It’s a sad truth that the wars in Ukraine and the Middle East – as well as a general increase in global uncertainty — have helped boost BAE Systems‘ (LSE:BA.) shares.

How do I know this? Well, they’re now (16 April) changing hands for 274% more than they were in February 2022, just before Russia launched its first attack on Kyiv.

And for those who are comfortable investing in the defence sector, I reckon there are plenty of reasons why now could be a good time to consider taking a stake. Let me explain.

Inoperable

For understandable reasons, the operational status of the Royal Navy’s ships isn’t publicised. However, according to recent newspaper reports, five of its six Type 45 destroyers are currently out of action.

At the start of the Iran war, repair work on HMS Dragon was hastily completed before it belatedly headed to the Mediterranean. It’s now in Cyprus undergoing further work. Last week, I heard an MP on the BBC complaining that four of the country’s six Type 23 frigates and HMS Elizabeth, one of its two aircraft carriers, were also out of action.

If true, it means 10 of the Navy’s 15 large ships are presently unable to be used. Remember the opening line from the chorus of that famous song? “Rule, Britannia! Britannia rule the waves“.

I’m not so sure.

Underwater

It appears to be a similar story with the country’s submarines. In late 2025, it was claimed that only two of the UK’s fleet of 10 were ready to go to sea.

This week, Lord Robertson, the former secretary general of NATO, warned about the state of the country’s military. He said: “We are underprepared… Britain’s national security and safety is in peril.”

An opportunity to consider

But one of the beneficiaries of this could be BAE Systems. It’s already the largest supplier to the Ministry of Defence and part-way through delivering the Navy’s Type 26 frigate programme. It’s also heavily involved with the upgrade of Trident.

However, if the UK government decides to speed up its plans to meet the NATO spending target of 3.5% of GDP, the country’s largest defence group’s likely to be a huge winner.

BAE Systems is also a major supplier to the US military. Here, President Trump wants a 50% increase in defence spending in 2027.

Possible issues

However, there are risks. The group’s shares are trading at nearly 32 times historic earnings. The five-year average is 18.7.

I suspect this lofty valuation reflects investor optimism about the group’s growth prospects but, even so, any sign of a slowdown and there could be a sharp correction in its share price.

Also, defence programmes are logistically challenging. Get things wrong and the cost over-runs could be significant.

Final thoughts

Despite these threats, BAE Systems looks to be performing well. In 2025, it reported an 8.2% year-on-year increase in sales. Underlying earnings per share rose by 9.8%. During the year, it also received new orders worth £36.8bn, bringing its backlog to £83.6bn. This is equivalent to nearly three times revenue.

Unfortunately, we live in a dangerous world. Therefore, I think those comfortable with the sector could consider taking a position in BAE Systems.

The post BAE Systems shares are up 274% in 46 months. And I reckon there could be more to come appeared first on The Motley Fool UK.

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James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended BAE Systems and London Stock Exchange Group Plc. 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.

Since April 2021, Greggs’ (LSE:GRG) shares have fallen 28%. It means a £5,000 investment made today (16 April) would buy 86 more shares than it would have five years earlier. In cash terms, the initial stake would now be worth £3,600, excluding the impact of the dividends received.

But that’s not the full story. The baker’s stock is now changing hands for 51% less than it was in December 2021 when it recorded its five-year high.

So what’s going on? Why has an icon of the British high street fallen so far out of fashion? More importantly, could now be a good time to consider taking a stake? Let’s take a closer look.

Out of favour

According to recent data, Greggs is the UK’s third most-shorted stock. Thirteen investment firms have borrowed 12.49% of the group’s shares (currently worth £210m) in the expectation they will fall in value. Of course, this doesn’t necessarily mean it will happen. It’s only a small sample of opinions.

But let’s leave this to one side and judge the investment case using some of the key performance indicators that the group uses to assess its own performance.

Slowing down

The first thing to note is that sales are increasing. Revenue during the 52 weeks ended 27 December 2025 (FY25) was 75% higher than in FY21.

However, the rate of increase in both total sales and like-for-like sales is slowing. Even when the exceptional 2021 bounceback from the pandemic is ignored, the slowdown’s significant.

By contrast, the group’s earnings, particularly on a per share basis, are flat. Comparing FY25 with FY23, there’s been little change. Increases in Employers’ National Insurance and the National Living Wage have affected the group’s bottom line. Supply chain inflation has increased direct costs.

Another issue

Also of concern, capital expenditure’s increasing but the group’s return on capital employed (ROCE) is falling. In other words, it’s spending more but getting less back. Some of this is to be expected given that it’s continuing to open more stores. The marginal return from each new shop is likely to fall as the best locations have already been secured.  

Had the group achieved the same ROCE in FY25 as it did in FY21, its earnings would have been £20m higher. This would have been enough to completely change the perception of its financial performance over the past five years.

What does all this mean?

But there’s no point dwelling on ‘ifs’ and ‘maybes’. The reality is that Greggs’ revenue and earnings aren’t growing as fast as would be expected of a FTSE 250 business. Investors are prepared to overlook this if they can see a clear path to recovery but the relatively higher number of those that have shorted the stock suggest there’s a high degree of uncertainty.

Despite its woes, Greggs retains a strong brand and remains a British success story. But I think the jury’s out on whether it’s going to recapture former glories.

Weight-loss drugs pose a threat – it’s estimated that around 5% of adults are using them – and a move towards healthier eating is another challenge. The group’s adapting by offering smaller calorie dense alternatives but, let’s be honest, it’s hard to beat the taste of sugar and fat.   

So as much as I love Greggs, I think there are better opportunities to consider elsewhere.

The post 5 years ago, £5,000 bought 218 Greggs shares. How many would it buy now? appeared first on The Motley Fool UK.

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James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Greggs Plc. 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.

Much has been written about Rolls-Royce Holdings‘ (LSE:RR.) shares over the past few years. Indeed, the astonishing post-pandemic recovery in its share price has been incredible to watch and worthy of plenty of headlines.

At the end of November 2020, just after the aerospace and defence group’s life-saving £2bn rights issue was completed, its shares were changing hands for £1.06. Today (16 April), they’re fetching £12.92. Ignoring dividends, that’s an overall return of 1,119%.  

No more to say as those figures speak for themselves. However, there’s lots to say about the group’s future. So here goes…

A key contributor

What I’m most excited about is Rolls-Royce’s civil aviation business. In 2025, this division contributed 51.8% (£10.4bn) of revenue and 61.5% (£2.1bn) of operating profit (both reported on an underlying basis). At 20.5%, this part of the group had the highest operating margin.

These numbers suggest that Rolls-Royce knows what it’s doing when it comes to manufacturing and maintaining aircraft engines. But it’s the future I want to look at. At the moment, the group focuses exclusively on widebody planes. However, it wants this to change.

A different approach

When reporting last year’s results, the group said: “We also see an opportunity to re-enter the large and growing narrowbody market, which offers attractive synergies to our existing widebody and business aviation activities, based on our UltraFan technologies”.

And I reckon the potential is enormous. According to latest (June 2025) figures from the International Air Transport Association (IATA), there are 30,300 active aircraft in the world. Of these, 18,495 are single-aisle planes and 5,869 are larger ones. The rest are turboprops and small jets.

What’s more, at December 2025, it’s estimated that there was an order backlog of 17,000 aircraft. This has doubled in the past few years.

With relatively little competition — there are only four companies making aeroplane engines at the moment – its UltraFan technology is proving to be 25% more fuel efficient than the group’s first-generation Trent engine. So the scale of its aviation business could be transformed if all goes to plan.

And why wouldn’t it make a success of it? It already powers a third of the world’s widebody fleet.

Some challenges

However, there are risks. The group’s shares are trading at 30 times forecast (2028) earnings. Any sign that these expectations will not be met and there could be a sharp correction in the group’s share price. Given that the business is exposed to global aviation cycles and macroeconomic shocks, this could happen.

Investors also appear to have placed significant value on its small modular reactor programme. However, this has yet to be proven to be commercially viable.

