Unfortunately, investors don’t seem to be willing to hang around for these returns to materialise. After initially proving to be a hit, as evidenced by the trust’s 15% premium to net asset value three months after its IPO in April 2015, investors have slowly drifted away. 

Today, the trust trades at a 13% discount to the latest reported net asset value of 102p. Earlier this year, the discount blew out to nearly 30%.

High risk, high reward 

I have never been entirely won over by Woodford’s patient capital strategy because I know how difficult it can be to pick early-stage tech and biotech companies successfully. 

Based on various surveys and studies, we know approximately two thirds of venture capital funds fail to produced positive returns for investors and a similar percentage of venture capital-backed companies fail. Most of these early-stage investors pin their hopes on just one investment paying off, which usually produces such fantastic profits all the other losses are forgotten.

Now I’m not saying Woodford is following the same approach. He already has an impressive record of investing in private companies, established when he was managing his previous stable of funds at Invesco, but it’s difficult to ignore the data from the rest of the industry. 

The Patient Capital Trust has focused its investments on the most promising companies, like Ultrahaptics, which has developed a technology that uses “high-frequency ultrasound to enable the sensation of touch to be felt in mid-air.” This company accounts for 2.8% of the trust’s portfolio, and recently completed another £35m fundraising. The technology is being used in Las Vegas in gaming machines and has also attracted other commercial partners such as Nike, Dell and IBM.

This isn’t the only company in the portfolio that’s pushing ahead. A few weeks ago, the trust told investors that three of its biotech startups, Immunocore, Mission Therapeutics and Spin Memory, have all signed landmark collaboration agreements with leading pharmaceutical companies and technology groups to help push forward product development.

Making progress 

There has been a steady stream of positive news from the portfolio throughout 2018. And while they have also been some negative developments as well, broadly speaking, the investee companies are moving forward. 

And for risk tolerance investors, now could be the time to consider taking a position here. A recent research note from City analysts pointed out that the number of the investee companies are now maturing and have reached “demonstrable milestones.” 

So, while there is still plenty of risk that the portfolio could not perform as expected, recent developments have helped de-risk the trust’s investment portfolio. This doesn’t guarantee returns, but I reckon recent events have dramatically improved the quality of the investment vehicle. A mid-teens discount to net asset value only sweetens the deal, in my view. 

If you’re happy with the risk that comes with investing in early-stage companies, the Woodford Patient Capital Trust might be worth further research.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended RPC Group. 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.

Of course, Diageo also offers strong growth potential. Alongside another share which seems to have a bright future and that reported positive results on Wednesday, could it improve your prospects of retiring early?

Improving outlook

The stock in question is plastic products design and engineering business RPC Group (LSE: RPC). It released half-year results which showed a rise in revenue of 7%, reaching £1,892m. It benefitted from acquisitions, as well as organic growth of 3.2%. Adjusted operating profit increased by 3% to £214.3m, with polymer headwinds offset by organic growth.

The company’s performance in China and the US was relatively strong as a result of higher added value products. The company has continued to invest in its sustainability proposition, with the acquisition of UK-based recycler PLASgran positioning the business as one of Europe’s lead recyclers. It also continued to dispose of non-core businesses as it seeks to refocus its efforts on its core operations.

With RPC forecast to post a rise in earnings of 5% in the current year, followed by further growth of 7% next year, it appears to have a bright future. Its price-to-earnings growth (PEG) ratio currently stands at 1.6, which suggests that it may deliver improving investment performance over the long run.

Defensive growth

As mentioned, Diageo has defensive characteristics. It has a track record of being able to generate relatively impressive levels of sales and profit growth in operating environments that are generally unfavourable. For example, an economic slowdown may lead to a fall in demand for a wide range of products, but alcoholic beverages may remain popular. This could be relevant given the uncertain prospects for the world economy, as tariffs and rising US interest rates start to bite.

Diageo, though, also offers strong outright growth prospects. The company’s current strategy is causing it to refocus its efforts on core brands where it believes it may have a competitive advantage versus sector peers. Although downsizing its brand portfolio may reduce its level of diversity, it could allow it to concentrate its efforts in areas where its capital can most effectively be utilised.

As such, the prospects for the stock appear to be relatively sound. It could provide investors with a favourable mix of defensive and growth characteristics, while the long-term tailwind, which may be provided by emerging markets, could have a positive impact on its growth rate. Therefore, it could be worth buying now, offering the potential for FTSE 100 outperformance over the coming years, in my opinion.

The post Could the Diageo share price beat the FTSE 100 and help you retire early? appeared first on The Motley Fool UK.

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Peter Stephens owns shares of Diageo. The Motley Fool UK has recommended Diageo and RPC Group. 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.

Following recent media speculation, RPC confirmed that “preliminary discussions are taking place with each of Apollo Global Management and Bain Capital which may or may not result in an offer for the company.” The shares are trading at around 830p, as I’m writing, valuing the business at £3.4bn. Is the company now fully valued? Or could the shares, which reached an all-time high of over 1,000p early last year, climb a lot higher yet?

Concerns

When I last wrote about RPC in June, I marked it as a stock to avoid. This was due to my concerns about three things: plastic regulation, potential aggressive accounting masking a weaker underlying business, and a rising number of hedge funds holding short positions in the stock — nine at the time, with positions totalling 6.74%.

RPC’s management set out to appease investor concerns about its balance sheet and cash flows, including by identifying non-core businesses for disposal. However, short interest in the stock continued to rise, with 12 institutions having disclosed short positions totalling 10.22% prior to today’s news.

Still a stock to avoid?

At the current share price, RPC is valued at around 11 times forward earnings and has a prospective dividend yield of 3.6%. The earnings multiple remains relatively cheap, which could suggest there’s further upside for the shares.

However, the interest of private equity is only tentative at this stage. Apollo and Bain both have until 8 October to either announce an intention to make a firm offer for the company or walk away. A bid or bidding war could send the shares higher but I wouldn’t buy the shares as a bet on such an outcome. The concerns I had about the business in June haven’t gone away, so I continue to see RPC as a stock to avoid.

Premier investment

Another company whose shares have recently soared on M&A news is FTSE 100 giant Whitbread (LSE:WTB). I was very bullish on the stock, which was then trading at around 4,000p. I reckoned there was a potential 30% upside to 5,200p by the end of the year.

My enthusiasm for the owner of Costa Coffee and Premier Inn was due to Whitbread having announced a commitment to demerge Costa. I saw great potential for the two businesses to better thrive as separate entities. But I also suggested there was “a fair chance value could be outed sooner rather than later by a bid for Costa before the demerger.”

On 31 August, Whitbread announced it had agreed to sell Costa to The Coca-Cola Company for £3.9bn. The UK firm’s shares soared on the news and are currently trading at over 4,700p. I believe Whitbread got a good price for Costa and is now strongly placed to focus on its growth plans for Premier Inn. I would still happily buy the stock on its current rating of 18 times forward earnings, with a prospective 2.2% dividend yield.

The post Is the RPC share price a bargain after rocketing 25% on takeover talks? appeared first on The Motley Fool UK.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended RPC Group. 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.

Indeed, such is the size of dividend yields over at one of these shares, Persimmon, that I reckon investors could use the housebuilder to help them to pack in the day job.

My quest for other potentially game-changing income shares has uncovered Assura (LSE: AGR), a FTSE 250 share that has lifted dividends by more than 80% during the past five years, and whose forward yields smash the main market average of 3.9% by some distance.

City analysts expect the total dividend to move to 2.6p per share in the year to March 2019 from 2.455p a year earlier, a prediction that creates a juicy 4.8% yield. The dial edges to 5.2% for fiscal 2020 thanks to predictions of a 2.8p payout too.

In great health

The number crunchers are really quite bullish over Assura’s profits picture — rises of 10% and 7% are predicted for this year and next alone — and it’s not surprising as Britain’s ageing population requires the NHS to keep investing heavily in its facilities.

The company, which invests and develops primary care properties in the UK such as GP practices, also remains busy on the M&A trail to drive business. It had 525 medical centres on its books with a total annualised rent roll of £92.3m as of the close of the second fiscal quarter, and the launch of a £300m bond in July gives it further firepower to execute its growth strategy (its pipeline already stood at a chunky £225m as of June).

Plastic fantastic

Now Assura doesn’t come cheap, the firm sporting a forward P/E ratio of 19.7 times, which sits outside the widely-regarded value territory of 15 times and below. Whilst I reckon its leading position in this particular defensive medical market warrants a ‘lively’ premium, investors on the hunt for classic value may be more interested by RPC Group (LSE: RPC) which carries a prospective earnings multiple of 9.2 times.

