The Motley Fool

Why Jardine Lloyd Thompson Group plc is an underrated growth and dividend star

Insurance companies can be some of the harder stocks for retail investors to figure out with their industry-specific language and reporting measures, exposure to dozens of markets and regions, and volatility tied to interest rate changes and macroeconomic conditions. But for those investors willing to do their homework, I believe speciality insurance broker Jardine Lloyd Thompson (LSE: JLT) may prove an under-valued stock offering a steady dividend and considerable growth potential.

JLT’s core business is serving as a middle-man between insurers and customers seeking speciality insurance policies. The company has made itself a go-to leader in the niche market and in 2016, this segment accounted for 60% of group revenue and is growing at a steady clip of 3-4% per annum.  

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...

On top of the speciality insurance broking business, JLT also serves as a reinsurance broker and provides advice and services for employee benefit plans. This set of offerings makes JLT’s services incredibly sticky, which leads to high levels of recurring revenue, the ability to cross-sell services to clients, and enviable pricing power.

In addition to steady organic growth in core markets slightly ahead of GDP growth as it consolidates the fractured speciality insurance broking market, JLT has very good growth prospects in the US and emerging markets. The company’s new US operations are currently loss-making but as the business scales up and brings on board new customers it is expected to turn a profit by 2019. Elsewhere, fast-growing divisions in Asia and Latin America are already profitable and earn margins in line or above group average.

The company also generates impressive cash flow with operations kicking off £141m last year from £1,261m in revenue. Last year this excess cash flow was mainly returned to shareholders through £18m in share purchases and £66m in dividends that at the current share price represents a very nice 2.7% yield.

While JLT’s shares are slightly expensive at 20 times forward earnings, its solid and growing dividend combined with very good growth prospects have it at the top of my watch list.

Lighting up the market

Another growth share flying under the radar of many retail investors is professional lighting manufacture, designer and supplier FW Thorpe (LSE: TFW), which provides lighting displays for everything from car dealers to train stations and retail stores.

The business has grown nicely in recent years through small bolt-on acquisitions and expansion into new markets across the UK, Europe and Asia. Thanks to organic growth and the weak pound, the company reported a very, very nice 23.8% year-on-year (y/y) rise in H1 sales to £51.2m. Y/y operating profit growth was a bit lower at 19.7%, due to a large order that necessitated extra overtime, but this appears to be a short-term blip and increased orders are, after all, to be welcomed.  

There are still problems with the company’s UAE operations but management is confident that the Australian business is now primed for a period of good growth. Expansion in these markets, together with the constant rollout of new products, bodes well for the company’s future. Unfortunately, its shares are very pricey at 30 times forward earnings. But should that valuation come down, I’d be more interested. 

“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!

Ian Pierce has no position in any shares mentioned. The Motley Fool UK owns shares of FW Thorpe and Jardine Lloyd Thompson. 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.

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.