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Vodafone Group plc isn’t the only super stock I’d buy right now

There was more good news this morning in full-year results from integrated marketing services company Communisis (LSE: CMS). Revenue during 2017 was up 4% over the previous year, adjusted earnings per share rose 5% and the firm’s strong cash flow enabled a 20% reduction in net debt, down to just over £24m. The directors expressed their satisfaction with this solid financial performance and their confidence in the outlook by pushing up the full-year dividend by 10%.  At today’s share price close to 67p, the forward dividend yield for 2018 sits at just over 4%, which looks attractive.

A new phase of growth

I like the stock because of its modest-looking valuation, strong showing on quality metrics and the momentum in the business and in the share price. The firm could be on the cusp of a new phase of growth, which may lead to a valuation re-rating down the line. Operational progress during 2017 looks compelling. Communisis won a new contract for marketing communication and renewed an existing contract for transactional communication with a “major UK bank,” which will last for five years providing useful earnings visibility. On top of that, a partnership contract with Proximity Ltd to provide communication services to the BBC for the TV Licensing programme was renewed for six years.

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Chief executive Andy Blundell announced the launch of a “focused three-year plan” aimed at enhancing returns to shareholders “as we raise the value we provide to our clients.” The firm said it has “clear evidence” that the themes of Digital First, Global Reach and Empowered Organisation “resonate” in its key markets. Buzzwords aside, I’m optimistic that because the new value enhancement programme has been built into the firm’s senior management remuneration policy, we’ll get some decent financial results in the years ahead to drive up the share price.

Underlying progress and a big yield

While we are waiting for renewed growth to materialise there’s a dividend yield running at just over 4% for 2018 to collect. I think it’s a good deal and the stock is well worth your research time right now. Perhaps Communisis would sit well in a portfolio alongside big-dividend payer Vodafone Group (LSE: VOD), the telecommunications company.

For a long time, I wasn’t keen on Vodafone because the firm looked over-valued to me. But since January 2014 the share price has wobbled up and down a bit without making any upwards progress. During that period, operating profits and cash flow have been rising, suggesting progress in the underlying business. Meanwhile, City analysts following the FTSE 100 stalwart have quite robust-looking expectations for forward earnings growth of around 11% for the year to March 2019 and 24% for the year after that.

On balance, I think it’s a good time to revisit the stock. Today’s share price around 206p throws up a forward dividend yield for the trading year to March 2019 of almost 6.5%. I think it’s worth collecting that income while we wait for growth to move the share price up over time. The company has held its dividend firm over the last few years so I think it unlikely we’ll see a cut in the dividend soon when expectations of earnings growth are high.

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Kevin Godbold has no position in any of the shares 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.