2 ‘top secret’ dividend stocks I’d buy for my ISA with my last £2k

Looking to make a fortune from dividend stocks? These smaller stocks could be just what you’re seeking, says Royston Wild.

| 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.

There’s no such thing as a sure bet when it comes to stock investing. Those who bought into mighty blue-chips Tesco, Centrica or British American Tobacco a decade ago will attest to just how far the mighty can fall in just a short space of time.

That said, I’d be willing to stake my last couple of thousand pounds on Bloomsbury Publishing (LSE: BMY) continuing to deliver terrific shareholder returns for many years to come.

Pottermania

The evergreen popularity of the Harry Potter franchise has been the publisher’s bread and butter for the past few decades. And there’s no sign Hogwarts-related mania will be dying down any time soon.

Potter prequels such as Fantastic Beasts And How To Find Them continue to attract legions of avid readers and film fans. Meanwhile, Harry Potter And The Cursed Child keeps drawing in legions of theatregoers in the West End and on Broadway, leading to speculation a movie version of the hit book and stageplay is imminent. No wonder Bloomsbury said Harry Potter remained one of its strongest-selling range of consumer titles in the four months to June, more than 20 years after they first hit bookshelves.

It’s important to point out Bloomsbury isn’t just a great play on Pottermania. It’d be an injustice not to mention the enormous profits potential that the small-cap’s drive into the academic and professional publishing arena, a segment where revenues shot 13% higher in the last fiscal year.

Unsurprisingly, City analysts are expecting more meaty earnings growth at Bloomsbury in the medium term (7% and 11% for the fiscal years ending February 2020 and 2021, respectively, to be exact). And this means they’re also expecting the firm — which has raised dividends each and every year for 24 years — to keep increasing the shareholder payout too.

This means that, at current prices, the publisher carries chunky yields of 3.7% and 3.8% for this year and next. Combine this with a forward price-to-earnings (P/E) ratio of 14.4 times and I reckon Bloomsbury’s a top bargain buy for your ISA today.

Fancy some 6% yields?

I’d also be very happy to spend my remaining investment capital to buy shares in Target Healthcare REIT (LSE: THRL). This particular share operates care homes all across the UK and so stands to gain from an increasingly ageing population, and the steady demand for specialist accommodation for this demographic, in the years ahead.

But this isn’t all. Target has plans to supercharge profits growth via an aggressive expansion strategy all over the country, and has recently undertaken a restructuring of its debt facilities and raised equity to give it more firepower on this front. Just last month, the small-cap spent around £19m to add an extra two care homes in Yorkshire and the West Midlands to its estate.

Now City analysts expect Target to pay a 6.6p per share total dividend for the fiscal year ended June and, helped by a estimated 26% earnings rise, predict it’ll rise to 6.7p in the current period. This means investors can enjoy a 6% dividend yield.

I expect the firm to remain a big dividend payer in years to come, thanks to its proactive approach in a market loaded with structural opportunity.

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 Tesco. 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

Passive income text with pin graph chart on business table
Investing Articles

Yields of up to 7%! I’d consider boosting my income with these FTSE dividend stocks

The London market has some decent-looking dividend stocks right now, and I’m tempted by these two for growing income streams.

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »