Despite the release of solid trading details in late August, investor appetite for WH Smith (LSE: SMWH) has remained quite muted.
Some would say that a plump forward P/E ratio of 15.7 times suggests that a continuation of strong momentum at the FTSE 250 firm is already baked into the share price, though I beg to disagree. It’s quite an undemanding valuation given the stationer’s resilience in the face of toughening trading conditions on the high street, allied with the brilliant rate at which sales are growing at its Travel division (which is thanks in no small part to its ambitious overseas expansion strategy).
WH Smith noted several weeks ago that Travel “continues to perform strongly,” and with confidence slowly returning to share markets, I think that news of sustained progress here when preliminaries are released on October 17 could prompt waves of buying.
The business should certainly be of interest to income hunters given the rate at which it’s raised dividends in recent times and is expected to continue doing so. An anticipated 58.5p per share payout for the year to August 2019 is expected to increase to 63.4p in the current fiscal year, resulting in an inflation-beating 3.2% yield.
5% dividend yields
I think that Bakkavor Group (LSE: BAKK) is also worth close attention right now. It might not have any fresh financials on the horizon, though at current prices it boasts a rock-bottom forward P/E ratio of 8.5 times.
This FTSE 250 firm updated the market in mid-September with a choppy set of financials. Challenging market conditions in the UK saw like-for-like sales here rise just 0.7% in January-June, while lower margins forced adjusted EBITDA 6.5% lower. In better news, though, international sales have accelerated even further and these were up 12.7% year-on-year.
I’ve previously tipped the fresh food manufacturer as a buy on the brilliant long-term growth opportunities it has overseas, ones which City analysts expect to push Bakkavor back into profits growth next year. I think it’s a great pick just now for patient investors, and especially as it also offers up a jumbo 5% forward dividend yield.
6%+ dividend yields
I also reckon snapping up Hays (LSE: HAS) ahead of quarterly financials (on October 15) could be a shrewd move.
The recruiter, like Bakkavor, also provides plenty of bang for your buck with its forward P/E ratio of 13.5 times and corresponding 6.2% dividend yield. It’s unlikely that Hays’ share price will tear higher in the coming sessions given market concerns over the health of the global economy, though I’m expecting nothing short of another resilient release from the FTSE 250 star, one that could prompt some buying of this under-appreciated and reliable growth generator.
Hays was still able to grind out a 6% improvement in net fees in the year to June 2019, this coming in spite of weakening market conditions in some of its key markets like Germany and Australia. Indeed, trading in some of its territories has remained quite terrific — it enjoyed all-time record performances in 19 countries — and the company is boosting investment in critical regions like Central Europe and Australasia to offset tough conditions and keep profits moving higher. This is a share I’d happily buy today and hold for years to come.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended WH Smith. 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.