My view

Despite these issues, I think the group’s in good shape and well positioned to take its operations to another level. However, patience is required. The first revenue from its single-aisle UltraFan engine is not anticipated until the early 2030s.

Until then, its defence division’s likely to continue growing as a result of increased global uncertainty. Also, I suspect the requirement for new data centres will help expand its power systems business.

Despite its lofty valuation, I still think Rolls-Royce is a stock for long-term investors to consider. There, I’ve said it.

The post Up 1,119% in 65 months, is there anything left to say about Rolls-Royce shares? appeared first on The Motley Fool UK.

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James Beard has positions in Rolls-Royce Plc. The Motley Fool UK has recommended Rolls-Royce Plc. 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.

Standard Life‘s (LSE:SDLF) share price didn’t change much on Wednesday (15 April), following an announcement that it’s reached an agreement to acquire the UK insurance and pension business of Aegon.

Let’s take a closer look at the implications of the deal. Specifically, what might it do to the group’s share price?

Some important details

The deal values Aegon’s operation at £2bn. It will be paid for through a combination of debt (£650m), cash (£750m), and the issue of new shares (£600m).

At first glance, the relatively muted response of investors — by mid-afternoon, the group’s shares were up 1.5% — is a little surprising. After all, the agreed price is equivalent to 28.5% of Standard Life’s market cap.

However, the business being acquired is reported to have an annual adjusted operating profit of £190m, valuing the group at 10.5 times this figure. In 2025, Standard Life’s adjusted earnings were £945m, equivalent to a pre-announcement valuation of 7.5 times profit.

What does this mean?

These numbers could be interpreted in two ways.

Either Standard Life’s paying £575m too much, or the group itself is undervalued by £2.8bn. Which is it? Judging by the reaction of investors today, nobody really knows.

It could be that the City’s digesting the implications for the group’s bottom line of taking on new debt. And issuing more shares – Aegon will become a 15.3% shareholder — will dilute existing owners. Once the dust settles, the share price might show a bigger movement, either up or down.

Going in the right direction

However, on the face of it, I think the deal could be good news.

For example, it will create the largest long-term retirement savings and income business in the UK. It will add approximately £160bn to assets under management and another 3.8m customers.

And it means 57% of operating profit of the enlarged group will come from capital-light fee-based business.

In addition, it will improve the group’s Solvency II ratio by a few percentage points.

Also, it’s estimated that £400m of additional free cash will be generated in the first five years following the acquisition. Although positive, this is unlikely to be a gamechanger for existing shareholders like me.

Already, the group has a reputation for being one of the best FTSE 100 dividend payers – the stock’s currently yielding 7.7%. Returning another £80m to shareholders each year would equate to 0.67p, based on the additional 181.1m shares being issued. This would be a 1.2% improvement on the group’s 2025 payout.

Of course, there can never be any guarantees when it comes shareholder returns. Indeed, the group hasn’t confirmed whether all (or any) of the extra cash will be paid in dividends.

But there are risks. It’s not easy integrating newly acquired businesses. And the transaction still needs regulatory approval.

My view

Personally, I welcome the “mid-single digit accretion” to adjusted operating earnings per share.

But to be honest, as a shareholder, I’m not overly-excited by the deal. For example, I still have some concerns over the purchase price. However, I think it will add value over the long term. In turn, this should translate into a higher share price and help maintain dividend growth. And that’s all that really matters when it comes to investing.

On this basis, I’m going to keep hold of my shares.

The post Standard Life’s announced a £2bn deal but its share price is largely unchanged. Why? appeared first on The Motley Fool UK.

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James Beard has positions in Standard Life. 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.

Dividend shares: don’t you just love them? I certainly do. The idea of earning money by doing nothing is hugely attractive to me. And by hand-picking some of the highest-yielding ones, it’s possible to earn a chunky second income. Let’s explore this further.

Top of the pile

The top five yielders on the FTSE 100 are presently (15 April) offering a return of 7.38%. This means a £20,000 investment made today (£4,000 in each) could earn £1,480 in dividends over the next 12 months.

