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2 top FTSE 250 climbers with growing dividends

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A terrific year

Shares in BBA aviation (LSE: BBA) have climbed by 59% over the past 12 months, to 302p, and even after that I don’t think they look expensive.

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On Thursday the aviation services firm reported a statutory pre-tax loss of $82.2m for 2016. But that was down to exceptional items amounting to $316m, including a previous accounting impairment and a writedown from the disposal of subsidiary ASIG.

Underlying pre-tax profit came in at $238.7m (from $181.5m) with underlying EPS up 8% to 19.4 cents, and strong cash flow helped get debt down. The dividend was lifted by 5% to 12.75 cents per share (approx 10.35p) for a yield of 3.4%. That’s not the biggest yield in town, but it’s close to expectations, is well covered, and the firm’s progressive policy has forecasts suggesting around 4% by 2018.

On the valuation front, underlying EPS puts the shares on a P/E of 19, which might seem high, but forecasts for two years of double-digit rises would drop that to around 15 by 2018.

Chief executive Simon Pryce said that “2016 was a transformational year for BBA Aviation“, a year in which it expanded its operations by the acquisition of US firm Landmark Aviation for $2bn. Mr Pryce added that the company has “materially enhanced its growth prospects and value creation potential“.

The share price dipped a few pennies on the day, possibly due to the resignation of finance director Mike Powell who is to become CFO of Wolseley. But looking to the longer term, I see BBA shares as attractive and I expect to see further progress in the next few years.

A recovering winner

I’ve had my eye on investment manager Man Group (LSE: EMG) for some time now, as the firm has been coming out of a lean patch and is looking tempting.

Results for 2016 show a 3% rise in funds under management to $80.9bn, following net inflows of $1.9bn during the year and a positive investment movement of $3.2bn — although exchange rates helped knock the overall total down by $2.9bn.

The firm reported an adjusted pre-tax profit of $205m, down from $400m in 2015, which was pretty much in line with expectations during what chief executive Luke Ellis described as “a challenging year for the investment management industry“.

The total dividend of 7.05p provided a yield of 4.9% on a share price of 143p, and the firm is still in the process of a share repurchase programme of up to $100m, with $60m covered already.

Meanwhile, the share price has risen by 32% since a recent low in August 2016, so if you’d bought back then you’d already be enjoying nice price growth plus some desirable income.

Forecasts convince me there’s more to come too, with City analysts predicting an EPS rise of more than 50% this year followed by 30% in 2018. That suggests PEG ratios of 0.2 and 0.3 for this year and next, and would see the P/E dropping as low as 9.1 by 2018. At the same time, the dividend is expected to rise to a yield of 6.2%.

The next couple of years will see more Brexit uncertainty for sure, and that might be keeping the punters away, but I see Man Group as a solid long-term investment for growth and for income.

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

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