Headlam Group (LSE: HEAD) is a big-dividend-paying small-cap that may not be for the faint of heart, but I’m convinced it still has what it takes to deliver titanic returns now and in the years ahead.
Brexit is wreaking no little havoc on trading at the floor coverings specialist right now, prompting it to predict in its recent pre-close update that “the UK market will show further general weakness during 2019.” Despite this, Headlam predicted that group revenues will remain flat this year, and I’m inclined to believe it given its ability to perform in already-tough conditions — it advised in this month’s statement that profits were “marginally ahead” in 2018 despite troubles in its home market.
Headlam may well experience some forecast-denting turbulence this year — a 4% earnings rise is currently anticipated by City brokers — but I believe the chances of this occurring are baked into the firm’s low forward P/E ratio of 9 times. I’m far more attracted by its bulging 6.7% dividend yield, and the brilliant long-term profits opportunities created by its expansion strategy in Europe.
Strike it rich
Bowling alley operator Ten Entertainment Group (LSE: TEN) is another income giant carrying inflation-mashing dividend yields in the near term, in this case a reading of 5.3%.
And just like Headlam, the ten-pin titan can also be picked up for next to nothing, the small-cap also carrying a mega-cheap prospective earnings multiple of 11.4 times. This also doesn’t factor in the resilience of this little-known income hero, in my opinion, the resurgent appetite for bowling in Britain helping it to overcome increasing pressure on consumer spending power as well as the impact of “extreme” summer weather.
Earlier this month Ten Entertainment said that like-for-like sales rose 2.7% in 2018, the seventh successive year of growth. And the business looks good to continue growing profits at a breakneck pace, helped by its ongoing acquisition drive. The City certainly thinks so, with analysts forecasting a 22% earnings rise in 2019.
Don’t miss this dividend star!
Corporate insolvency specialist Begbies Traynor Group (LSE: BEG) may have seen its share price clatter lower in recent months, but I am convinced this represents a prime dip-buying opportunity.
Why? Well, as the British economy slows the number of businesses experiencing financial distress is growing, and this is playing into the likes of Begbies Traynor’s hands. It saw revenues rise 8% in the six months to October, to £28m, and with debt falling the AIM business is in great shape to execute more earnings-enhancing acquisitions, not to mention to keep lifting dividends.
Indeed, City boffins predict a full-year dividend of 2.6p for the period to April 2019, up from 2.4p last year and yielding a formidable 4.5%, aided by an anticipated 9% earnings rise. Combined with a low, low forward P/E ratio of 13.1 times I reckon Begbies Traynor is a great income share to pick up today.
