The Motley Fool

St Ives plc’s Fast-Growing Dividend Trounces AstraZeneca plc’s And BP plc’s

Searching out dividend growth can often lead investors to capital growth as well in the world of investing.

That perfect combination of an expanding income and a rising share price is investing heaven to me. Yet, to find such gems we often need to look down the table of market capitalisations on the share listing pages, to firms smaller than well-known dividend payers such as AstraZeneca (LSE: AZN) and BP (LSE: BP).

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

I think I’ve found one!

Over four years from 2011 to 2014, FTSE Small Cap company St Ives (LSE: SIV) increased its dividend payout by around 104%, which beats BP’s 88% increase and knocks spots off AstraZeneca’s 9.8% uplift over the period.

Around 50 years ago, St Ives started out as a traditional printing firm but evolved into a marketing business engaged in today’s digital world. The company reckons it diversified by acquiring high-growth outfits led by management teams focused on client service and expansion. In St Ives now, we see a firm offering digital and mobile creativity, intelligent data analysis, research, production, and other services in the marketing and print industry.

It’s hard to argue with progress. Since 2011, earnings are up around 32% and, at today’s 179p or so, the shares are up about 75%. An investor holding St Ives shares from January 2011 through to the end of 2014 will have seen a total return from capital growth and dividends of around 118%, which compares to 76% from AstraZeneca and just under 2% from BP.

More to come?

City analysts following St Ives have around 7% earnings-per-share growth pencilled in for 2016. Yet the current valuation seems undemanding with a forward price-to-earnings (PER) ratio running at just under nine and a dividend yield of around 4.4%. Earnings should cover that payout around 2.6 times when it arrives next year, providing a comfortable cushion of support for investor income from the shares.

There’s no doubt that St Ives’ business has a big element of cyclicality to it. As such, we can’t expect racy valuation multiples at this point in the general macro-economic curve. Investors will be worried about an earnings slow-down at least, or a profit-collapse at worst, when the next economic downturn arrives. So the valuation will likely contract even as profits rise, but how long will the cycle last? Anyone’s guess will do. As long as we keep the nature of the beast in mind, St Ives remains investable on that front — the firm is cyclical, yes, but it’s growing too, and cash generation appears to remain strong.

What now?

St Ives’ shares dropped back a bit recently, which makes them worth researching. The firm’s acquisitive past has left it with a net debt load of around £43 million at the last count, which is around three times the level of last year’s operating profit. As long as the company keeps growing, and as long as the banks keep playing along, that seems fine; however, any macro-economic plunge could make such borrowings problematic.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

Kevin Godbold has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Where to invest £1,000 right now

Renowned stock-picker Mark Rogers and his select team of expert analysts at The Motley Fool UK have just revealed 6 "Best Buy" shares that they believe UK investors should consider buying NOW.

So if you’re looking for more top stock ideas to try and best position your portfolio in this market, then I have some good news for your today -- because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.