I’m still as bullish as I was last December about this counter-cyclical small-cap stock and its growing dividend yield.
And Begbies Traynor (LSE: BEG) had a ‘good’ coronavirus-crash experience. Indeed, the business recovery, financial advisory and property services consultancy saw its shares bounce back fast after the March crash. And by 7 April, the stock had exceeded its level before the market plunge.
A growing dividend yield
Had you bought some of the shares in December, you’d be up around 12% at today’s 98p. And on top of that, the company hasn’t missed a beat with its shareholder dividends. In today’s full-year results report to 30 April, we learn that the directors have raised the total dividend for the year by almost 8%. The forward-looking yield for the current trading year is around 3%.
And there are some more tasty figures too. Revenue rose by just over 17% compared to the previous year, driven by both organic progress and acquisition activity. And adjusted earnings per share moved almost 19% higher. It seems clear the firm’s doing many things right. And I reckon the shares are a decent ‘hold’ in the economic environment we’re experiencing now.
Indeed, today’s report reveals to us the company earned around 75% of its operating profit in the period from business recovery and financial advisory services. Executive chairman Ric Traynor expects an increase in market insolvency levels “once the short-term Government support measures for the economy are removed.”
When times are tough for other companies, Begbies Traynor tends to do well from its business recovery, insolvency, and restructuring work. As such, operations have a degree of counter-cyclicality. And in the current economic environment, the shareholder dividend could be one of the safest around.
Looking ahead, Traynor reckons good trading and a higher order book in the current trading year places the company well to exceed today’s results. Recent acquisitions and investment in operations should also boost the results a year from now. The company expects insolvencies to rise this year, so there’s a strong tailwind behind the business.
In a measure of the firm’s resilience, it kept trading through the lockdown and didn’t call on any financial help offered by the government. And I think the business is in the rare position that the coronavirus pandemic has improved its forward prospects. Indeed, the difficulties Covid-19 created for other companies could boost insolvency levels and create more work for Begbies Traynor.
The forward-looking earnings multiple for the current trading year to April 2021 is around 16. Meanwhile, the dividend has been on the rise since 2017, powered by impressive increases in revenue, earnings and cash flow. It seems to me those measures have every chance of improving further in the years ahead.
I’m tempted to add the share to my long-term diversified portfolio to collect that growing dividend yield.
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.
Kevin Godbold has no position in any share 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.