Although concerns over the way the company funds acquisitions has weighed on its share price more recently, I believe that these fears are now baked into the plastics packager’s rock bottom valuation. The FTSE 250 play has pruned its operations and divested non-essential divisions to boost its balance sheet to help it continue on its M&A-led growth path in recent times too.

Moreover, whilst fears over plastics regulations from the EU have also put a dampener on investor appetite in 2018, RPC’s drive to develop its products with customers in line with modern environmental concerns should still provide the scope for it to keep winning plenty of business.

Dividends have risen for 25 consecutive years over at RPC, culminating in a reward of 28p per share for the year ended March 2018. It’s no surprise that expectations of further profit growth (of 5% this year and 7% next year) lead the City to anticipate extra significant payout growth as well.

A 30.2p reward is anticipated for the current fiscal year, meaning a chunky yield of 4.3%. And in fiscal 2020 the dial moves to 4.7% thanks to the predicted 32.5p dividend. RPC remains a stock to buy today and hold for years, in my opinion.

The post 2 FTSE 250 dividend stocks that could help you quit your job appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended RPC Group. 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.

Historic returns

Over the past decade, plastics producer RPC (LSE: RPC) has generated outstanding returns for investors. The stock has produced a total return of around 26% per annum since August 2008, turning £1,000 into £13,100. 

However, over the past 12 months, shares in the company have struggled as investors have started to voice concerns about the group’s growth strategy. In particular, stakeholders are concerned that RPC has been expanding too fast, and using aggressive accounting to flatter returns from new investments. Some shareholders are also worried about RPC’s role in a world that’s moving away from plastic packaging. 

The good news is, the company has not ignored investors. Management is now trimming the group’s business portfolio, exiting non-core businesses, and using the funds generated to expand further into the areas where it has the most experience. 

Today, RPC updated the market on this strategy. So far, the firm has divested its foodservice business of Letica Corporation for a total of $95m. Other divestments are also in the pipeline, including the sale of the European injection moulding automotive business. 

As well as these asset sales, it also today announced that the company is splashing out just under £34.5m to buy PLASgran, a leading UK recycler of rigid plastics. 

In my view, these actions show that management is committed to turning RPC around. There are still some accounting issues to sort out (namely the low percentage of profits that are converted to cash), but it looks as if CEO Dr Pim Vervaat and team are taking shareholder concerns seriously.

As there’s already plenty of bad news factored into the stock (the shares are trading at a forward P/E of 9.7 and yield 4.1%), I reckon it won’t take much for investors to return as concerns about the state of the business peter out. And as RPC returns to growth, based on its past performance, investors should be well rewarded. 

The best profit margins

Moneysupermarket.com (LSE: MONY) is another FTSE 250 superstar I’ve also got my eye on. 

Over the past five years, shares in the online comparison site have charged higher, registering a total return of 15% per annum. With City analysts expecting earnings per share to rise another 15.2% over the next two years, I reckon this trend isn’t going to come to an end any time soon. 

Indeed, even though shares in the business currently trade at a forward P/E of 16.5 (compared to the market average of 13.3), this is a 21% discount to the broader IT sector. 

I believe the shares deserve to trade at a premium to the rest of the IT sector. With an operating profit margin of 30% and return on capital employed (a ratio of profit for every £1 invested in the business) of 55%, Moneysupermarket is one of the market’s most profitable businesses, which means it deserves a premium valuation. Management is recycling profits into bolt-on acquisitions to boost growth, and there’s a 3.9% dividend yield on offer. 

The post These 2 FTSE 250 income growth stocks could help you quit your job appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Moneysupermarket.com and RPC Group. 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.

Over the past 10 years, it has been able to capitalise on the rising demand for innovative plastic products and packaging. It has expanded through a combination of both organic growth and bolt-on acquisitions, which have allowed it to access both new markets and new intellectual property. 

The group has proven itself to be remarkably adept at executing this strategy and over the past five years alone, net profit has risen 10-fold.

Shareholders have been handsomely rewarded following this growth. RPC’s dividend per share has increased from 6p in 2008 to 28p for this year. But dividend growth is only part of the story. Relentless profit growth has also translated into capital gains. Over the past decade, the stock has produced a total return of 24.9% for investors, turning a £1,000 investment into £11,000 today. 

