The FTSE 250 is jam-packed with exceptional dividend shares. Stobart Group (LSE: STOB), which has trebled the annual dividend over the course of the past three years, is one such stock investors need to check out on the back of its stunning yields.
Payout growth is expected to slow markedly this year, an anticipated 18.5p per share dividend predicted for the 12 months ending February 2019, up slightly from the 18p reward forked out last time around. However, the yield still stands at a formidable 7.3%.
And things get even better for fiscal 2020, the anticipated 19.1p dividend nudging the yield to 7.5%.
In years gone by, Stobart has been able to light a fire under dividends thanks to a flurry of asset sales. And while further disposals may just be around the corner, this is not the only reason to believe the support services business will have the financial firepower to keep offering knockout dividend yields.
I have spoken before about the exceptional earnings potential afforded by its role as operator of London Southend airport. Its outlook received an additional shot in the arm last week after it was announced Irish low-cost carrier Ryanair would be opening a base at the site with a view to launching maiden flights from the summer of 2019. Needless to say I remain bullish about Stobart’s possibilities here.
The boardroom upheaval at the firm may be pretty unedifying as the fallout surrounding the departure of former chief executive Andrew Tinkler this month worsens. But I prefer to concentrate on the brilliant growth strategy of the company’s Aviation and Energy divisions, which make it worthy of its princely forward P/E ratio of 48.1 times.
Motoring along nicely
Those seeking giant yields for less may want to have a look at Hastings Group (LSE: HSTG) instead.
The car insurance colossus has a bright earnings outlook thanks to the rate at which it is pulling customers away from its major competitors. This quality helped the number of in-force policies climb 10% in the 12 months to March, to 2.67m, a result that helped gross written premiums surge 16% to £942.2m.
Hastings’ last financial update put its share of the motor insurance market at 7.4%, up 70 basis points from a year earlier. And the company is investing heavily to bulk up its workforce and improve its online platform to keep the customer grab in business.
Handsome earnings growth has allowed Hastings, like Stobart, to lift dividends at an excellent pace over the past three years (up 473% during the period, in fact). And an expected continuation of this trend through to the close of next year underpins predictions of extra payout expansion. Last year’s 12.6p per share reward is predicted to rise to 14.1p in 2018 and 17.8p for 2019, meaning yields stand at 5.5% and 7% for these respective years.
Intense competition may be discouraging many from investing in the motor insurance sector right now. But Hastings has proved itself more than capable of thriving in this environment, and thus it deserves a higher forward P/E ratio than its current reading of 11.5 times, I believe.
Card Factory (LSE: CARD) is suffering from the effects of constrained consumer spending power at the moment and this is reflected in its ultra-low prospective P/E ratio of 10.6 times.
I reckon this is a very-appealing level upon which to pile into the cards and balloons retailer, though. Although like-for-like sales fell 0.4% during the three months to April, this was still a pretty respectable result given the tough comparatives of a year earlier, and especially in the current environment.
Once the current stormclouds abate I am confident that Card Factory’s store expansion programme — it plans to add another 40 shops to its existing UK estate of 925 during the current fiscal year alone — should deliver brilliant profits and thus dividend expansion.
In the meantime, City analysts are forecasting dividends of 15.5p and 16.5p in the years to January 2019 and 2020 respectively, figures that yield a staggering 7.9% and 8.4%. Earnings might be lumpy for a little while but Card Factory’s cash flows should prove robust enough to keep payouts rolling northwards.
Another 8% yielder!
Bovis Homes Group (LSE: BVS) is another dividend hero trading far too cheaply at current prices right now.
It’s fair to say that conditions have become much, much tougher for the housebuilders since the EU referendum as the political and economic maelstrom has intensified.
Still, while demand has undoubtedly softened (and certainly so over the past 12 months) the outlook for the likes of Bovis remains strong as, quite simply, there are not enough homes to go around, a scenario that is keeping purchases of new-build properties pretty robust. Indeed, the average private sales rate per site per week is up 6% to 0.52 during the period spanning January 1-May 23, it announced recently.
While the builders may struggle to command the same sort of prices for their homes in this environment, there is certainly no barrier to the business still recording strong earnings growth — indeed, City analysts are actually forecasting double-digit earnings expansion through to the close of 2019.
And the number crunchers are expecting Bovis to honour its commitment to pay special dividends as a result. Consequently, a reward of 101.8p per share is anticipated for 2018, and a payment of 102.6p for 2019. This means the FTSE 250 star sports giant yields of 8.4% and 8.5% for these respective periods.
At current prices, Bovis can be picked up on a forward P/E ratio of 12.7 times. This, allied with the prospect of the firm serving up market-mashing yields long into the future, makes the business a splendid pick for both value and income investors today.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK owns shares of Card Factory. 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.