Shares in 4Imprint (LSE: FOUR) have been in a sharp slump since the middle of February. But a 19% spike on Tuesday morning reversed most of that, and restored the price to a 50% rise over the past 12 months.
4Imprint manufactures promotional items, including all sorts of things an organisation can put its logo on. And there’s clearly a big market for such a business as the company has just posted $861m in revenue for 2019.
That’s 17% ahead of 2018, and led to a 20% jump in underlying pre-tax profit. The bottom line shows a 19% rise in underlying EPS to $1.54, enabling the company to lift its dividend by 20% to 84 cents per share. Unlike some, the dividend is easily payable, with 4Imprint ending the year with a 50% hike in net cash to $41m.
Growth plus dividends
I’m impressed by 4Imprint’s recent growth record, which has propelled it into the FTSE 250 during the year. The $1.54 EPS for 2019 represents growth of 55% in only the three years since 2016. And there are double-digit rises forecast for the next two years too.
Over the same period, the firm has doubled its dividend, so that growth is feeding into income for shareholders. Yields aren’t big, with around 2.5% predicted for the current year. But the dividend is strongly progressive, which I see as more important for the long term.
I reckon 4Imprint is a great example of a growth stock that’s well on its way to becoming a long-term provider of income. Some falter when their growth slows before dividends have started ramping up, but as 4Imprint is already paying out good dividends, I don’t see that as a risk here. 4Imprint is definitely on my 2020 ISA candidates list now.
The CMC Markets (LSE: CMCX) price also leapt upwards Tuesday, by 15%, on the back of a trading update.
CMC shares have seriously beaten 4Imprint’s over the past month, more than doubling in value. It pays dividends too, though they’re a little more erratic as EPS seems somewhat volatile on a year-to-year basis. Forecasts suggest a 5.5% yield for the current year, though it would drop to around 4% on next year’s predictions. But that’s still a tempting yield, and could contribute nicely to a long-term accumulation of cash.
The trading platform provider looks to be putting in an impressive year, with a trading update headlined “Strong underlying performance continuing in Q4 2020.”
The company now expects to “deliver net operating income ahead of market consensus for the year ended 31 March 2020.”
Looking at the one-year share price chart, we could be forgiven for thinking we’re looking at a typical growth share ride. But it’s been more of a recovery than anything, and examining the past five years we see a few price slumps that still show their effect.
At 177p, CMC shares are actually down 26% on their flotation price of 240p in February 2016. So that’s more evidence that buying at IPO might not be such a good idea, and it can pay to wait and see how a company’s fortunes turn out.
Forecasts suggest P/E valuations of 12 to 13.5 over the next two years for CMC, and I think that’s undervalued. This is another I have lined up as an ISA possibility.
Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended 4IMPRINT GROUP PLC ORD 38 6/13P. 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.