Are these the best small-cap dividend shares to buy in this stock market crash?

Royston Wild talks up two lesser-known income heroes he thinks are too good to miss at current prices.

| 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.

If the share market washout of the past month has taught us anything, it’s that plummeting trader confidence takes no hostages. It doesn’t matter how good a stock’s long-term outlook remains. Investors don’t care about a company’s ability to brush off the impact of severe events like this coronavirus outbreak, either.

Biffa’s (LSE: BIFF) 13% share price decline since 21 February isa  perfect example. Its defensive operations – it is a major player in the waste management sector – provide the same sort of security that classic utilities companies offer. Yet investors have been minded to rapidly sell out here, too.

The small cap reassured shareholders a few weeks back with news that that the Covid-19 outbreak “has not been any meaningful impact” on its operations to date. Share pickers continued to sell out en masse, though. Sure, conditions on the ground have worsened since then as coronavirus infection rates have accelerated. But I’m confident that Biffa can continue to grow earnings. Rubbish needs to be collected and recycled even in the current landscape, right?

I’d argue that recent share price action leaves dip buyers an opportunity to snap up a bargain. Right now Biffa carries a rock-bottom forward price-to-earnings (P/E) ratio of 11 times. The City expects Biffa to keep its ultra-progressive dividend policy rolling, too and it offers a chunky 3.3% yield. I own this share and am tempted to buy up some more.

Internet sensation

They say that real estate is another brilliant safe haven when investor confidence takes a tumble. In this vein I’d like to tip Tritax EuroBox (LSE: EBOX) as a big-dividend-paying defensive stock for these troubled times.

This small cap owns a cluster of so-called big box facilities the length and breadth of mainland Europe. Such properties are becoming more and more important as the steady growth of e-commerce drives the need for large warehousing and distribution hubs.

Tritax EuroBox’s most recent trading update last month underlined just how strong underlying market conditions are. It said that “structural drivers of accelerating e-commerce growth, automation of omni-channel supply chains, and ongoing urbanisation continue to increase demand for prime big box logistics assets across Continental Europe.”

It added that both vacancy rates and the construction of new development sites are at “historic lows,” too.

Box clever

Putting your money in Tritax EuroBox is a particularly great play on ‘bricks and mortar’ assets, then. It’s probable that the recent coronavirus has hurried e-commerce adoption, too, pushing investors who usually do their shopping in a supermarkets or on the high street into making online purchases instead.

Following its 14% share price drop of the past month, this particular small cap trades on a forward P/E ratio of 22.9 times. It’s a reading that is still high on paper, sure. But it’s some distance back from its historical multiples of closer to 30 times.

Besides, a chunky 5.4% prospective dividend yield helps take the edge off to a large degree. I think this is one attractive income share to buy today and hold for years to come.

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 owns shares of Biffa. 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

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 »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »