In a recent article I took a look at two of the worst-performing FTSE 100 dividend shares so far in 2018, and considered whether or not they’re worthy of investment right now.
This time around I’ve scoured the FTSE 100 and FTSE 250 for shares that have been making headlines for all the right reasons. Here is what I’ve found.
A stream of strong trading updates has allowed Victrex’s (LSE: VCT) share price to bulge in 2018, up 21% since the bells rang in New Year’s Day.
In its latest release in July, the FTSE 250 plastics manufacturer advised that group sales volumes in the nine months from last October were up 19% year-on-year, reflecting in part positive market conditions. Although sales are expected to cool in the fourth quarter Victrex remains positive that it can meet current projections.
Speaking of which, City analysts are forecasting a double-digit profits improvement in the 12 months to September, an estimate which supports predictions of a 124.9p per share dividend, up from 121.8p last year.
A prospective P/E ratio of 26.4 times might be toppy on paper. But a corresponding dividend yield of 3.9% helps to take the edge off. I wouldn’t be surprised to see Victrex maintain its momentum in the months ahead.
Smurfit Kappa (LSE: SKG) is another tasty dividend share that has flown in 2018, its share price expanding by 28% since the turn of January.
The paper packaging giant jumped in March when news emerged that International Paper was circling it. Smurfit Kappa may have fought off its US rival’s takeover bid, but its share price has remained stable, the FTSE 100 business helped by a slew of positive updates. Just last week it announced that operating profit before exceptionals jumped 48% during January-June.
Yields might be lagging those of Victrex, but the rate at which Smurfit has raised dividends in recent years — and is likely to continue doing so — makes it a genuinely great pick for income-chasers in my opinion.
In the immediate term, a payout of 94 cents is forecast, up from 87.6 cents last year and yielding 2.6%. This, allied with an undemanding forward P/E ratio of 14.2 times, makes the Irish firm a terrific buy today.
Poised to reverse?
BCA Marketplace’s (LSE: BCA) value has also swelled in the year to date, up 16% to be precise. But I am a lot less optimistic over the car auctioneers’s share price prospects going forwards than those of Smurfit Kappa’s.
The FTSE 250 company — most famous as the UK’s largest auction house as well as the owner of online vehicle buyer WeBuyAnyCar.com — has accelerated on the back of its resilience in a tough marketplace. It has also been the subject of takeover action in recent months, attracting the wistful glances of Apax Partners, although it has also been quick to bat away the interest.
I’m worried about the firm’s ability to keep earnings on an upward slant as the UK economy toils, even though City forecasts suggest further growth in the year to March 2019. The dividend is also expected to expand from 8.55p per share to 9.1p, resulting in a large 3.9% yield. In my opinion, though, a forward P/E ratio of 19.4 times doesn’t fully reflect the risks to earnings growth, in the current year and beyond. I would give the share a wide berth today.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Victrex. 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.