Sadly, Sainsbury’s has failed to deliver either of these benefits over last 20 years. Here’s how the stock has performed since 1999:

Although a few lucky investors have made money by buying during the dips and selling at short-term highs, the share price has delivered poor returns for many investors. Indeed, the shares have basically drifted lower since 1995, as this chart shows:

The dividend hasn’t been all that reliable either. The payout was cut by 50% in 2005. After regaining the lost ground, it was then cut again in 2015, 2016 and 2017. This year’s forecast payout of 10.7p per share is 38% less than the 2014 dividend of 17.3p.

What’s the problem?

Back in November, I explained why Sainsbury’s profit margins have continued to fall despite its acquisition of Argos. In short, most of the products sold by Argos appear to be even less profitable than groceries. So while sales have increased, profit margins have fallen.

Chief executive Mike Coupe hopes that a proposed deal to merge with Asda will solve the group’s problems. Combining the two would create a firm with sales to rival those of Tesco. The company estimates that cost savings and improved buying power could add £500m to earnings before interest, tax, depreciation and amortisation (EBITDA).

Sainsbury’s successful integration of Argos suggests that the firm might be able to pull off a complex merger with Asda. But this deal remains a risky and challenging project and has not yet gained regulatory approval.

In the meantime, Christmas trading was tough for the group. Despite recent falls, an uncertain future means that the supermarket’s shares look fully priced to me at the moment. I think there’s better value elsewhere.

Here’s one I’d buy

If you’re looking for a defensive income stock, then I think ingredients producer Tate & Lyle (LSE: TATE) could be a better buy.

The sweetener specialist’s dividend has been much more reliable than Sainsbury’s. As far as I can tell, Tate & Lyle’s payout has only been cut once since 1992. Even then, it was restored to its previous level after just one year.

The FTSE 250 firm’s share price has also performed better. Tate stock has risen by almost 75% over the last 10 years. Although the shares have fallen over the last five years, I believe this could be a buying opportunity.

A buy-and-forget stock

Rapid growth seems unlikely, but Tate & Lyle’s earnings have continued to inch ahead in recent years. Debt levels are low and cash generation is generally good.

The shares currently trade  on 13 times forecast earnings, with a 4.5% yield. That looks like a decent buying level to me. I see this as a buy-and-forget stock that will provide a reliable income for many years to come.

The post Why I’d avoid the Sainsbury’s share price and buy this FTSE 250 dividend stock appeared first on The Motley Fool UK.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Tesco. 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.

One way to earn a place in my retirement portfolio is to deliver market-beating growth over long periods. A company that fits this description is travel catering specialist SSP Group (LSE: SSPG).

This firm operates branded and franchised food outlets at airports, railway stations and motorway services. It currently operates more than 2,500 units in over 30 countries. The company’s brands include Ritazza, Upper Crust and James Martin Kitchen in London.

Although SSP has been in business for 50 years, it only floated on the London market in 2014. Since then, the firm’s shares have nearly tripled in value. Profits have also risen rapidly.

Tasty growth in Q3

In a trading statement on Tuesday, the group said that its revenue rose by 7.3% during the third quarter of its financial year, excluding currency effects. This figure was broken down into like-for-like sales growth of 2.7%, new contract wins worth 3.3% and a 1.3% increase from a small acquisition.

This diverse mix is one of the attractions of this stock for me. There’s a lot of room for growth in this market. Although profits can be affected by short-term dips in passenger numbers, I think it’s fair to assume that passenger numbers will keep rising over the long term.

Expensive but worth it

This business is a significant player in a large, growing market. And it’s surprisingly profitable. Although the group’s operating margin is only about 7%, return on capital employed (ROCE) has risen to 18.5% over the last 12 months.

These high returns are backed by strong cash generation. This has allowed the firm to double its profits since 2015, while reducing net debt.

SSP Group shares currently trade on 28 times 2018 forecast earnings. Although that’s not cheap, I believe the group’s long-term growth potential justifies a hold rating here. I’d aim to buy on the dips.

A 4.7% yield I’d buy

SSP’s growth potential impresses me, but its 1.5% dividend yield isn’t that exciting. To improve the income yield of my retirement portfolio I’d also like to include a few high-yield stocks as well.

