An indifferent reaction to a strong trading update from Tyman (LSE: TYMN) in March has exacerbated the poor share price performance that has afflicted the door and window parts manufacturer in 2018.
Tyman had failed to recover from the cross-market washout that set in during mid-January, and it is now languishing around one-year lows having shed almost 25% of its value since the year’s peaks set around the start of the year.
However, I believe this weakness provides a prime buying opportunity for long-term investors, and particularly those with a love of dividend shares.
A window of opportunity
Tyman first suffered the wrath of the market in November after warning that profits would fall short of predictions on a blend of higher input costs and troubles for its North American operations.
The London company’s full-year financials released this month were much more encouraging, even if share selectors have reacted with a shrug of the shoulders. Despite its recent troubles across the Pond, Tyman still saw revenues jump 14% in 2017 to £522.7m, or 2% on a like-for-like basis. This pushed underlying pre-tax profit 10% higher to £68.3m.
Sales leapt last year thanks in no small part to impressive performances from the recently-acquired Bilco and Giesse units, purchases that have significantly bolstered Tyman’s presence across emerging and developed economies alike and provide exceptional revenues opportunities in the years ahead. And the business doesn’t intend to let up on the earnings-boosting acquisitions just yet — it also snapped up North American door and window specialist Ashland Hardware earlier this month.
The UK is likely to remain a difficult spot for Tyman a little longer, but with North America, Europe, Latin America and the Middle East all showing signs of strong momentum, it looks like profits should keep moving higher.
Indeed, City analysts are tipping growth of 3% and 10% in 2018 and 2019 respectively. And these figures create a dirt-cheap forward P/E ratio of 10.6 times.
What’s more, these forecasts feed through to predictions of further dividend growth. Last year’s 11.25p per share reward is anticipated to rise to 11.9p this year and again to 12.8p in 2019.
Such figures yield 4% and 4.3% respectively. And dividends should continue impressing as Tyman’s acquisition-led growth strategy clicks through the gears.
Another share I feel should be on the watchlist of all investors seeking generous dividend growth is Avon Rubber (LSE: AVON).
The Wiltshire business, which makes masks for armed forces and security services as well as milking devices for the dairy industry, has trebled shareholder payouts over the course of the past five years.
And thanks to its impressive cash generation and the sunny outlook for its broad portfolio of hi-tech products, City analysts expect this story to keep on rolling. Accordingly, last year’s 12.32p per share dividend is expected to rise to 15.7p in the year to September 2018 and again to 19.8p next year.
Subsequent yields of 1.3% and 1.6% respectively may be handy rather than spectacular. However, when you add in Avon Rubber’s bright long-term earnings outlook (it is expected to get start recovering from a 13% earnings fall this year with a 1% rise in fiscal 2019), and undemanding earnings multiple of 17.2 times, I believe the defence share is a pretty compelling pick today.
Royston Wild 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.