UK investors are having to grab their tin hats as dividends fall like dominoes. Companies of all shapes and sizes are cutting shareholder rewards in a desperate bid to build big cash piles to ride out the impact of the Covid-19 outbreak on the global economy.
It’s time to be extra careful with your investment capital. But it doesn’t mean you need to pull up the drawbridge and stash your money in a low-yielding cash account. There’s an abundance of income shares that should keep on growing profits and consequently keep increasing annual dividends.
Home comforts
One of these is Bloomsbury Publishing (LSE: BMY). It is perhaps best known as the publisher of the Harry Potter line of titles, a dependable cash cow that continues to take the world by storm. But the FTSE 250 firm’s Consumer division is more than that. Sarah J. Maas’s Crescent City: House of Earth & Blood just hit number one on the New York Times bestseller list, for example.
It’s a share whose top line should in fact benefit from a world going into a wide and possibly prolonged shutdown. It said in fresh financials last month that it is unclear how the virus will affect full-year numbers for the fiscal period ending February 2021. But it did add that while “there is disruption to bookshops, online retailers and academic institutions… reading books, including print books, is likely to be popular at home.” Revenues from its e-books and audio books could well receive a boost too.
Book sales boom
But don’t just take my word for it. Industry data from Nielsen Book illustrates how demand for reading material is booming at the current time.
According to most recent figures, book sales in the UK were up a mighty 6% during the week to March 21. The research house said that sales of paperback fiction titles soared by more than a third week-on-week. Demand for arts and crafts books had jumped 38% over the same period too.
Growth AND dividends!
Good signs for the likes of Bloomsbury, then. However, don’t be fooled into thinking that this is a great stock to buy for the near term only. It remains active on the M&A trail and last month acquired some assets of academic publisher Zed Books for £1.75m. It has also turbocharged investment in its online academic and professional division to deliver long-term profits too.
City analysts don’t think that Bloomsbury will be blown over by the coronavirus storm. They think that earnings will rise 11% in fiscal 2021 and 12% the following year. And they reckon dividends will follow the bottom line northwards too, resulting in bulky yields of 4.1% and 4.3% for these respective years.
At current prices the publisher trades on a rock-bottom forward P/E ratio of 12.1 times. I reckon this, combined with those chunky yields, makes Bloomsbury a brilliant buy today as the rest of the market shakes.