I believe this is just the start of RPC’s growth story. 

Expanding around the world 

Over the past five years, it has been investing heavily to take advantage of rising demand in China. It has also been investing in the production of new recyclable plastics. It is my view that RPC’s position in the industry gives it a unique edge over smaller peers to adapt to the global shift towards more eco-friendly products. 

Despite the company’s efforts, it seems the market is not willing to give it the recognition it deserves. As they flee the stock, investors have sent the shares plunging by 26% over the past 12 months. 

According to management, these declines are now weighing on growth plans. Chairman Jamie Pike published a statement alongside a pre-AGM trading update this morning and said: “Pressure on the company’s market valuation and differing investor views on the appropriate level of leverage is constraining the group’s ability to pursue some attractive opportunities for growth.“

Be greedy when others are fearful

Based on this feedback, management is now looking to de-lever the business and sell off non-core assets. Personally, I believe cleaning up the balance sheet is probably the best course of action for the firm.

Debt does not pose a threat just yet (at the end of 2017 RPC reported a net debt-to-EBITDA ratio of 2), but I would rather the group took action to stabilise the balance sheet before it’s too late. 

Looking at last year’s figures, reducing debt shouldn’t be too much of a struggle. Asset sales will help, and free cash flow for 2017 was £229m, compared to a net debt balance of £1.1bn. The group has already identified some non-core businesses for disposal. 

In my opinion, RPC’s management has already proven to investors over the past 10 years that it can successfully set a strategy and execute it. With this being the case, I’m confident that the group’s self-help strategy will yield the desired results. The enterprise will come out stronger and better placed for growth on the other side. 

Today you can buy into this growth story for just 9.9 times forward earnings, and there’s a 4% dividend yield on offer as well. To quote Warren Buffett, I believe now is the time for investors to be greedy while others are fearful.

The post This mid-cap has already turned £1,000 into £11,000. Time to buy? appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended RPC Group. 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.

Before I discuss why this battered FTSE 250 firm’s share price keeps falling, let’s take a look at the latest results and valuation of the company.

Strong numbers and cheap valuation

The headline numbers were strong. Revenue increased 36% (with 2.8% organic growth boosted by acquisitions), statutory operating profit rose 85% and statutory earnings per share (EPS) advanced 66%.

The profit numbers were still very decent on the company’s non-statutory adjusted measures, with adjusted operating profit up 38% and adjusted EPS up 16% to 72p. The board increased the dividend to 28p, representing a hike of 17% on the prior year and the 25th year of consecutive dividend growth.

At the current share price, the price-to-earnings (P/E) ratio is in the sub-10 bargain basement at 9.4 and the dividend yield is a tasty 4.1%. What’s not to like?

Why the share price keeps falling

I see a number of factors as significant, since the all-time high of the shares in January last year. Two months after the high, a scathing report on the company was published by Northern Trust, advising its clients to sell the stock. It reiterated this recommendation in a further report in July, following RPC’s annual results.

Northern Trust suggested that RPC’s multiple rights issues and acquisitions and “some of the most aggressive accounting we have seen” mask an underlying business that is delivering few real gains in true net income and free cash flow.

Following on from this and with rising concerns about plastics regulation, disclosable short positions in RPC took off in October, rising to over 3% by the year-end and to over 6% by the end of the first quarter this year. Currently, nine institutions have disclosable short positions, totalling 6.74% of the stock, and are thus positioned to profit from the company’s falling share price.

Bulls and bears

Returning to today’s results, some of the less impressive numbers were a drop in adjusted operating cash conversion to 77% from 95%, a fall in return on capital employed to 14.8% from 15.2% and a 4% decline in free cash flow to £229m. Bearish Northern Trust calculates free cash flow at £160m and, needless to say, retains its sell rating.

I should make it clear that there are plenty of fans of RPC among City brokers, fund managers and private investors, as well as my Foolish colleagues, who have praised its dividend record and argued that its growth outlook seems solid. Indeed, bears are very much in the minority.

Scanning private-investor chatrooms this morning, there was an air of disbelief at the market’s response to RPC’s results and amazement that the company is now trading on such a low P/E and generous dividend yield. A number of bullish brokers have also come out and reiterated their recommendations to buy the stock.