One company that would be near the top of my list would be ingredients firm Tate & Lyle (LSE: TATE). This business may lack the excitement of a growth stock, but this FTSE 250 firm offers a forecast dividend yield of 4.7% and hasn’t cut its payout for at least 15 years. This kind of consistency can be very valuable for retirement investors.

What about growth?

Tate & Lyle’s sweeteners and ingredients businesses are unlikely to deliver spectacular growth. But this company has been around for more than 150 years and is continuing to adapt to a changing food marketplace.

These efforts seem to be delivering results. Adjusted pre-tax profit rose by 13% to £286m last year, excluding currency gains. Adjusted free cash flow rose by £22m to £196m, helping the firm to cut net debt by £60m to just £392m.

Tate shares remain modestly valued, probably because profits are expected to be flat this year. But with the shares trading on just 12.5 times forecast earnings, I’d argue that this could be a good buying opportunity for long-term investors. I’d be happy to buy this stock today and forget about it for 20 years.

The post 2 FTSE 250 dividend growth stocks I’d buy and hold for my retirement appeared first on The Motley Fool UK.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of SSP 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.

With that in mind, here are two FTSE 250 shares which seem to offer high and sustainable dividend yields. They could be worth buying right now for the long term.

Volatile performance

Ingredients and solutions supplier to the food and drinks business, Tate & Lyle (LSE: TATE), has historically had a volatile bottom line. Due in part to the nature of its business and the impact of commodity prices on its margins, the company’s earnings have rarely offered a smooth, upward trajectory.

However, in the long term, the company could generate strong performance. It seems to have a solid strategy that could help to boost its financial performance, while also ensuring that dividend growth is above inflation in future years.

With a dividend yield of around 5.3% and a dividend coverage ratio of 1.6 times, Tate & Lyle appears to offer a sound income outlook. And with its price-to-earnings (P/E) ratio of 13 being historically low for the company, it could offer upside potential at a time when a number of its index peers may be starting to look overvalued after the FTSE 250’s capital growth of 43% in the last five years.

Improving performance

Also offering a mix of a high income return and low valuation is gaming company William Hill (LSE: WMH). It has been able to put a new strategy in place, which seems to be delivering improved efficiency and overall performance.

Of course, the wider gaming industry faces a relatively uncertain outlook. The company’s shares have been volatile in recent trading sessions due to fears surrounding higher taxes on gambling, as well as possible changes to fixed-odds betting terminals. There are concerns that changes to legislation could lead to reduced profitability across the industry.

While this is a potential risk to investors in William Hill, the company’s valuation appears to factor this in. It has a dividend yield of 4.1% from a shareholder payout that is covered twice by profit. This suggests that its dividend is sustainable, and that there is a margin of safety on offer as a result of its valuation.

Looking ahead, a bid approach for the company would not be a major surprise. It has been the subject of takeover talks in the past, and with the wider gaming industry experiencing a period of consolidation it could be a takeover candidate. Whether this takes place or not, though, the company appears to have a sound strategy, fair valuation and a sustainable high dividend return at the present time.

The post 2 FTSE 250 dividend shares I’d buy in May appeared first on The Motley Fool UK.

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• Is the 8.7% yield on this FTSE 250 stock too good to be true?

Peter Stephens 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.

Personally I don’t sell dividend stocks based on share price movements alone. Unless I feel something serious has gone wrong, such as a major profit warning, I’ll sit tight. I may even buy more shares.

A potential bargain

The share price of motor and home insurer Hastings Group (LSE: HSTG) fell by 7% in early trade, after the company issued a first-quarter trading update.

Despite this poor reaction, the figures seemed quite good to me. Live customer policies rose to 2.67m, a 10% increase on one year ago. Net revenue rose by 12% to £184.5m during the first three months of the year. This increase in sales left the group’s share of the UK private car insurance market at 7.4% at the end of March, up from 6.7% one year earlier.

Although a surge of collisions in snow and ice during the quarter added to claims costs, management expects full-year claims levels to be within its target range.

Why I’d buy this fall

One reason for today’s slump could be another warning of “continued price competition”.

However, my reading of the figures suggests the group’s pricing power is still quite good. Net revenue per customer has risen from £257 to £275 over the last year. New digital technology is helping to cut costs and should help to speed up the claims process.

Hastings’ shares have now fallen by nearly 20% from their December highs of 320p. The stock now trades on 11 times 2018 forecast earnings with a prospective yield of 5.2%. This dividend looks safe enough to me. I believe the shares are a good buy for income at current levels.

