3 mega-cheap dividend heroes with yields above 5%. Can I afford to ignore them?

Royston Wild discusses three income greats that he thinks are trading much too cheaply right now.

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If you’re looking for a blend of growth, income, and value then Ten Entertainment Group (LSE: TEG) is a share worthy of investment cash, in my opinion.

The popularity of ten-pin bowling with Millennials has prompted a renaissance of alleys the length and breadth of the country. It’s a relatively-inexpensive night out, meaning despite the broader pressure on Britons’ spending power, sales at Ten Entertainment are swelling (like-for-like sales were up 5.1% in the first 11 weeks of 2019).

And Ten Entertainment is harnessing this momentum by investing heavily in its existing estate and opening new arenas. Just this month, it completed the purchase of a site in Southport, Merseyside, taking the number of centres on its books to 44.

It’s not a surprise to see City analysts predicting earnings growth of 26% in 2019, a figure which leaves it dealing on a forward P/E ratio of just 11.3 times, and leads to predictions of more dividend growth. Ten Entertainment thus yields 5.2% and sits as a true income star.

Swot up

Empiric Student Property (LSE: ESP) is another share in great shape to deliver terrific profits rises in the near term and beyond. The student accommodation provider’s share price has plunged in recent months, leaving it dealing on a rock-bottom, sub-1 forward PEG ratio of 0.5, as concerns over how and when the UK exits the European Union have grown.

As of right now, though, Empiric is yet to see any impact of this on its operations. The business commented last month that “while there are economic and political uncertainties, particularly regarding Brexit, we are yet to see any material adverse consequences.”

British universities remain hugely popular with students from all over the world and are likely to continue to be so. It’s why revenues at Empiric soared 25% in 2018 and occupancy rates rose four percentage points to 96%.

Pre-tax profits almost doubled at the firm last year and City brokers are forecasting more terrific progress in 2019, a bottom-line rise of 42% currently anticipated. This bubbly estimate supports forecasts of more chubby dividends, leaving Empiric with a corresponding yield of 5.3%.

On target

My last selection is Target Healthcare Reit Ltd (LSE: THRL), a company whose yield of 5.8% for the upcoming fiscal year (beginning July 2019) makes it the best payer on this list.

City analysts expect the care home operator to generate earnings growth of 17% for the new period and, due to the UK’s rapidly-ageing population, there’s plenty of reason to expect profits to keep barrelling higher, in my opinion.

Like Ten Entertainment, Target is also committed to rampant expansion. In the first quarter alone, it opened new homes in Oxfordshire and Leicestershire. It currently has 23 tenants and expects this to rise to 26 once planned acquisitions and developments are completed.

At current prices, Target can be picked up on a forward PEG reading bang on the bargain watermark of 1 times. For a business with such scintillating growth opportunities for the years ahead, I reckon this makes it a steal.

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 considered so you should consider taking independent financial advice.

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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