However, despite the cheap valuation, I personally find Northern Trust’s analysis of the company and the number of shrewd hedge funds holding short positions sufficiently concerning to see RPC as a stock to avoid.

The post Here’s why this battered mid-cap’s share price keeps falling appeared first on The Motley Fool UK.

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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended RPC Group. 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.

Missed the bus

FirstGroup posted a statutory £326.9 loss before tax, against profit of £152.6m last year. This principally reflected goodwill impairments and other asset charges totalling £277.3m at its Greyhound operation, partly blamed on severe weather and driver shortages, although the biggest problem was structural. Like-for-like revenue growth of 0.7% “was insufficient to offset long-haul demand challenges from intensifying airline competition” as budget operators significantly increased capacity and extended into new markets.

The group was further hit by an onerous contract provision on its TransPennine Express (TPE) rail franchise, which booked a £106.3m loss, and many blame FirstGroup management’s excessively optimistic assumptions when it initially bid for the contract. Statutory revenues did rise 13.2% to £6.4bn, but the positives were swamped by the negative numbers.

Greyhound bites

Chief financial officer and interim chief operating officer Matthew Gregory said forward group adjusted earnings should be broadly stable, with opportunities to improve the margins, returns and cash generated from its road divisions (which together represent more than four fifths of the group’s adjusted profit), while its rail portfolio should also make a positive contribution.

However, my Foolish colleague Royston Wild saw today’s skid coming, previously warning that its UK and US bus operations face colossal struggles, which are reflected in its lowly current forward valuation of 8.6 times earnings. The group recently rejected what it called an “opportunistic offer” from private equity company Apollo Management, but such high-mindedness does not sit well today. The challenge from budget airlines is not going to disappear. Yes, the valuation looks low, but there is a good reason for that. I think I’ll wait for the next bus.

Plastic people

RPC Group (LSE: RPC) has also given investors a bumpy ride lately, its share price down 15% in the last six months. It specialises in rigid plastics packaging which is now threatened by the war on the growing tide of waste clogging up the planet.

The threat overshadowed a strong Q3 for the FTSE 250 group, which posted a 31% rise in year-on-year revenues to £898m, boosted by acquisitions and organic growth. Management also said it was working with governments to reduce plastic waste and noted that many of its products are already recyclable.

Easy as RPC

My Foolish colleague Alan Oscroft is a fan of the £3.23bn group, noting that RPC has increased its dividend for each of the last 25 years. It currently offers a forecast yield of 3.8%, covered 2.5 times, with operating margins of 10.7%.

Its growth outlook seems solid, with earnings per share forecast to increase 8% in the year to 31 March 2019, and 6% the year after. By then, the yield could be 4.1%. It has also gifted shareholders £100m in its buyback programme over the last year. Despite this, it trades at just 10.3 times earnings. RPC appears to have it wrapped.

The post One FTSE 250 bargain I’d sell and one I’d consider buying today appeared first on The Motley Fool UK.

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harveyj has no position in any of the shares mentioned. The Motley Fool UK has recommended RPC Group. 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.

If you’re investing for the long term, I reckon there are two key things to look for in a dividend, strong cover by earnings and a history of progressive annual rises.

Challenger bank

Virgin Money Holdings (LSE: VM) has only been a listed company since November 2014, so its track record is relatively short. But since its first dividend in 2015, of a modest 4.5p for a 1.2% yield, it’s been growing well ahead of inflation.

A 13% hike in 2016 followed by a further 17% last year took the yield to 2.1%. And though that initial rate of growth can’t be expected to continue, analysts are still forecasting a 6% uplift this year followed by another 9% in 2019. That would bring the yield up to 2.6%.

That’s clearly well ahead of inflation, but is Virgin Money likely to maintain this impressive start and get actual yields up to something decent? I think so, for several reasons.

Firstly, in these early days the bank’s dividend policy has been very conservative, with 2018’s expected payment more than six times covered by earnings. By contrast, Lloyds Banking Group has a predicted 5.3% yield, around twice covered, and Barclays‘ 3.1% would be covered three times.

If Virgin were to go for cover of three times this year, we’d be looking at dividend yields of 4.4%, with twice cover yielding 6.6%. But right now, the cash is better spent on growing the business.

This year is off to a strong start, with first-quarter gross mortgage lending of £1.4bn and net lending of £0.2bn in line with expectations. Retail deposits are doing better than expected, and overall full-year guidance has been confirmed.

