Luxury goods

Global luxury goods manufacturer, retailer, and wholesaler Burberry CLSE: BRBY) sells via stores, concessions, outlets, digital commerce, and franchisees in department stores. The company also licenses third parties to manufacture and distribute products using the Burberry trademarks.

In January, the company delivered a robust third-quarter trading update and said full-price sales grew at a double-digit percentage compared with two years earlier. Burberry reckons it is attracting new, younger consumers to the brand. And the directors said they are “confident” of finishing the year strongly.

City analysts have pencilled in an increase in earnings of around 55% for the current trading year to March 2022 followed by a further uplift of around 12% for the year after that. But estimates could be missed if operational challenges arise to thwart progress.

Meanwhile, new chief executive Jonathan Akeroyd starts on 15 March. And new blood at the top could will bring new energy and enthusiasm to drive the business forward.

The share price is near 1,957p as I write and that leads to a forward-looking earnings multiple of just over 19. And the anticipated dividend yield is around 2.7%. That’s not a cheap valuation and could lead to some risk for me as an investor. But Burberry scores well against quality indicators and has growth ambitions. I think the stock would make a promising addition to my long-term portfolio.

Sausage skins

Devro makes collagen products for the food industry around the world — think sausage skins. The company delivered its full-year trading update in January. And the directors said revenue growth at around 5% in 2021 was “encouraging” with positive movements in volume, price, and mix.  

Operating profit will likely be “in line with expectations”. And that means an uplift of about 10% compared to the previous year. Looking ahead, City analysts expect earnings to increase by a mid-single-digit percentage in 2022.

And with the share price near 220p, the forward-looking earnings multiple is about 12 with the anticipated dividend yield around 4.4%.

The valuation looks fair. But I don’t think Devro will ever set my portfolio alight with high growth. Nevertheless, the business operates in a steady, defensive sector and the firm’s dividend record reflects that. The stock looks like a useful hold for the long term and I’d consider it now.

Healthcare

The third stock I’m tempted by today is global healthcare company GlaxoSmithKline (LSE: GSK).

With the final results report on 9 February, chief executive Emma Walmsley said the business ended the year strongly. And the company saw “another quarter of excellent performance driven by first-class commercial execution”. Looking ahead, she said 2022 started with good momentum. And the year will likely deliver “a step-change in growth” and multiple R&D catalysts. The company also plans to demerge its Consumer Healthcare business in 2022.

The recent share price of 1,630p throws up a forward-looking earnings multiple of around 13 when set against analysts’ expectations for a mid-single-digit uplift in earnings in 2023. And the anticipated dividend yield is around 3.3%. I think that valuation looks fair.

There are no guarantees that growth will materialise as expected. But I think GlaxoSmithKline is at an interesting point in its development. And I’d add the stock to my long-term portfolio now.

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Here are three cheap UK shares I’d consider buying if they fall far in price. Each currently changes hands for less than £3.50.

A defensive hero

We have to spend to fill our bellies even when broader economic conditions worsen. This is why I think Devro (LSE: DVO) could be a top stock to buy if it falls amid a broader stock market crash. This cheap UK share manufactures sausage skins that it sells across developed and emerging markets.

I’ve long liked Devro because of the massive investment it has made in fast-growing developing territories, China, in particular. Meat demand in these geographies is tipped to keep rising strongly as personal income levels rise. Indeed, Devro’s latest financials said that it enjoyed strong growth in Latin America, the Middle East, and Africa during the four months to October. I’d buy the business despite the threat posed to its operations by the growing popularity of vegetarian and vegan diets.

Riding the petcare boom

People in Europe are spending more and more money to keep their companion animals happy and healthy. This is what makes Animalcare Group (LSE: ANCR) such an attractive stock in my book. Analysts at the Business Research Company think the global animal medicine market will be worth $85.1bn by 2030. That compares with the $42.5bn it was estimated at in 2019.

I am aware, however, that Animalcare (like Devro) could be hit by the rise of meat-free diets. This is because the business supplies medicines for livestock as well as for pets in Europe. Indeed, a report by Smart Protein over the summer showed that 46% of Europeans had reduced their meat consumption on a 12-month basis. Still, I think the bright outlook for the petcare market offsets this threat.

A consumer goods colossus

I bought Unilever shares because I considered it to be a relatively secure place to park my money. Products like Dove soap, Magnum ice cream, and Domestic bleach give it a market-leading position in ultra-defensive food and household and personal goods markets. I am also considering snapping up PZ Cussons (LSE: PZC) for my portfolio because it shares the same qualities. Brands like Imperial Leather soaps have been excellent sales generators for the business for decades now.

PZ Cussons has a great track record of innovating its powerhouse labels to keep consumers interested. And it has supercharged marketing investment in the likes of Imperial Leather, too. I also reckon the business will benefit from changing consumer attitudes towards hygiene following the Covid-19 outbreak. Despite the threat of rising raw material costs, I think PZ Cussons (like Unilever) could thrive even if the economic recovery runs out of steam.

