The Motley Fool

Are these the best 3 mid-cap dividends out there?

We might not like it when share prices fall, but it’s great news for those looking to buy — and as well as potential price rises, it can be a great time to lock in some tasty long-term dividends. Here are three whose yields are looking tempting.

Construction woes

Shares in Galliford Try (LSE: GFRD) slumped on the results of the EU referendum as confidence deserted the housebuilding and construction sector. Today they’re 22% cheaper than they were on the day of the vote, at 1,020p, even though a pre-results update on 12 July predicted full-year figures in line with expectations.

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Any Brexit impact obviously won’t be felt until the current year gets underway, of course. But since the vote, the analyst consensus forecast for the year to June 2017 hasn’t been downgraded — and a couple of brokers updating their views since the vote have reiterated their buy stance.

Expectations for the year just ended suggest a P/E of only eight, dropping to under seven on 2017 forecasts. And well-covered dividend forecasts suggest a yield of 7.8% this year, rising to 9.7% a year from now. I reckon that warrants serious consideration.

Profit from payments

We don’t need Brexit falls to provide us with nice dividends, not when we have the likes of PayPoint (LSE: PAY) out there. The bill payments processor has recorded several years of strongly rising earnings, and we have two more years of growth forecast for this year and next.

The shares are on forward P/E multiples of around 15-16, which aren’t madly attractive in themselves. But while PayPoint’s earnings have been growing, the firm has been ramping up its dividend. On top of that, with its results for the year to March 2016 released in May, the company announced a special dividend of £25m to be paid over 2016-17. And an update last month reminded us that PayPoint will also be distributing the proceeds from the sale of its mobile payments business when it’s sold.

The overall result of that is a forecast dividend yield of 6.1% for the current year, with a rise to 6.3% on the cards for the year to March 2018. Considering PayPoint’s reiterated progressive dividend policy, this is looking like a cash cow to me.

Retail recovery?

Shares in home shopping retailer N Brown Group (LSE: BWNG) have lost 70% since early 2014, and a look at the company’s recent results makes it clear why. Earnings per share have been falling for four years in a row, and there’s a further 4% dip forecast for the current year. But there’s a modest EPS recovery pencilled-in for February 2018, putting the shares on a lowly P/E of eight.

Dividends have been maintained throughout, with this year’s forecast suggesting a yield of 7.3% and the same to follow a year later.  Is this a company foolishly handing out cash, or are we looking at a stable payer here?

With results released in June, chief executive Angela Spindler told us that “our systems transformation programme […] remains on track in all respects“, predicting that “our new systems will give us a strong platform to capitalise on the significant growth opportunities ahead.” If she’s right, N Brown could be an income stock that’s been unfairly overlooked.

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