The first week of June brings an update from a FTSE 250 stock that I think looks cheap.
I’m talking about B&M European Value (LSE: BME), with full-year results due on 4 June. The company runs the B&M store chain in the UK and France, and the UK’s Heron Foods chain. With the bulk of revenue in the UK, perhaps it can be seen as a barometer of cut-price retail in this country.
Barometer
Despite an uptick in the past month, the stock has fallen 8% in 2025. And it’s down 45% since a December 2023 peak. The barometer is reading Stormy.
What to expect
It was an April pre-close trading update that kicked off the recent mini-recovery in the B&M share price. In it, the company put total group revenue at £5.6bn, up 3.7% on a comparable 52-week basis.
Adjusted EBITDA is now expected to be above the midpoint of the previous guidance range of £605m-£625m. And we should be looking at a full-year return on capital of around 30%.
That sounds pretty good. But the problem is that the tempting revenue rise is from store openings, with 45 new ones added to the list in the year.
On a like-for-like basis, B&M UK revenue fell 3.1% for the full year. French B&M stores saw a 2.6% like-for-like rise. But France accounts for a bit less than 11%, so it doesn’t make all that much difference. Heron Foods saw a 2.5% fall, and it accounts for about the same proportion of total revenue as B&M France.
What’s so good?
Here’s what I really like — the dividends. We’re looking at a forecast yield of around 4.5%, but that only paints part of the picture. It’s likely we’ll see a small fall in earnings per share (EPS) when we get our eyes on the full numbers. But if forecasts are right, it would still cover the dividend 2.2 times.
What’s more, the outlook suggests rises in both earnings and dividends in the subsequent two years too. But even that doesn’t tell the whole story.
In the past year, B&M paid out ordinary dividend cash totalling £149m. But on top of that, shareholders pocketed a £151m special dividend. And in the recent update, the company hinted at possible future share buybacks, though a hint is all it was.
What to watch
News of another special dividend is a key thing to hope for. If there is one and it comes close to last year’s, we could be looking at an effective total yield of close to 9%. There aren’t many stocks paying that much.
On the other hand, the absence of a special dividend, or even a disappointingly small one, could send shareholders rushing for the sell button. I think it’s a coin toss which way the B&M share price might go on results day.
And we still need to see if and when like-for-like revenues will start moving up again, which will be needed for this impressive dividend record to continue. These are clearly risks, but for me it all makes B&M definitely a FTSE 250 stock to consider.
