The Motley Fool

2 dirt-cheap dividend champions I’m considering today

Concerns about the state of the UK retail industry have weighed on shares in SCS (LSE: SCS) since the beginning of the year. Indeed, until this morning, shares in the company had lost 6% excluding dividends for the year.

However, today shares in the firm have jumped by 7.3% in early deals after it published an upbeat set of results for the year ended 29 July 2017, somewhat allaying concerns about the state of the UK consumer market. 

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...

Improving outlook 

For the first six months of the year, gross sales expanded 4.4%, and revenue improved 4.9%. Operating profit rose 8.8% year-on-year and earnings per share for the period grew from 21.8p to 23.5p. As well as the uptick in sales, SCS reported free cash flow for the year of £23.6m and a net cash balance at year end of £40.1m.

As well as the positive historical trading performance, more importantly, the company reported today that trading for the nine weeks to September 30 had continued to show a positive trend with sales order intake up 3% on a like-for-like basis. 

I believe that these figures show SCS’s outlook is not as dim as many analysts have speculated, and despite Brexit uncertainty, customers are still attracted to the business’s offering. And that’s why I believe that the shares could be a great income investment at current levels. Based on today’s numbers, shares in SCS are trading at a highly attractive historic P/E of 7.4, and support a dividend yield of 9.1%, 2.4 times more than the market average. 

Nonetheless, there’s still a risk that a Brexit-inspired consumer slowdown could weigh on SCS in the near future. That said, the company’s low valuation indicates to me that there’s already plenty of bad news baked into the shares here, and any positive surprises could result in a re-rating higher. 

Dividend set to double 

Homebuilder Bovis (LSE: BVS) has put in a stronger performance than SCS this year. The company’s shares are up 37% year-to-date excluding dividends, thanks to tailwinds from the government’s help-to-buy scheme. News that this scheme may be extended helped the shares add another 4% yesterday and even after these gains, I believe that the shares still look attractive. 

Over the past five years, thanks to rising home prices, sales volumes and widening margins, Bovis’s earnings per share have more than doubled as pre-tax profit has tripled. Over the same period, the firm’s dividend to investors has increased fourfold, and it looks as if this is just the start. 

Cash cow 

During August Bovis reported its results for the first half of the year. Operating profit jumped 18% year-on-year, but more importantly for dividend investors, net debt was reported at £8m, compared to £59m a year ago. Based on this trend, it looks as if the company will be nursing a healthy net cash position within the next two years and City forecasts are calling for the company to pay a special dividend as a result. 

Based on current forecasts, shares in Bovis support a dividend yield of 4.2%. Next year, however, analysts have pencilled in a prospective dividend payout of 80.3p per share for a dividend yield of 7.3%. To me, that looks to be a dividend yield worthy of further research. 

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...

It’s just ONE innovation from a little-known US company that has quietly spent years preparing for this exact moment…

But you need to get in before the crowd catches onto this ‘sleeping giant’.

Click here to learn more.

Rupert Hargreaves does not own any share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. 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.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.