Stocks that provide both capital growth and income are the holy grail for private investors. The combination of share price gains and regular dividend cheques can really propel a portfolio higher over the long term. With that in mind, here’s a look at two stocks that I believe have the potential for both.
Online sports betting company GVC Holdings (LSE: GVC) is a classic example of a company that has generated strong capital growth, and rewarded its shareholders with generous cash dividend payouts. Over the last five years, the stock has risen from 190p to 839p, a gain of 340%, and the company has paid out some huge dividend cheques as well. Can the group’s momentum continue? Judging by this morning’s interim results, I believe it can.
Half-year results saw net gaming revenue rise 25%, or 10% on a pro forma basis, to €486.2m, and adjusted profit before tax surged an impressive 99% to €101.9m. Adjusted fully diluted earnings came in at €0.31 cents per share, with the company declaring an interim dividend of €0.165.
The owner of Sportingbet and Foxy Bingo sounded confident about future prospects, advising that it expects clean EBITDA to be “comfortably ahead” of consensus expectations, with CEO Kenneth Alexander commenting “the strong performance of the business together with the smooth integration of bwin.party continues to present exciting organic growth opportunities.”
City analysts currently forecast earnings of €0.58 for the full year, which at the current share price and exchange rate, equates to a reasonable forward P/E ratio of 16. While the company paid no dividend last year as it negotiated the significant acquisition of bwin.party, a full-year payout of €0.33 is anticipated this year, resulting in a dividend yield of 3.5% at present. Given those metrics, I believe GVC Holdings has the potential for further gains going forward.
Another stock that has potential for both share price gains and income, in my view, is FTSE 250-listed Britvic (LSE: BVIC).
The group’s products are well known as it owns names such as Robinsons squash, J2O and Tango, and also has agreements to make, distribute and market global brands such as Pepsi and 7UP.
While Britvic’s share price rise has not been as prolific as GVC Holdings’, the stock is still up over 100% in the last five years, and shareholders have been rewarded with a healthy stream of increasing dividend payments along the way.
City analysts forecast a 7.5% rise in the company’s top line this year to £1,538m, along with earnings per share of 49.6p, which at the current share price, places the stock on a forward P/E ratio of 15.2. A dividend payout of 25.3p is also anticipated, up 3.3% on last year’s payout, which gives a forward dividend yield of a juicy 3.4%.
At a time when many other consumer staple stocks are trading at relatively high valuations (Unilever forward P/E 22.3, Reckitt Benckiser forward P/E 21.1), in my opinion, Britvic appears to offer good value at present.
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Edward Sheldon has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic and Unilever. The Motley Fool UK has recommended GVC Holdings and Reckitt Benckiser. 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.