Chief executive Jayne-Anne Gadhia spoke of “10.4% year-on-year growth in our mortgage book,” and that’s from a small bank in a big market with plenty of room for further growth.

Decades of growth

If you’re looking for a terrific long-term record, they don’t come much better than my second pick, RPC Group (LSE: RPC).

One of the world’s leading suppliers of rigid plastics packaging and plastic containers, RPC has upped its annual dividend for 25 years in a row. And with forecasts suggesting further earnings growth, analysts are expecting serious inflation-busting dividend rises of 15% this year and 9% annually for the following two years.

If that proves accurate, this year’s mooted 3.4% yield would climb to 4.1% by 2020, with dividends covered around 2.5 times by earnings.

On top of these attractive dividends, RPC has been handing back further cash to shareholders via a £100m share buyback programme since July 2017. It hasn’t actually made much difference to the share price in a year, but it is up 160% over five years. And the shares are trading on what I see as a very tempting P/E multiple of 11.3, dropping to 9.9 on 2020 forecasts.

Again, this year is looking good so far, after March’s trading update told us the “positive trading trends outlined in the third quarter update have continued, and revenue for the full year is expected to have grown significantly versus last year.“

The post 2 FTSE 250 stocks with soaring dividends I’d buy with £2,000 today appeared first on The Motley Fool UK.

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Alan Oscroft owns shares of Lloyds Banking Group. The Motley Fool UK has recommended Barclays, Lloyds Banking Group, and RPC Group. 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.

When I last wrote about RPC Group (LSE: RPC) in February I lauded the environmental factors that are underpinning demand for the company’s portfolio of recyclable plastics.

Investor appetite has still failed to kick in since then and I believe the market is missing a trick here, particularly in light of more encouraging trading data that has come out.

RPC declared at the back end of March that “the positive trading trends outlined in the third quarter update have continued, and revenue for the full year is expected to have grown significantly versus last year.” The FTSE 250 company said that on top of solid organic growth, the impact of recent acquisitions, polymer prices and support from foreign exchange movements had all helped to drive the top line.

Dividends pounding higher

Reflecting the bubbly fourth-quarter result, City brokers are predicting earnings growth of 14% in the year to March 2018. And they reckon RPC has plenty left in the tank too, with current forecasts pointing to profits advances of 8% and 6% during fiscal 2019 and 2020 respectively.

This is no surprise as the plastics powerhouse develops its products in line with the industry’s environmental standards. What’s more, the company’s appetite for M&A action also lends support to predictions of strong revenues growth in the near term and beyond. Indeed, RPC commented last month: “The global packaging market continues to consolidate and… growth through acquisition remains an important part of the group’s strategy. RPC continues to build a healthy pipeline of opportunities.”

With earnings and cash generation expected to remain solid, dividends should keep rising at a fair lick as well. The projected 27.6p per share reward for the last year is predicted to swell to 30.3p in the current period and again to 33.2p next year. As a consequence, yields for fiscal 2019 and 2020 clock in at a chubby 3.8% and 4.2% respectively.

As RPC is also carrying a dirt-cheap forward P/E ratio of 10.4 times as I write, I reckon there is plenty for cost-conscious share pickers to get their teeth into today.

Steer clear

But those seeking stocks for brilliant dividend growth in the near term should look beyond forecasts for FirstGroup (LSE: FGP) and give it a wide berth, in my opinion.

The Square Mile’s army of brokers are expecting the transport titan to bounce from a predicted 2% earnings slip in the year to March 2018 with a 12% rise in fiscal 2019. They are also anticipating that a (projected) 1.6p per share dividend for last year will almost double to 3.2p in the present period.

This means the yield stands at 2.7%. What’s more, the extra 3% profits rise expected in fiscal 2020 results in an estimated 3.8p dividend, nudging the yield to a decent 3.3%.

At current prices FirstGroup changes hands on a prospective forward P/E multiple of 8.4 times. But this is a mere reflection of the company’s colossal struggles for its bus operations in both the UK and US, troubles that are in danger of persisting long into the future. There are much better stocks in the FTSE 250 for dividend chasers to tap into, RPC being just one of them.

The post A FTSE 250 dividend bargain I’d buy with £2,000 today appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended RPC Group. 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.