Another 5% yield I’d buy and forget

Another company whose shares have fallen steadily this year is sweetener and ingredients specialist Tate & Lyle (LSE: TATE). Shares in this 150-year old firm have lost 25% of their value over the last year, even as trading stabilised and the dividend was maintained.

This company’s products are used in a wide range of processed and packaged foods, such as soups, sauces, cakes and soft drinks. Its customers include many of the world’s largest food producers.

If demand for this kind of convenience food ever changes dramatically, the firm could be wrong-footed and suffer falling sales in the future. Personally, I’m not too concerned by this risk. Tate & Lyle has adapted and survived for more than 150 years. I suspect it will continue to do so.

A sticky income

What interests me is that the stock looks like a low-risk dividend buy. Debt is low and cash generation is generally good. Profits have now stabilised after a difficult few years, and the group’s adjusted earnings are expected to rise modestly this year. 

Broker forecast put the stock on a forecast P/E of 12 with a well-covered yield of 5%. This dividend hasn’t been cut since at least 1997, the earliest date for which I could find records. In my view these shares could be an excellent buy for investors wanting a buy-and-forget income.

The post 2 FTSE 250 5% yielders I’d buy today and hold forever appeared first on The Motley Fool UK.

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• 5 years ago, £5,000 bought 3,185 Marks & Spencer shares. But how many would it buy now?
• Is the 8.7% yield on this FTSE 250 stock too good to be true?

Roland Head 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.

Outclassing competitors 

One that’s very much of interest to me is discount greeting card retailer Card Factory (LSE: CARD) which, in the year to January, paid out 9.3p in ordinary dividends alongside a 15p special dividend per share. Together, these offer shareholders a hard-to-beat 10.4% trailing yield.   

Now, management has already said it expects this year’s special payout to be in the 5p-10p range, which suggests a yield nearer to 7% than 10%. But this is still nothing to sneeze at. And at just 12.3 times forward earnings, the company’s stock is sanely valued for such an impressive dividend dynamo.

This low valuation isn’t without reason, though, as the company’s margins have contracted over the past year as higher input costs — due to the weak pound and increased staffing costs from the national living wage — have raised costs. Rather than pass these costs on to consumers, management has eaten them in the hopes of widening its price-led competitive advantage over higher cost-of-production rivals.

Thus far, this strategy is working with like-for-like sales growth accelerating to 2.9% last year which, together with 50 new store openings, helped boost revenues by 6% to £422.1m. EBITDA over this period did fall from £98.5m to £94m, which is why this year’s special dividend will be smaller. But I think this is a worthwhile short-term price to pay for gaining market share and squeezing rivals who, unlike Card Factory, have higher costs due to not owning their own design and print operations.

With the company still comfortably profitable, generating wads of cash and operating with a very healthy balance sheet with net debt only 1.72x EBITDA, I think Card Factory is a bargain income and a growth stock for long-term investors.

A renewed focus on profits pays off 

Another cheap income stock I’m looking at is Tate & Lyle (LSE: TATE), which trades at 11.4 times forward earnings and kicks off a healthy 5% dividend yield. The maker of speciality food ingredients, such as artificial sweeteners and bulk ingredients like corn syrup, has been trading very well of late, with sales for the half year to November up 6% year-on-year to £1,400m. Meanwhile, pre-tax profits leapt up 13% on a constant currency basis to £169m.

This performance was driven by good trading from both main divisions as customers continued to flock to non-sugar sweeteners in developed countries and prices for bulk commodities rose dramatically. Although the prices of bulk ingredients are volatile, the business has made good progress in recent years in driving more demand for the more reliable and higher margin speciality ingredients.

This has helped boost adjusted free cash flow from £92m in H1 2016 to a whopping £151m in the current year’s H1. And with net debt down to £371m at period end and earnings covering dividends roughly twice over, the company’s dividend payouts look very safe with considerable scope to rise. This makes Tate & Lyle one very attractive income share to me.

The post 2 bargain FTSE 250 stocks offering 5%+ yields I’d buy right now appeared first on The Motley Fool UK.

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Ian Pierce 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.

Standard Life Aberdeen (LSE: SLA) is in my view, one of the best retirement stocks on the market today.