Assuming this yield is maintained for 10 years, these five shares could produce an income of £14,760. That’s a total return of 74%.

But instead of spending the dividends on something non-essential, what would happen if the cash was used to buy more shares? Well, after a decade of investing, the initial lump sum of £20,000 could grow by 104% to £40,837.

A few words of caution

That’s impressive. But we must remember these yields might not be maintained over the long term as their payouts could be cut if earnings come under pressure. Indeed, I’d have to do more research before deciding whether all of them are worth considering.

Also, some would argue that owning five shares isn’t large enough to sufficiently spread risk. Indeed, of the five companies, three operate in the financial services industry and two are real estate investment trusts. The high yields on these stocks is a reminder how cash generative these sectors can be but it would be better to have exposure to other industries in a relatively small portfolio.

Finally, the gains ignore any movements in the underlying share prices. History suggests there’s a good chance an investor will enjoy some capital growth. But they could lose money.

However, bearing all this in mind, the analysis highlights how picking the right high-yielding shares can deliver some impressive long-term gains.

My own experience

At the top of the table is Legal & General (LSE:LGEN). In fact, it’s a stock I own.

Over the past five years, it’s yielded well above the FTSE 100 average, but – as a reminder why some investors prefer growth stocks — its share price has been stuck in a relatively narrow range.

Set alongside the fact that it’s operating in an increasingly competitive sector, it might not appeal to everyone. However, I remain a fan. And because of its leading position in the UK pension risk transfer market, I think it’s in a good position to continue growing its earnings and dividend.

In 2025, over £40bn of pension schemes were transferred to new managers. Legal & General completed three of the five largest buyouts. In 2026, it’s predicted that up to £50bn of scheme assets will be moved.

A strong track record

This trend is likely to add to the group’s £1.1trn of assets under management and help the group maintain its remarkable dividend history.

Its payout was last cut in 2009, during the global financial crisis. And the directors have pledged to raise it by 2% a year until 2027. A £1.2bn share buyback programme is also underway.

On balance, I think Legal & General’s an impressive income stock investors could consider.

The post Could £20,000 invested in these 5 dividend shares produce £14,760 of passive income over the next 10 years? appeared first on The Motley Fool UK.

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James Beard has positions in Legal & General Group Plc and Standard Life. The Motley Fool UK has recommended Land Securities Group Plc, London Stock Exchange Group Plc, LondonMetric Property Plc, and M&g Plc. 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.

As distasteful as it sounds, it’s usually the case that whenever there’s trouble in the Gulf, BP’s (LSE:BP) shares go up. With instability in the region often resulting in rising oil and gas prices, it stands to reason that the British energy giant is likely to be one of the biggest beneficiaries.

Indeed, the group’s share price is currently (15 April) 19% higher than when the current conflict started. Admittedly, it’s fallen back from its 52-week high of 609p. But BP’s shares are still changing hands for 66% more than they were a year ago.

However, with the current ceasefire just about holding, is now a good time to consider buying the group’s shares? Let’s take a closer look.

The art of the impossible

If we needed reminding, we’ve learned over the past few weeks that oil and gas prices are impossible to forecast accurately. On 10 February, the US Energy Information Administration released its short-term energy outlook. It said it expected Brent crude to average $57 per barrel in the second quarter of 2026. Today, it’s around $95, having peaked at $110 in early April.

Of course, economists can’t predict when a war will start. But the unpredictable nature of commodity prices makes it difficult to build an investment case for BP. With earnings hugely influenced by volatile energy prices, investing in the company carries more risk.

Looking into the future

However, by taking a long term view, it becomes a little easier. That’s because, despite the move to a greener world, the demand for oil is continuing to rise. Although there’s little agreement as to when ‘peak oil’ will come — I’ve seen forecasts ranging from 2030 to 2050 — we will still need hydrocarbons for decades to come.

And based on current prices, BP has over $600bn of untapped reserves. In 2025, it made its largest discovery for 25 years.

Other factors

Another positive is that the group’s trying to become leaner. It’s also working hard to reduce debt. With lower overheads and reduced borrowing costs, this is likely to help improve its margin. This should offset some of the impact should energy prices fall.

