SThree (LSE: STHR) is a stock that, to me, offers the perfect formula of big dividends at rock-bottom prices.
Share pickers seem to be reluctant to take the plunge because of the weak UK economy and fears that this will rock profits growth at the recruitment giant. I’m afraid this argument doesn’t hold water with me, though, as thanks to the tearaway performance of its foreign operations total profits continue to surge.
Last year, for example, SThree saw gross profits at group level swell 12% even as the bottom line in its UK and Ireland territory fell 5%. Less than 20% of the small-cap’s profits are now derived from home shores and so I’m confident that it can continue to thrive even if Brexit has bad implications for its domestic operations.
City analysts expect the bottom line to keep rising too, creating a dirt-cheap P/E ratio of 9.2 times for fiscal 2019 and expectations of more dividend growth to 15p per share. This results in a jumbo 4.9% yield.
Hollywood Bowl Group (LSE: BOWL) isn’t as cheap as SThree. In fact, its forward P/E ratio of 16.6 times sits outside the widely-considered value watermark of 15 times and below. But I would consider this rating to be a very attractive entry point given its hugely exciting growth strategy.
The British tenpin bowling renaissance continues to go from strength to strength and through its busy expansion programme — it’s looking to cut the ribbon on two new centres each year — the leisure giant is setting itself up to capitalise on this trend.
Thanks to a 13% pre-tax profits boost last year, Hollywood Bowl continued to raise the ordinary dividend and to fork out special payouts. City brokers expect more significant bottom-line growth in fiscal 2019 to push the ordinary dividend to 7.6p per share, yielding an inflation-mashing 3.3%, and investors can probably look forward to more delicious supplementary rewards too.
The biggest yielder of all
If you’re on the hunt for particularly explosive yields then Go-Ahead Group (LSE: GOG) might be more to your liking.
The Square Mile suggests that the bus-and-rail-service operator will keep the full-year dividend locked at 102.08p per share for another year. The good news is that this projection yields a stunning 5%.
Adding some sheen to the Go-Ahead investment case is its low, low forward P/E ratio of 13 times, a rating that’s far too little in my opinion given the rate at which it has been winning contracts at home and particularly abroad over the past year.
The transport titan has recently added maiden contracts in Australia and Norway, for example, as well as additional accords within the German rail network. And the fruits of its endeavours were shown in half-year financials last week in which it advised that group revenues rose 5% during July-December despite tough conditions in the UK. With its contract pipeline packed with more opportunities I’m tipping it to flip back into strong profits growth soon enough and to get back to lifting dividends too.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Hollywood Bowl. 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.