Even though the company has had some problems over the past year, particularly the loss of Lloyds’ Scottish Widows’ business, it remains one of the largest asset managers and pension providers in the UK.

Scottish Widows represented 17% of the group’s overall £646bn of assets under management, but due to the fact the business was on a different contract to the rest of client assets, it only represents 5% of revenues. So, I do not believe that this will be a significant headwind for the company. 

City analysts seem to agree with this view. Analysts have pencilled in growth of earnings per share of 6.7% for 2018, followed by an increase of 5.5% for 2019. Based on these targets, shares in the asset manager are trading at a forward P/E of 13.3. 

And when it comes to income, Standard Life is currently one of the FTSE 100’s top dividend stocks with a dividend yield of 6%, more than 50% above the market average. Analysts believe that the distribution will grow in line with earnings over the next two years and is covered 1.3 times by earnings per share. 

Growing monopoly 

Standard Life has been managing retirement funds for nearly 200 years, and it is this heritage that gives it an edge over competitors. Meanwhile, Royal Mail (LSE: RMG) has its own advantage over its peers due to its UK wide distribution network that would cost billions for any competitor to replicate. 

Even though the company is facing increased competition and a decline in letter volumes, it is managing to offset these negative factors by investing overseas and streamlining operations here in the UK. Indeed, last year international parcel delivery income grew 9% and now accounts for 25% of total revenue and 40% of operating profit. 

Also, management is confident in hitting its £600m cost reduction target by 2017/18. As the company continues to invest in its overseas expansion, Royal Mail should be able to sustain its market-beating dividend yield. 

Analysts have the company yielding 4.3% this year and 4.5% in 2019 as the distribution grows in line with earnings per share. The stock currently trades at a forward P/E of 13.4, which is hardly cheap but seems suitable considering the group’s steady growth, market-leading position, and dividend income. 

Business transition 

Tate & Lyle (LSE: TATE) is my final income retirement pick, and once again, this is a company with a rich heritage. Founded in 1921, over the past few years the business has been transforming itself into a specialist ingredients producer, away from its traditional business of sugar supply. 

Following three profit warnings between 2014 and 2015, the company now seems to be back on track after announcing a 26% increase in first-half profits in November. Sales of new products are expected to hit $200m in 2020, up from $69m in 2014. 

Unfortunately, City analysts are expecting the company’s earnings per share to decline over the next two years as the tailwind from weaker sterling vanishes. Still, Tate’s dividend distribution is expected to increase in line with inflation, and with the payout covered 1.7 times by earnings per share, there’s plenty of room for this growth if earnings stagnate. 

The stock currently supports a dividend yield of 5.1% and trades at a forward P/E of 11.6 — a valuation that, in my opinion, more than makes up for Tate’s mixed outlook.

The post 3 dividend stocks I believe could be perfect for retirement appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Lloyds Banking Group and Standard Life Aberdeen. 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.

Profit from convenience

Dublin-based Greencore Group (LSE: GNC) is a major manufacturer of pre-packed sandwiches and ready meals for the UK and US markets.

The market for such products is massive and growing. Greencore is the UK’s biggest manufacturer of pre-packed sandwiches, producing more than 690m items each year. Sales of Food to Go products rose by 12.2% during the 13 weeks to 29 December, helping to lift UK revenue by 9.2% to £385.4m during the period.

The UK business is impressive and well established. But it’s already a market leader. Much greater growth potential exists in the US. Greencore has operated in this market since 2008, but took a big step up in scale at the end of 2016, when it acquired Peacock Foods for $747m.

An acquisition of this size takes time to digest and the group’s profits dipped last year. But this year’s results look more promising to me. US sales rose by 5.1% to £255.1m on a pro forma basis during the first quarter, with volume growth of 7%.

Capital spending is expected to fall this year, improving cash flow and positioning the group to start reducing debt levels.

Cheaper than a sandwich

At a last-seen price of 193p per share, Greencore stock is cheaper than a garage sandwich. It’s also likely to be a more satisfying buy, in my opinion.

This stock currently trades on a forecast P/E of 11.9, with a prospective yield of 3.1%. I’d rate the shares as a buy at these levels.

A sweet choice

Although Tate & Lyle (LSE: TATE) is often associated with the bags of sugar seen in every supermarket, these retail products are made under licence. The group’s main focus these days is producing sweeteners and other bulk ingredients for food manufacturers.

