For many investors the prospect of declining consumer spending power as we move through 2018 makes Marston’s (LSE: MARS) a gamble too far.
Much-publicised restaurant shutterings by a string of dining chains like Byron, Chimichanga and Jamie’s Italian underline the pressure on cash-strapped Britons’ wallets as inflation still outpaces wage growth, and economic and political uncertainty also means more of us are electing to stay indoors. The intensely competitive landscape hasn’t exactly helped revenues across these establishments either.
Reflecting the toughening trading landscape Marston’s has seen its share price decline 25% over the past 12 months. However, I believe this weakness represents a great buying opportunity for long-term investors.
A tasty treat
You see, the FTSE 250 company has a long track record of outperforming its peers, and its plans to keep expanding its pub estate, with 15 pub restaurants and six lodges in the current fiscal period alone, should build a platform for solid top-line progression now and in the years ahead.
Accounting for the impact of difficult market conditions and a rising cost base, City analysts expect Marston’s to record a fractional earnings improvement in the 12 months to September 2018.
This is still expected to lay the base for extra dividend progression, and so last year’s 7.5p per share reward is anticipated to rise to 7.7p in the present period. As a consequence the yields stands at a colossal 7.3%.
And with profits growth expected to improve to 5% in fiscal 2019, the dividend is expected to swell to 7.9p too. The yield edges to 7.5% as a result.
Of course Marston’s is not without its share of risk. But I believe a forward P/E ratio of 7.4 times is more than reflective of this.
More monster yields
The emerging markets investment manager has kept the dividend locked at 16.65p per share for the past three years, but it is expected to finally get payouts marching higher again from the current fiscal period.
Despite a 16% profits slide being forecast by City brokers for the year to June 2018, Ashmore is expected to lift the dividend to 16.9p, meaning the yield registers at an excellent 4.4%.
What’s more, helped by an anticipated 9% earnings recovery in fiscal 2019, the dividend is expected to rise again to 17.4p. The yield subsequently edges to a juicy 4.5%.
Now Ashmore might be a tad expensive on paper, the firm rocking up on a forward P/E ratio of 18.6 times. But in my opinion at least, the FTSE 250 firm’s recent record of beating Square Mile forecasts makes it an attractive destination regardless. Ashmore saw assets under management jump 18% in July-December, to $69.5m, surpassing City expectations.
Besides, the strong outlook for its developing markets, coupled with predictions of activity-boosting volatility in financial markets in 2018 and beyond, makes it worthy of such a high rating.
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.