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Charles Taylor (LSE: CTR) flies under the radar of most investors, but the company does not deserve its overlooked status. The firm provides professional services to the insurance market, a specialist and lucrative job. 

The company is growing its business both organically and through bolt-on acquisitions. According to figures released today, for the six months to 30 June, 2017 revenue grew 36.1% year-on-year to £100.7m. Adjusted earnings per share expanded 5.8% thanks to “ongoing programme of investing in the group to expand our service offering for our clients globally and to deliver long-term growth in profits for shareholders.”

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Management outlined four key strategic initiatives at the end of 2016, to help drive growth and the pursuit of these objectives has pushed costs higher, but shareholders should benefit over the long run. 

For the full-year, City analysts are expecting Charles Taylor to report earnings per share of 19.9p, down 11% year-on-year as the company continues to allocate capital to growth. However, in 2018 earnings expansion of 6% is pencilled in, taking earnings to 21.2p per share, giving a P/E of 12.3.  

Conservative dividends 

Charles Taylor operates a conservative dividend policy. For the past five years, payout cover has averaged two times, and management has not been afraid to cut the dividend in lean years to make sure the business does not overstretch itself. 

Going forward, the group is expected to pay out 11p per share to investors this year, and 11.6p for 2018. Both payouts will be covered at least twice by earnings per share. At the time of writing, shares in Charles Taylor support a dividend yield of 4.5%, rising to an estimated 4.7% by 2018. Continued investment in growth should underpin steady payout growth for the foreseeable future. 

Undervalued dividend

Concerns about the state of the UK property market have helped cut the value of shares in LSL Property (LSE: LSL) in half since the beginning of 2014. Over this period, earnings per share have declined by less than 20% as the firm’s diversified offering has helped it avoid the issues hurting other estate agents. 

As well as its estate agent division, LSL also provides services for landlords, valuation services for lenders for residential mortgage purposes, surveying services for private house purchasers, and the provision of Home Reports and professional services in Scotland. 

One of the company’s biggest clients is Barclays. Today the firm announced that its contract to supply UK residential survey and valuation services to the company has been extended, which should help boost confidence in LSL’s outlook. 

Dividend growth 

City analysts are not expecting much in the way of earnings growth this year but next year growth of 6% is projected, and the firm is on track to pay a dividend of around 10.3p to shareholders this year (based on last year’s numbers), giving a dividend yield of 4.5%. That said, considering the company reported a 34% increase in adjusted earnings per share for the first half, I would not rule out a full-year dividend hike to reward investors. 

Shares in LSL currently trade at a highly attractive valuation of 9.2 times forward earnings. 

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Rupert Hargreaves owns shares in LSL Property Services. The Motley Fool UK has recommended Barclays. 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.

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