This company has had a difficult few years, including several profit warnings. But the outlook seems to be improving. The last few trading updates have all been positive and in line with expectations, suggesting performance is back on track.

The only ingredient that’s missing now is growth. Adjusted earnings are expected to rise by 5% to 49.3p per share this year. This puts the stock on an affordable P/E of 11.6, with a dividend yield of 5%.

This modest valuation may partly be due to an uncertain outlook for growth. Forecasts for 2018/19 suggest sales and earnings will be broadly flat, which could leave shareholders reliant upon the dividend for short-term gains.

It’s worth asking questions about growth, but in my view these concerns are not a reason to avoid this stock. The group’s balance sheet is strong and the 5% dividend yield should be covered comfortably by free cash flow and earnings.

I believe Tate has the financial capacity to make acquisitions, and it could even become a bid target.

If the core business continues to perform well, then I’m confident that management will find new opportunities for growth and shareholder returns. In the meantime, I’d rate this as a strong income buy.

The post 2 defensive dividend stocks I’d buy for uncertain markets appeared first on The Motley Fool UK.

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Roland Head has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Greencore. 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.

Defensive business

Tate is split into two divisions, Speciality Food Ingredients and Bulk Ingredients, two relatively defensive businesses that should see demand increase steadily as the world’s population demands more food. And according to a trading update issued by the firm today, this is precisely what is happening.

The group said that for the three months ended 31 December, the speciality ingredients core business “delivered good volume growth, including a continuation of modest volume growth in North America.” Meanwhile, on the bulk side of the business “profit growth is currently expected to be robust” for the fiscal period ending 31 March. Overall, the group remains on track to hit City forecasts for growth for the fiscal year to March.

Unfortunately, for the full year, City analysts are expecting the company to report a decline in earnings per share of 23%, mainly thanks to higher levels of investment, unfavourable currency movements, and higher ingredients costs. Still, even though Tate may not be the market’s next top growth stock, as an income play, it is highly attractive. 

The shares currently support a dividend yield of 4.4%, and the payout is covered 1.7 times by earnings per share. Over the past five years, management has strengthened the balance sheet by reducing net gearing to just 28%, which gives the company plenty of financial headroom. Finally, the shares are currently trading at a forward P/E of 13.1.

So, if you are looking for a relatively defensive, inexpensive stock to add to your portfolio as an initial income investment, Tate seems to me to be a great buy.

A retirement company for a retirement portfolio

Another income stock I’m positive on the outlook for is Standard Life Aberdeen (LSE: SLA). 

This retirement savings and investment manager is the perfect stock for income seekers who want to buy and forget their holdings. The very nature of the business means that management has to run the company with a retirement outlook because if they don’t, pension savers will avoid the business and its products. If Standard Life can maintain this reputation, the opportunity for growth over the long run is enormous as the demand for pension savings products will only grow as the world population ages (the recent merger has only improved the enlarged group’s outlook).

An enforced long-term mindset means that Standard Life’s dividend should be safer than most. Currently, the shares support a dividend yield of 5.7%, which is nearly double the market average, and trade at a modest forward P/E of 13.2. City analysts are expecting the company to increase its dividend by between 9% and 6% per annum over the next few years as earnings per share growth by a similar amount.

All in all then, as a starter income investment, Standard Life ticks all the boxes. The stock is modestly priced, offers a market-beating dividend yield, and the nature of the business should ensure the firm continues to grow for many decades.

The post 2 dividend stocks I’d invest £500 in today appeared first on The Motley Fool UK.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Standard Life Aberdeen. 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.

While the BoE may have increased its base rate for the first time in a decade this morning, bond yields across the board are still hovering perilously close to zero. Together with relatively low yields from equities due to soaring share prices, income investors would be forgiven for panicking. However, it’s not all doom and gloom as I believe the 8.8% yield offered by PayPoint (LSE: PAY) and 4.21% yield of Tate & Lyle (LSE: TATE) may make them attractive income stocks.

Cash, cash and more cash

For those who aren’t familiar, PayPoint works with 28,000 retailers across the UK and offers services such as point of sale terminals, bill payment, ATMs and click-and-collect parcel deliveries. While the company does work with some large chain retailers, its focus is on small corner shops, a market over which it essentially has a stranglehold.