Also, due to its capacity to generate huge volumes of cash — even when energy prices have been much lower than they are today – BP has established a reputation for being a decent income share.

Of course, there can never be any guarantees when it comes to dividends. BP’s payout was suspended during the Deepwater Horizon tragedy (another reminder of how risky the sector can be) and it cut its quarterly dividend by 50% during the pandemic. However, since then, a series of gradual increases means it’s now at 75% of its pre-Covid level.

Even so, the recent surge in its share price has pushed its yield down to 4.3%. Although this is still above the FTSE 100 average, it was over 6% a year ago.

Final thought

Hopefully, the war in the Middle East will end soon. If it does, energy prices are likely to fall significantly and BP’s share price will probably drop too. On this basis, I don’t think now would be a good time to consider buying.

However, those comfortable with the sector, could take another look when current tensions ease.

The post At 570p, is it too late to consider buying BP shares? appeared first on The Motley Fool UK.

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James Beard 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.

Anyone investing £5,000 in Aviva (LSE:AV.) shares five years ago would have bought themselves 1,231 of them. Today (15 April), those same shares are worth £7,742, a return of 55%. For comparison, a £5,000 investment now would buy 436 fewer.

However, this ignores dividends. For its last five financial years, the insurance and savings group’s declared payouts of 161.45p a share. Add this to the capital growth and the overall return is nearly 95%. But what might the next five years bring? Let’s have a look.

Confidence in the future

If the company’s boss is to be believed, the outlook is a good one. Since 2021, she claims the business has been “transformed” and “whilst we have made significant progress, there is much more to come.”

Much of this confidence stems from Aviva’s status as the UK’s market leader in general and life insurance products (it has a 26% share of the latter). It’s also the country’s leading provider of individual annuities, number one for workplace pensions, and it has Britain’s largest equity release loan book.

In Ireland, it’s the top provider of income protection insurance and the third biggest general insurer. It also ranks second for day-to-day insurance products in Canada. In addition, its UK and Ireland wealth management division manages £262bn of assets on behalf of its clients.

This gives the group the scale to generate a healthy profit that, in turn, supports a generous dividend.

A strong track record

In 2025, the group reported a 25% year-on-year increase in operating profit. For 2026–2028, it’s targeting an 11% annual increase in operating earnings per share. Last year, the group delivered a 17.5% return on equity. Also, as a sign of confidence in its capacity to generate surplus cash, it’s launched a £350m share buyback programme.  

Since 2021, it’s raised its payout by 78% — the increase was 10% in 2025. The stock’s now yielding 6.2%, the seventh-highest on the FTSE 100 and more than twice that of the index as a whole. Of course, there are no guarantees when it comes to dividends.

Over the past five years, Aviva’s delivered an unusual combination of both impressive share price and dividend growth.

Possible threats

But despite its recent success, it still faces some potential challenges.

The scale of its investment portfolio makes it vulnerable to market uncertainty. Rising inflation could affect its £190bn of bonds and ongoing geopolitical turmoil is likely to further reduce the value of the £113bn of shares that it owns.

Also, there are fears that AI tools could make it easier for customers to shop around looking for cheaper insurance.

My view

However, its 2025 results suggest that the business is in good shape. Its balance sheet remains strong and it comfortably meets the regulatory minimum for reserves.

Looking ahead, with the State Pension age likely to rise further, this could lead to an increase in the number of individuals wanting to take control of their retirement planning.

I also like the group’s capital-light business model. By focusing on fee-based products, it hopes to deliver a return on capital of more than 20% by 2028.

On balance, I think Aviva’s an excellent all-round stock to consider.

The post 5 years ago, £5,000 bought 1,231 Aviva shares. But how many would it buy now? appeared first on The Motley Fool UK.

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James Beard 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.

Marks & Spencer’s (LSE:MKS) recent makeover has boosted both the perception of its brand and its shares. Over the past few years, the British icon has managed to shed its reputation for catering only for older customers and being a bit, well, middle-of-the-road.

