3 top (and cheap!) dividend stocks I’d buy right now

Royston Wild discusses three income heroes that won’t cost you a fortune.

| 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.

SThree (LSE: STHR) is a stock that, to me, offers the perfect formula of big dividends at rock-bottom prices.

Share pickers seem to be reluctant to take the plunge because of the weak UK economy and fears that this will rock profits growth at the recruitment giant. I’m afraid this argument doesn’t hold water with me, though, as thanks to the tearaway performance of its foreign operations total profits continue to surge.

Last year, for example, SThree saw gross profits at group level swell 12% even as the bottom line in its UK and Ireland territory fell 5%. Less than 20% of the small-cap’s profits are now derived from home shores and so I’m confident that it can continue to thrive even if Brexit has bad implications for its domestic operations.

City analysts expect the bottom line to keep rising too, creating a dirt-cheap P/E ratio of 9.2 times for fiscal 2019 and expectations of more dividend growth to 15p per share. This results in a jumbo 4.9% yield.

Strike now

Hollywood Bowl Group (LSE: BOWL) isn’t as cheap as SThree. In fact, its forward P/E ratio of 16.6 times sits outside the widely-considered value watermark of 15 times and below. But I would consider this rating to be a very attractive entry point given its hugely exciting growth strategy.

The British tenpin bowling renaissance continues to go from strength to strength and through its busy expansion programme — it’s looking to cut the ribbon on two new centres each year — the leisure giant is setting itself up to capitalise on this trend.

Thanks to a 13% pre-tax profits boost last year, Hollywood Bowl continued to raise the ordinary dividend and to fork out special payouts. City brokers expect more significant bottom-line growth in fiscal 2019 to push the ordinary dividend to 7.6p per share, yielding an inflation-mashing 3.3%, and investors can probably look forward to more delicious supplementary rewards too.

The biggest yielder of all

If you’re on the hunt for particularly explosive yields then Go-Ahead Group (LSE: GOG) might be more to your liking.

The Square Mile suggests that the bus-and-rail-service operator will keep the full-year dividend locked at 102.08p per share for another year. The good news is that this projection yields a stunning 5%.

Adding some sheen to the Go-Ahead investment case is its low, low forward P/E ratio of 13 times, a rating that’s far too little in my opinion given the rate at which it has been winning contracts at home and particularly abroad over the past year.

The transport titan has recently added maiden contracts in Australia and Norway, for example, as well as additional accords within the German rail network. And the fruits of its endeavours were shown in half-year financials last week in which it advised that group revenues rose 5% during July-December despite tough conditions in the UK. With its contract pipeline packed with more opportunities I’m tipping it to flip back into strong profits growth soon enough and to get back to lifting dividends too.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Hollywood Bowl. 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

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

3 essential factors for investors to consider when aiming for passive income success

Mark Hartley outlines three of the most important considerations investors are faced with when attempting to secure a lucrative passive…

Read more »

Investing Articles

£10,000 invested in Barclays shares 1 month ago is now worth…

Barclays shares have carried on where they left off in 2024, by climbing far faster than the FTSE 100. Harvey…

Read more »

Investing Articles

I’ve been watching the easyJet share price like a hawk. Here’s what it did last week

Harvey Jones can't take his eyes off the easyJet share price. He thinks it looks good value and ready to…

Read more »

Investing Articles

A £10,000 investment in Nvidia stock 6 months ago is now worth…

Nvidia stock's shown a lot of volatility for a mega-cap company in recent weeks. Dr James Fox explores how an…

Read more »

Investing Articles

4 reasons Ferrari could continue to be a stock market winner

The global luxury goods market may have struggled in recent years, but you wouldn’t guess that from Ferrari’s soaring stock.

Read more »

Investing Articles

5 perfect starter stocks to consider for a Stocks and Shares ISA in 2025

Wondering which shares to buy for a newly opened Stocks and Shares ISA? Our writer thinks these five investments are…

Read more »

Row of terrace houses.
Investing Articles

Thinking about buy-to-let? Consider these UK stocks instead

Owning UK property stocks could be a better way to invest in buy-to-let, though there are drawbacks. Royston Wild explains.

Read more »

Investing Articles

Here’s a plan to target £7,500 a month in passive income

This writer outlines a roadmap that someone could consider taking to try and aim for a substantial future passive income…

Read more »