This strong competitive position, together with operating an asset-light business, means sky-high profitability. In the year to March, operating margins rose to 42.2% and earnings per share hit 64.3p. Furthermore, by the end of Q1 in June, the company’s balance sheet held a full £39.3m in cash.

This excess cash and high cash flow are why the company can afford to pay out such hefty dividends. In fiscal year 2017, total dividends were 120.6p per share, comprised of a 45p regular dividend, 38.9p from the sale of a non-core business, and a 36.7p special dividend that will be paid out in each of the next few years unless management finds a suitable acquisition.

PayPoint is not a rapidly growing business, but the rollout of its next generation point of sale terminal and other retail services in the UK, together with its fast-growing business in Romania, offer the prospect of steady growth over the coming years. Add in a strong competitive position, very successful management team and a large dividend and I believe its shares may be a bargain at 15 times forward earnings.

Full steam ahead? 

Sugar and sweetener manufacturer Tate & Lyle’s H1 results released this morning held a nice surprise for income investors as management upped its dividend for the first time since 2015 on the back of double-digit profit growth. Analysts are now pencilling in a 4.5% yield for this year as the company benefits from a rebound in demand for artificial sweeteners and booming demand for bulk ingredients.  

For the six months to September, constant currency group sales were flat, but adjusted operating profits rose a whopping 20% thanks largely to increased volume and prices for its bulk ingredients, which includes high fructose corn syrup and the like. The rollout of new speciality artificial sweeteners also played its part as volumes rose 3% and left the company on track to hit its 2020 target of $200m in annual sales from new products.

Rising cash flow also improved the company’s financial situation with net debt down to just 0.8 times EBITDA. The company is also looking attractively valued at just 13.7 times forward earnings. However, I’d personally hold off buying its shares for now as the company’s high exposure to US-Mexico trade could prove troublesome if Donald Trump convinces the US Congress to heavily modify or pull out of NAFTA altogether. But if the status quo stands, Tate & Lyle could be a very tidy income stock to consider.

The post 2 bargain high-yield stocks to consider today appeared first on The Motley Fool UK.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK owns shares of PayPoint. 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.

Improving performance

Reporting on Thursday was ingredients specialist Tate & Lyle (LSE: TATE). The company’s full-year results showed progress has been made, with its adjusted pre-tax profit figure moving 20% higher. Both of its key divisions delivered good growth rates, with Bulk Ingredients increasing its adjusted operating profit by 32%. It was buoyed by strong commercial and manufacturing performance. Similarly, Speciality Food Ingredients recorded a rise in adjusted operating profit of 5%, with margin expansion being a positive feature of the year.

In terms of its income prospects, Tate & Lyle’s dividend yield of 3.6% is relatively attractive. Although 20 basis points lower than the FTSE 100’s yield, it is nevertheless relatively well-covered by dividends. In the financial year just ended, dividends were covered 1.9 times by profit. This indicates that a higher dividend could be warranted in future without putting the company’s growth outlook or financial stability under pressure.

Despite this, Tate & Lyle seems to be relatively overvalued at the present time. It trades on a price-to-earnings (P/E) ratio of 14.1 and yet is forecast to record a rise in its bottom line of just 4% in each of the next two financial years. Therefore, while it does have some income appeal for the long run, its share price growth could lag the wider index over the medium term.

High valuation

While the property sector faces a relatively uncertain outlook, property investment and development company Newriver Reit (LSE: NRR) appears to have a rather generous valuation. For example, it trades on a P/E ratio of 15.5 and yet is expected to report a fall in earnings of 5% in the current year. Certainly, its price-to-book (P/B) ratio of 1.2 may not be exceptionally high. However, at the present time a number of property-focused stocks offer either lower valuations or superior growth outlooks for the medium term.

Of course, Newriver Reit remains a relatively attractive income stock. It currently has a dividend yield of 6.2%. While dividends are only just covered by profit, property stocks do not generally require the same level of reinvestment for future growth as stocks in other sectors. Therefore, while dividend growth may be limited because of a potentially challenging outlook for the sector, the company’s current shareholder payout may prove to be sustainable.

However, with superior options within the same sector, there may be better opportunities for investors to generate a high return in the long run.

The post Are these income stocks getting too expensive? appeared first on The Motley Fool UK.

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Peter Stephens has no position in any 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.