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Retirement investing! A cheap 5%+ dividend yield I’d stick in an ISA today

One of the key tenets of successful share investing is to only buy companies you’d be happy to hold for a bare minimum of around five years. None of us has a crystal ball, however, and can sometimes be a challenge to identify such stocks, let alone those that’ll definitely be creating brilliant profits beyond the next decade and by the time many of us have retired. But they can be found.

SThree (LSE: STHR) is one such business I think falls into this category. Things aren’t exactly rosy at the recruitment specialist right now as the impact of a slowing global economy has hit fee growth. Net fee rose 4% in the June to August quarter, slowing markedly from 9% in the prior six months.

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To my mind though, SThree’s ability to grind out any sort of fee growth is to be celebrated. Conditions in its core mainland Europe market and in the US are getting increasingly tough while business keeps declining in the UK amid intense political and economic uncertainty. This resilience pays tribute to the company’s steps to embrace the contract end of the market. Here, activity remains stronger in downturns like we’re seeing at the moment (the recruiter gets 75% of all fees from contract roles versus a quarter from permanent ones).

Profits primed to explode

And, as I said at the top of the piece, over the long term I reckon the small-cap’s investment case remains white hot. Its commitment to becoming the biggest player in the fast-growing STEM niche market (the Science, Technology, Engineering and Mathematics segments) offers some terrific opportunities for growth. It’s a quality which is also keeping net fees growing despite the difficult macroeconomic backdrop — even as recently as the middle of September SThree said that “we continue to see strong demand across our key regions for STEM roles.”

Meanwhile, SThree’s ongoing commitment to global expansion adds an extra plank to its growth platform in the years ahead. Indeed, total headcount was up 8% year-on-year as of the end of August as it added roles in the US and Japan.

5%+ dividend yields

Despite that bright profits outlook, the jobs giant trades on a bargain-basement forward P/E ratio of 9.1 times. But as if a cheap share price and a great growth pedigree weren’t enough, SThree also offers up market-mashing dividend yields over the medium term. Predictions of 15.2p and 15.7p per share for fiscal 2019 and 2020, respectively, also create readings of 5.1% and 5.3% for fiscal 2019 and 2020, marching past the UK blue-chip forward average of 4.5%.

What’s more, the company also looks good to make good on these predictions too, on account of brilliant dividend coverage above the safety watermark of 2 times and the company’s rapidly-improving balance sheet (net debt halved year-on-year to £12m as of August).

Right now, SThree’s a share that offers plenty of bang for your buck and I’m thinking of adding it to my own ISA 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.