, below the accepted bargain threshold of 1, does however. And I reckon this low rating leaves plenty of room for further share price strength, its market value having already risen more than 40% over the past 12 months alone. I’d happily buy the camera colossus and hold it for years to come.

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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.

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