Warning of the perils of leaving your cash locked in a Cash ISA is a familiar theme here at The Motley Fool. Say you pay each and every month into Newbury Building Society’s market-leading 1.5% instant-access account. With inflation in the UK currently running around 2% the value of your money is actually dwindling. What a bum deal!
Compare the possible returns on offer from cash accounts, with what’s on offer from buying shares in Reach (LSE: RCH). Not only does it carry monster dividend yields — something which I’ll discuss a bit later on — but it looks jaw-droppingly attractive from an earnings perspective too.
Right now the newspaper publisher carries a forward P/E ratio of 2.5 times, and this is despite the publisher of the Mirror, Express and Star range of titles seeing its share price boom 53% since the start of 2019. Buying activity has heated up as the acquisition of the latter two blockbuster franchises last year to bolster its clout in the digital publishing market shows signs of paying off.
Ad spending on the march
Most recent financials from the news giant actually showed revenues generated from its online publications improve markedly in recent months as page views have ballooned. Sales generated via cyberspace grew 5.6% in quarter one and then 13.6% in the following three-month period.
And if recent industry data is to be believed, total ad spend continues to get better and better for Britain’s internet publishers. According to the latest Advertising Association/WARC Expenditure Report, total ad spend in the UK was up 5.8% year-on-year in the second quarter, with advertising expenditure through online national news brands up 15.6% in the period.
The figures vindicate the rationale behind Reach’s decision to buy those titles from Northern & Shell as, by comparison, ad sales from print national news brands grew 0.3%. And cheerily for the FTSE 250 firm, the report suggests that conditions should remain supportive in 2020 despite the uncertainty created by Brexit as aggregated advertising spending on these shores is expected to grow by another 5.3%.
6%+ dividend yields!
Reach is set to update the market with third-quarter financials on November 27 and I’m perhaps not surprisingly expecting another sunny set of trading numbers. Low earnings multiples, a bright trading outlook and the probability of more share price gains in 2020 aren’t the only great reasons to buy Reach right now, though.
Indeed, I consider Reach to be a particularly attractive pick for dividend chasers. City forecasts of more dividend growth through to the end of next year result in colossal yields of 6.5% and 6.8% for 2019 and 2020 respectively. Compare that with the 3.3% forward average for Britain’s mid-caps, not to mention the sub-2% interest rates on offer from Cash ISAs. So don’t leave your cash gathering cobwebs in one of these low-paying vehicles. I consider Reach to be a much better way to use your savings.
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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.