Victoria Wood, the British comedian, once joked: “I know I’m different sizes in different shops, 16 in some, 18 in others. In Marks and Spencer’s, I’m only a size three because they don’t want to upset anybody.”

Then and now

Although those who bought the retailer’s shares in April 2021 might not be laughing all the way to the bank, they’re probably patting themselves on the back.

A £5,000 investment at the time would have bought 3,185 shares. Today (15 April), they’re worth (excluding dividends) an impressive £11,498. As an illustration of how well investors have done, the same investment now would get them 1,800 fewer shares.

But does a 130% rise in the retailer’s share price mean it’s too late to consider the stock? Let’s see.

Growth opportunity

Although the group is probably more talked about for its clothing, it’s the food side of the business that most interests me.

Over the past three financial years, fashion, home, and beauty customer numbers have remained flat. Last year, they were overtaken by grocery shoppers for the first time. Food customers have increased 9% over the period and, significantly, they’re making an average of 2.9 more visits a year to the group’s shops.

Indeed, the company has set itself the target of doubling the size of its grocery business over the long term. To achieve this, it’s aiming to increase its number of food-only stores from 328 to 420.

Sometimes it’s forgotten that, since September 2020, the group’s had a joint venture with Ocado. During the 12 weeks to 22 March, it recorded a 2.2% share of the British grocery market. It’s never been higher.

Some challenges

Undoubtedly, there was a loss of investor confidence following last year’s cyberattack. This cost a lot to put right but, more significantly, led to some loyal customers shopping elsewhere.

Despite this, they came back and the group’s reputation with consumers appears unharmed. According to polling by YouGov, based on a combination of perception, quality, value, reputation, and satisfaction, it remains the nation’s best brand.

Of course, operating a chain of shops is logistically challenging. And the fashion industry is notoriously difficult to get right with consumer tastes changing quickly. That’s another reason why I believe the emphasis on its less-cyclical food business is the right strategy.

Final thoughts

Personally, I think the group’s made great strides over the past 10 years or so, with progress only interrupted by the pandemic. Both its profit before tax and return on capital employed are going in the right direction.

And despite changing shopping habits, it remains an important part of Britain’s high streets and retail parks.

I like what I see. That’s why I think it’s a stock to consider.

The post 5 years ago, £5,000 bought 3,185 Marks & Spencer shares. But how many would it buy now? appeared first on The Motley Fool UK.

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James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Marks And Spencer Group Plc and YouGov Plc. 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.

It might come as a surprise to many that stocks on the FTSE 250 are presently (15 April) offering a better return than their larger FTSE 100 cousins. One of these that recently caught my attention is a relatively unknown energy company. Why? Well, it currently has a jaw-dropping yield of 8.7%.

Could this be a rare opportunity to generate a huge dividend income stream? Or could it be a value trap? Let’s see.    

Which one?

Ithaca Energy (LSE:ITH) is a British oil and gas group with stakes in six of the 10 largest fields in the North Sea. In terms of reserves, it’s the largest operator. When considering production, it ranks second.

However, its sole focus is the UK Continental Shelf. This means all of its profit is taxed at an eye-watering 78%. In fact, a look at the group’s 2025 accounts shows an effective tax rate of 110%. But due to complicated rules surrounding the tax treatment of derivative contracts, tax breaks on capital expenditure, and the way in which decommissioning costs are accounted for, much of this is deferred to a later period.

Can it last?

Cash is, therefore, a better guide to the sustainability of the group’s dividend. In 2025, its payout was $498m out of free cash flow of $683m. Clearly, there’s some headroom here but not an enormous amount.

This could explain why during Ithaca Energy’s relatively short life as a public company – it listed in November 2022 – it has already cut its dividend. In cash terms, its 2025 declared payout is 23.7% lower than in 2023.

This is mainly due to the erratic nature of oil and gas prices, which makes the sector one of the riskiest in which to invest. Volatile earnings means the group’s dividend is likely to be difficult to predict as well.

