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Have £2,000 to invest? A shockingly-cheap dividend growth stock I’m considering buying today

Just as a rising tide lifts all boats, choppy waters can drag stocks both good and bad to the bottom.

At The Motley Fool we’ve spent no little time explaining why recent risk-aversion across stock markets leaves ample opportunities for savvy investors to grab a bargain or two. Even the release of stellar trading news hasn’t prevented some great companies from sinking and this, quite frankly, is barmy.

Take Bloomsbury Publishing (LSE: BMY), for instance. ‘The House of Harry’ (Potter, that is) fell back below the 200p per share milestone in Thursday trading and it is now dealing at levels not seen since the middle of May.

Considering that the publisher released another set of exemplary financials earlier this week, I reckon this weakness should put all bargain hunters on red alert. And particularly those with a predilection for chunky dividend yields.

It’s not all about Harry

Bloomsbury announced on Tuesday that, thanks to a 4% revenues rise between March and August, to £ 75.3m, pre-tax profit before one-off costs (such as restructuring charges related to its acquisition of publisher I. B. Tauris) charged 13% higher to £2.9m.

The performance of Bloomsbury’s Harry Potter cash cow franchise is of course the first thing that investors look at. And thankfully the results showed that reader interest in the Hogwarts favourite has remained bubbly following on from the fanfare of last year’s 20th anniversary, with sales of these titles having risen 5% during the six months to August.

But the magician’s enduring popularity isn’t the only reason to cheer latest results. As I’ve mentioned previously, Bloomsbury’s drive into the academic and professional publishing segments provides some really terrific earnings opportunities for the years ahead. And this was laid bare in the half-year report, with the business declaring that revenues from its academic and professional titles had risen 9% during March-August to £18m.

Bloomsbury continues to make strong development progress on this front too. It remains on track to launch three new digital resources in the second half of this year alone following the three that it brought out in the first. And this week it also inked a five-year subscription deal with the Institute of Chartered Accountants of England & Wales to supply its online tax services.

Dividend upgrades

Bloomsbury’s sterling performance over the past several months has led brokers to upgrade their medium-term profits estimates, and rises of 2% and 12% are now forecast for the fiscal years ending February 2019 and 2020 respectively.

And consequently dividend projections for this period have been improved too. An 8p per share reward predicted for this year remains the same, yielding 4.1%, but next year’s has been raised to 8.5p, a figure which nudges the yield to 4.4%.

What’s more, that share price weakness I mentioned earlier now leaves Bloomsbury dealing on a dirt-cheap forward P/E ratio of 13.6 times. This reading should command attention from all wise value investors and I for one am seriously considering buying into the books behemoth.

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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.