You might not have heard of Impax Asset Management (LSE: IPX) and Premier Asset Management (LSE: PAM), but if you’re on the lookout for the market’s best dividend stocks, I believe these businesses certainly deserve your attention.
Both manage money for clients (as their names suggest) and they are both reasonably good at it judging by their performance figures.
Outperforming the market
Today, Premier reported it received £175m of client assets for the three months to the end of 31 March, taking total net inflows for the six months to £411m. For the rolling 12-month period to the end of March, inflows totalled £847m.
It seems investors are attracted to the firm’s funds thanks to management’s ability to pick stocks. Indeed, over the five years to the end of March, 97% of assets managed by Premier (excluding absolute return funds, investment trusts and segregated mandates) outperformed the median return of similar funds in the same sector.
Following this robust performance it looks as if Premier is well on the way to hitting City forecasts for 2018. Analysts have pencilled in earnings per share growth of 70% for 2018, and a further increase of 21% is expected for 2019, leaving the group trading at a forward P/E of 12.3.
But it’s the City’s dividend expectations for the company that really get me excited. Analysts are expecting Premier to distribute a total of 10.4p per share to investors this year, up 31% year-on-year and giving a dividend yield of 4.4%. The payout is expected to grow by a further 21% for 2019.
So, if you are looking for a cheap, fast-growing company, with dividend aristocrat qualities, you shouldn’t overlook Premier (there’s also £18m of net cash on the balance sheet to support the payout.)
Future dividend star
Impax Asset Management also published an upbeat update on its asset flows this morning. According to CEO Ian Simm, “In the first half of this financial year we have received over £1bn of new money, and our new business pipeline remains encouraging.” These new funds include the addition of the Pax World Management acquisition, which closed in January. On January 1, total firm assets under management amounted to £8.2bn.
And just like Premier, analysts believe that if Impax can keep up its rate of client acquisition, then earnings are set to surge over the next two years as it benefits from economies of scale.
Specifically, analysts are expecting earnings to jump 60% in 2018, supporting an increase in the full-year dividend payout of 24%. If the company does hit this target it will have increased its dividend by 380% since 2012 and earnings per share will have grown by a similar amount since 2013.
Analysts are also forecasting dividend growth of 25% for 2019 which, if it materialises, will mean that the distribution has grown by 31% per annum since 2012.
With this being the case, while the current dividend yield of 2.2% might not seem like much, if you bought shares in Impax today, according to my figures, by 2021 the yield on cost will be 4.8%.
