2 hot dividend stocks I’d buy to fund my nest egg

Royston Wild looks at two shares with exceptional dividend potential.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Even though Standard Life Aberdeen (LSE: SLA) may not be having the best of it right now, I am convinced the financial colossus has what it takes to deliver stunning investment returns in the years ahead.

In its mid-December market update, the newly-created FTSE 100 firm advised that fund outflows continued in the third quarter, continuing the trend seen in the first six months of 2017.

The business said that net outflows clocked in at £23bn during January-September, meaning that total assets under management registered at £646.2bn at the end of the period. This was down from £647.6bn at the beginning of the year.

Investors are pulling their money out of Standard Life Aberdeen because of concerns over stashing their cash in just one company, particularly one which has just come into existence.

It may take some time to convince these customers, but in the long run I reckon the fund management giant has a terrific future — the £11bn merger back in August has built a business with terrific scale, splendid cross-selling opportunities, and excellent exposure to both the UK and developing markets.

Dynamite dividend yields

Not that City analysts believe it will take long for Standard Life Aberdeen to deliver knockout earnings growth, mind. Indeed, profits rises of 59% and 9% are predicted for 2017 and 2018 respectively, meaning the company changes hands on a mega-cheap prospective P/E ratio of 14 times.

This — combined with the investment specialist’s exceptional cash generation — underpins dividend projections of 21.7p for this year and 23p per share for 2018. And as a result Standard Life Aberdeen carries mighty yields of 5.2% and 5.5% for this year and next.

A smart selection

I also believe Moss Bros Group’s (LSE: MOSB) market-mashing dividend yields make it worthy of serious attention today.

In the year to January 2018, the retail play is expected to hike the dividend to 6.2p per share from 5.89p in the prior period, underpinned by a 6% earnings rise and resulting in a mammoth 7.4% yield.

Another 2% profits rise is predicted for fiscal 2019, too, and as a consequence the dividend is expected to step to 6.5p, nudging the yield to an even-better 7.7%.

And like over at Standard Life Aberdeen, stock pickers can take extra security from Moss Bros’ strong balance sheet, giving current forecasts additional weight. The company had £21.5m of cash on its books as of July and zero debt.

Of course, Moss Bros is not immune to the macroeconomic pressures washing over the broader retail sector.

But so far the suit specialist is managing to keep its head above water, the massive investments it had made in refreshing its store network, as well as improving its digital operations, continuing to deliver revenues growth. Indeed, the business saw like-for-like sales improve 2.8% during the six months to July, a result that helped pre-tax profit leap 15.7% year-on-year to £4.2m.

Whilst Moss Bros may struggle to deliver the brilliant earnings growth of yesteryear in the current climate, in my opinion a prospective P/E ratio of 14.7 times still makes it worthy of attention.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Standard Life Aberdeen. 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.

More on Investing Articles

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »

Investing Articles

Could the JD Sports Fashion share price double in the next five years?

The JD Sports Fashion share price has nearly halved in the past five years. Our writer thinks a proven business…

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

If interest rate cuts are coming, I think these UK growth stocks could soar!

Falling interest could be great news for UK growth stocks, especially those that have been under the cosh recently. Paul…

Read more »

Investing Articles

Are these the best stocks to buy on the FTSE right now?

With the UK stock market on the way to hitting new highs, this Fool is considering which are the best…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Can the Centrica dividend keep on growing?

Christopher Ruane considers some positive factors that might see continued growth in the Centrica dividend -- as well as some…

Read more »

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »