Retired? Hunting for top FTSE 100 dividend stocks that could provide your income with a kick up the backside? Excellent. The big-yielding winners that I’ve outlined here could make you a pretty penny in the years to come.
But why confine your attention to Britain’s top-tier Footsie index? The FTSE 250 could prove to be a happy hunting ground too, and particularly so if you decide to invest in rampant dividend grower Hastings Group (LSE: HSTG).
While the intense competition amongst Britain’s biggest motor insurers is prompting many investors to sell out of the sector, Hastings is a share that they might be minded to hang on to.
Last time I covered it in June I alluded to the excellent progress it is making in grabbing market share. And I am delighted to say that it has kept up the pace.
The number of live policies on its books rose 6% in the six months to June, the company advised last week, taking the total to 2.7m. It now has a 7.5% share of the British private car insurance market, up 50 basis points from the mid-point of 2017.
With revenues also having leapt 9% during January-June to £376.3m, Hastings saw operating profit boom 22% year-on-year to £105.1m.
This wasn’t the only good news, either (and particularly for dividend chasers). Thanks to its strong cash generation — free cash flow sprinted to £107.8m during the six months, from £65.8m previously — Hastings’ already-robust Solvency II coverage ratio bumped from 167% to 171%.
The spirited first-half performance, allied with its rock-hard balance sheet, encouraged the insurer to hike the interim dividend 10% to 4.5p per share.
And the stage looks set for dividends at Hastings to keep on rising. With its net debt leverage multiple having dropped to its target of around 1 times adjusted operating profit during January-June, down from 1.4 times at the close of 2017 and 1.7 times six months before that, Hastings said that hitting this goal “allows us to move towards a policy of increasing distributions to shareholders over time.”
Even though earnings progression is expected to be fractional in 2018, this capital strength means that the full-year dividend is predicted to rise to 13.2p per share from 12.6p last year. Consequently the yield stands at a colossal 5.1%.
Yield pops above 6%
Dividend growth is anticipated to step up a notch again from next year as profits explode. A 12% rise is predicted for 2019, and this comes as no surprise as Hastings invests huge sums to improve its digital capabilities. This includes the rollout of a new mobile app and the introduction of Guidewire, the firm’s integrated claims and broker platform which, among other things, should turbocharge the amount of business taken from price comparison websites and bolster its multi-car proposition.
2019’s stratospheric growth projection means that Hastings is predicted to upgrade the dividend significantly to 17.3p per share, a forecast that shoves the yield to a market-mashing 6.6%. You can be the judge, but in my opinion, there’s plenty of reason to expect dividends to keep roaring higher well beyond the current period too.
An added bonus is that Hastings can be picked up on a forward P/E ratio of just 11.7 times. There’s a lot to like about the insurer right now, and its extreme value is the cherry on the cake. I consider it to be a hot buy today.
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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.