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2 unknown but amazing (and cheap!) dividend stocks I’d buy for 2019

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The stock market washout that kicked in during the fourth quarter has left a landscape ripe with bona-fide bargains. I’ve taken time in recent days to look at some cheap shares with particularly great dividend profiles from outside Britain’s main indices, and I’m at it again here.

You may not have heard of Gateley Holdings (LSE: GTLY) or VP (LSE: VP) so here’s why they’re worthy of your investment cash.

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Gateley is a share I’m particularly excited about. Since it listed on AIM four years ago, it’s been rapidly growing its headcount across the UK and the Middle East to capitalise on the soaring demand for legal services. This has helped to power earnings — and thus dividends — higher over the period.

I’m pleased to say that its strong bottom-line momentum is yet to show signs of running out of steam. Indeed, the release of more excellent trading details on Tuesday illustrated that energy. Revenues soared 20.1% in the six months to October to £46.4m, a period which also saw organic sales rise by 10.2%. Pre-tax profit also jumped 18.6% to £5m.

What’s more, with cash conversion at the firm improving by 2.1% year-on-year to 87.4%, the business elected to hike the interim dividend by an eye-popping 18.2%, to 2.6p per share.

The headcount at Gateley’s core legal operations has risen by almost 50% since its IPO in 2015, underpinning the relentless profit growth of recent years. Looking away from the steady expansion at its bread-and-butter divisions, the company’s foray into other professional services, like tax and accountancy matters, adds another layer of growth potential for the years ahead.

In the meantime, City analysts forecast an earnings increases of 11% for the year to April 2019 and 9% for fiscal 2020. And these projections underpin dividend predictions of 7.8p and 8.4p per share for these respective years, up from 7p last year, yielding a jumbo 5.6% and 6%.

Despite the recent share price bump, Gateley still trades on a low, low forward P/E ratio of 11.4 times. I believe that this rating is far too cheap given the company’s breakneck top-line momentum.

Another income star

Like Gateley, VP has also been splashing the cash to expand its geographical and operational base. The benefits of this programme were laid bare in November’s latest financial statement.

Following the acquisition of Brandon Hire last year, both revenues and profits boomed between April and September — by 42% and 22%, respectively. As a consequence, the half-time dividend was hiked by more than a fifth year-on-year to 8.2p per share.

An expected 10% earnings hike for the full year to this March results in a prediction for a 30.3p total dividend, yielding a chubby 3.1% and suggesting a meaty upgrade from last year’s 26p reward. And the yield moves to 3.3% for fiscal 2020 as a predicted 7% profits rise by City analysts leads to an anticipated 32p dividend.

The rental equipment company has proved immune to the wider implications of Brexit so far. Yet this resilience is not reflected in its low valuation, in my opinion, with a forward P/E multiple of 10.2 times. Like Gateley, I reckon VP is a great budget buy right now, particularly for those seeking excellent dividend growth.

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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.

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