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2 ‘secret’ dividend shares you can’t afford to miss

The UK’s leader in self-storage Big Yellow Group (LSE: BYG) has been enjoying rapid growth for over a decade with both revenues and earnings rising each and every year since 2003, resulting in a tenfold share price increase over the same period. However, since May, the shares have come off all-time highs of 886p, down to today’s levels below 700p. Is this perhaps an opportunity to buy into long-term growth, or could this be the start of a downturn in the FTSE 250 company’s fortunes?

In its most recent trading update the firm revealed that total revenue had risen 10% to £26.4m during the first quarter, compared to the same period the year before, with like-for-like revenue up 8% to £26m. There was also an improvement in average like-for-like achieved rent, up from £25.31 to £25.99 per sq ft. By the end of the first quarter, Big Yellow had 3.55m sq ft occupied, 7% higher than a year earlier, equal to 78% of the maximum lettable area. In my view these are excellent results, whichever way you choose to measure them.

More appealing valuation

Big Yellow Group has pioneered the development of the latest generation of self-storage facilities, making full use of state-of-the-art technology. Its storage facilities tend to be located in high profile and highly accessible main road locations, with the brand name now possibly the most recognised in the UK self-storage industry. The company has been operating as a Real Estate Investment Trust (REIT) since 2007 and shareholder payouts have been rising steadily every year since 2010, with further growth anticipated.

The company’s premium valuation may have put off some value-focused investors in the past. But after their recent slump the shares certainly look more appealing, with the earnings multiple falling to 18 and dividend yield rising to a healthy 4.5% for the year to March 2018. In my view, Big Yellow looks like a buy for income seekers after a progressive dividend as well as long-term investors seeking capital growth.

Turnaround in fortunes

It’s certainly been a tough few years for the world’s largest security company G4S (LSE: GFS), with the firm dropping out of the FTSE 100 index as well as being embroiled in a number of widely-publicised controversies, including the London Olympics and more recently its involvement with prisons in Israel. In 2014, Archbishop Despond Tutu along with others, penned an open letter to G4S, calling for it to end its work in Israeli prisons that detain children. Finally, after much international pressure, the firm revoked its contract with Israel. 

It looks like 2016 will be the year G4S finally turns things around. Indeed, after four years of decline, earnings are starting to rise, and last week the firm announced that it had won new contracts with annual revenues of £1bn and total contract value of £2bn since the start of the year. In spite of all its problems, G4S has been a very reliable payer of dividends, with payouts improving every year for the last 12 years. I think that if dividends can continue to grow in times of trouble, they can certainly continue to grow when things improve. Income seekers with a passion for rising dividends should certainly take a closer look at G4S, currently yielding 4%.

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Bilaal Mohamed 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.