One dividend stock I’d buy for my ISA before February, and one stock I’d avoid

Royston Wild looks at a couple of stocks before the release of upcoming financials. Should you buy them for your Stocks and Shares ISA?

| 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.

Illustration of bull and bear

Image source: Getty Images.

Those looking to buy some top dividend shares on a shoestring should look at Reach (LSE: RCH). The media giant’s share price has leapt 136% in 12 months yet on paper it remains spectacularly cheap. The small-cap stock trades on a forward price-to-earnings ratio of 3.5 times and boasts a giant 5.2% dividend yield, too.

City analysts expect earnings to fall 5% at Reach, the owner of the Mirror line of titles as well as more recently the Express and Star mastheads, in 2020. The publishing market is tough, sure, as advertising budgets remain under no little pressure. But I reckon the company’s low rating fails to reflect the pace at which revenues at its digital operations are taking off.

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

Online sales rose 14% between 1 July and 29 November, Reach reported last time it updated the market. This was up from 9% in the same 2018 period. And I expect the top line to keep soaring over the long term as Reach expands to grow its readership.

I’m expecting another sunny set of numbers when full-year results come out on Monday, 24 February. I therefore reckon the publisher is a top income buy right now.

Too expensive?

I certainly won’t be buying Dunelm Group (LSE: DNLM) today, though. It’s loaded with risk as retail sales in the UK continue their steady decline. And yet this FTSE 250 stock commands a premium rating, a forward P/E rating of 21.6 times.

That said, there’s sure to be an army of happy buyers in the lead up to half-year trading numbers scheduled for Wednesday, 12 February. Dunelm’s ability to defy gravity has been quite impressive, all told. The furniture specialist released another strong update last month. A 5% rise in like-for-like growth between June and August was also particularly decent in the context of the strong comparatives of a year earlier. Underlying sales rocketed almost 11% then.

Dunelm’s refusal to engage in Black Friday promotions or pre-Xmas sales made that latest number even more impressive. This decision also boosted gross margins by 1.1% in the quarter. So what’s my beef, you may ask? Well that monster earnings multiple and smallish forward dividend yield (of 2.6%) means that Dunelm comes packed with plenty of risk but with potentially very little reward.

Look elsewhere

The launch of its new digital platform may give the business more reason to expect sales to keep tearing higher (revenues generated via Dunelm.com jumped more than a third in the last quarter). City analysts expect earnings to rise 8% in the fiscal year to June 2020 and by 6% the following year.

But with geopolitical and economic uncertainty threatening to linger through the rest of this calendar year and possibly beyond, too, I can’t help but fear that Dunelm might struggle to keep up the pace, and that its huge premium leaves it in danger of a share price correction. I’d rather park my hard-earned investment cash elsewhere.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

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.

More on Investing Articles

A Rolls-Royce employee works on an engine
Investing Articles

In penny stock territory, is the Rolls-Royce share price set to soar?

The Rolls-Royce share price has sunk recently, falling into penny stock territory. But with flying hours recovering, is it too…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Lloyds shares drop 20% in 4 months. Should I buy now?

Lloyds shares have lost a fifth of their value since peaking on 17 January this year. But after rebounding from…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

As the stock market recovery stalls, should I wait to buy?

Has the stock market recovery run out of steam? If so, what does that mean for our writer's portfolio? Here…

Read more »

Diagonal chain made of zeros and ones. Cryptocurrency and mining.
Investing Articles

At 55p, is the Argo Blockchain (LON:ARB) share price too cheap to miss?

With a low P/E ratio and strong financial results, could the Bitcoin miner be good value for money?

Read more »

macro shot of computer monitor with FTSE 100 stock market data in trading application
Investing Articles

Here are 2 recession-proof FTSE stocks!

In the face of current economic uncertainty and fears of a looming recession, this Fool identifies two recession-proof FTSE stocks.

Read more »

British Pennies on a Pound Note
Investing Articles

Here is 1 penny stock primed to benefit from the construction boom!

Jabran Khan delves deeper into a penny stock that he believes could benefit from the construction boom, and explains why…

Read more »

Various denominations of notes in a pile
Investing Articles

Here is 1 top passive income stock to buy and hold!

Jabran Khan wants to boost his passive income stream through dividends and has identified this insurance giant as a way…

Read more »

Cheerful young businesspeople with laptop working in office
Investing Articles

These are the 5 worst ways to invest in stocks

It's all too easy to lose money when you don't really know how to invest in stocks. Here are the…

Read more »