It has a target of returning 20%–35% of post-tax cash flow from operations to shareholders. But the uncertain nature of Ithaca Energy’s business makes it hard to forecast from one period to the next what this actually means. Having said that, even a 50% cut in its dividend from its present level would still result in the stock offering an above-average yield.

Other threats to earnings include an unscheduled interruption to production and higher interest rates. Borrowing costs accounted for 24% of operating profit in 2025.

A growing market

Much to the disappointment of environmentalists, the demand for oil and gas is continuing to rise. And despite the move towards net zero, we will need hydrocarbons for decades to come.

Recent events in the Middle East have also revived the debate about whether the country should be drilling more. Nearly all opposition parties (the Green Party being a notable exception) are united in their view that the UK should be exploiting its own natural resources to help increase energy security.

In my opinion, income investors comfortable with the sector, could consider taking a position but I think it’s probably worth waiting. Hopefully, the current ceasefire in the Gulf will hold. If it does, energy prices are likely to fall. In these circumstances, Ithaca Energy’s share price is likely to come under pressure as well, pushing its yield higher still.

The post Is the 8.7% yield on this FTSE 250 stock too good to be true? appeared first on The Motley Fool UK.

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James Beard 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.

Since April 2016, Games Workshop Group’s (LSE:GAW) shares have beaten all others on the FTSE 100. Anyone clever enough to have invested £20,000 at the time would now (13 April) be sitting on a shareholding worth over £782,000. That’s a mind-boggling return of 3,810%.

And this excludes dividends. For its past 10 financial years, “the largest and the most successful hobby miniatures company in the world” (its own words), has declared payouts of £23.65 per share. Include these and the total return goes up by over £97,000.

However, for those that didn’t invest, is it too late? Could the stock be one of the best performers over the next 10 years? Let’s explore.

Then and now

Compared to a decade ago, the group — most famous for its Warhammer franchise – is operating on a different scale. At the time of publishing its results for the year ended 29 May 2016 (FY16), it was valued at around £150m. Now, it has a market-cap of around £6.3bn.

Revenue has increased four-fold over the period. Earnings per share has soared more than 13 times.

Some of its success can be attributed to various licensing deals. During FY16, it earned £5.9m in royalites. In FY25, it was £52.5m. These are highly lucrative as they have no associated direct costs. Impressively, the group reported a 78.8% gross profit in FY25.

On the expensive side

However, as is common for a group that’s grown so rapidly, its shares aren’t cheap. They trade at around 33 times forecast earnings for FY26.

This is a double-edged sword. Yes, it’s a sign that the company’s highly rated by investors. But it also means any slowdown in earnings or a failure to live up to expectations, could see a sharp drop in its share price.

Of concern, given the current uncertain economic outlook, disposable incomes could be squeezed leaving less left over for hobbies.

What next?

I suspect it’s highly unlikely the group’s success over the past 10 years is going to be repeated over the next decade. Going forward, I reckon it’s likely to be more of a steady performer. But that doesn’t necessarily mean it’s too late to take a stake.

A well-run company with a strong brand will, generally speaking, continue to deliver over the long term. I have no doubt that Games Workshop will be able to sell more to existing customers. Whenever the group launches something new, it’s enthusiastically received by its passionate fan base.

But it also needs to find new buyers. That’s why I think its ongoing TV project with Amazon could be a gamechanger, although it might not be launched until 2028.

Final thoughts

When discussing the group, there’s often a debate as to whether it’s a niche business or a mainstream player. I suspect most people’s opinions are shaped by whether they buy its products. But I don’t think this really matters: the group’s impressive track record – and huge loyal following — shows it’s very good at what it does.

Importantly, it’s vertically integrated. This means it controls everything from the design to the distribution of its models. Impressively, it also has no debt on its balance sheet. Undoubtedly, Games Workshop is a British success story. I reckon it’s still a stock to consider.

The post £20,000 invested in this FTSE 100 stock 10 years ago is now worth this astonishing amount… appeared first on The Motley Fool UK.

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James Beard has no position in any of the shares mentioned. The Motley Fool UK has recommended Amazon and Games Workshop Group Plc. 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.