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For my part, I feel that smaller companies are often unfairly ignored in favour of established FTSE 100 plodders. Accordingly, here are two examples of the former I might consider.

Passive income provider

Miner Central Asia Metals (LSE: CAML) is first up. The diversified base metals producer operates a copper facility in central Kazakhstan. It also owns the Sasa zinc and lead mine in North Macedonia.

For those who believe that demand for metals (and particularly copper) is only going to rise in the years ahead, CAML’s outlook could be very positive indeed. This could/should lead to improving free cash flow and, as a consequence, steadily rising dividends for passive income seekers.

Central is currently predicted to return 14p per share this year. That’s a chunky yield of 5.7%. For perspective, the best Cash ISA pays out a ludicrously low 0.65%. What’s more, this handout looks likely to be covered over twice by profit, making it, in theory at least, very secure.

The investment case is further boosted when considering the valuation. A P/E of just under 8 looks seriously cheap, given CAML’s relatively low net debt and consistent operating margins of over 40%. 

Cheap market leader

Another small-cap option that’s grabbing my attention is collagen product manufacturer Devro (LSE: DVO).

Put simply, the £350m-cap provides the casing used in the production of sausages. That clearly doesn’t grab the attention in the same way as a glitzy tech stock. Then again, I’d probably prefer to own a global leader in a niche market rather than an unprofitable business in a highly competitive space.

Despite rising 33% in value over the last year, DVO shares trade on a little less than 13 times earnings. That looks good value to me. Returns on capital and operating margins have been improving in recent years. Debt has also been coming down.

As far as passive income is concerned, analysts have the company returning 9.27p per share for the current financial year. That’s a tasty yield of 4.4% at DVO’s current share price. Importantly, this payout is expected to be covered 1.8 times by profit. Like at CAML, that suggests dividends will actually be paid. To me, that’s far more preferable to firms promising too much and not delivering.

Never risk-free

Sure, no dividend stream is guaranteed. In fact, it can be one of the first things to be sacrificed when the going gets tough. It’s also worth highlighting other, more specific, drawbacks to investing here.

As far as CAML is concerned, the company clearly has no control over a volatile copper price. Moreover, mining is a notoriously tough sector, both in a physical and financial sense. The possibility of operations being interrupted by rising Covid-19 cases can’t be dismissed either.

Pandemic aside, DVO arguably doesn’t share these risks. However, it’s worth noting that the company hasn’t hiked its dividend by much over the years. Ideally, I’d want a payout to be increasing in order to outpace inflation. It’s not a killer blow, but it’s something to consider.

So, while I do rate both stocks as being cheap sources of passive income, the importance of staying suitably diversified shouldn’t be overlooked.

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Best dividend share in retail?

One of the big winners from the retail lockdown last year was B&M European Value Retail (LSE: BME).

The firm’s stores — which sell a value range of food, household goods, and seasonal items — were classified as essential retail and allowed to stay open. B&M’s out-of-town stores were easy to drive to and a more convenient size for a quick shop than larger supermarkets.

The group’s sales rose by 26% to £4.8bn during the most recent financial year, which ended on 31 March. Pre-tax profit doubled to £525m during the same period, while the dividend rose by 140% to 17.3p per share.

The company doesn’t expect this rate of growth to be maintained, and neither do I. But B&M’s mix of cheap staple items and ever-changing promotional items means that customers visit regularly. I expect many of the new shoppers who started visiting B&M stores last year will stay loyal.

Trading so far this year shows sales flattening out compared to last year. But the company is continuing to open new stores and is seeing strong growth with its store rollout in France.

The main risk I can see is that increased competition might put pressure on B&M’s profit margins and reduce the group’s growth potential. So far, I don’t see much sign of this. But I think it’s a real risk, given how successful the company has been.

I’d also be concerned if CEO Simon Arora or Trading Director Bobby Arora — who own 11% of the company — decided to leave B&M.

Of course, all investments carry some risk. I’m comfortable with the outlook for B&M and tempted by the stock’s 3.6% dividend yield, given the group’s record of growth. On a medium-term view, I think this could be one of the best dividend shares out there today.

I’d invest in sausages

Sausages are a popular food in pretty much all western cultures. They’re cheap, tasty, and easy to cook. One thing all sausages have in common is that they need a skin to hold the meat together.

That’s where my next pick, Devro (LSE: DVO), comes in. This £370m company is one of the world’s biggest suppliers of “collagen casings for food” — otherwise known as sausage skins.

This Glasgow-based company has been in business for 85 years and now serves customers in more than 100 countries. Perhaps its biggest challenge is to find ways to continue growing, when most of its largest markets are quite mature.

However, management say that demand from Asian markets is steadily increasing. I think the risks are already reflected in Devro’s valuation, which prices the stock on just 12 times forecast earnings.

Devro’s dividend hasn’t been cut for 20 years and currently offers a yield of 4.2%. I see this business as a below-the-radar choice that’s one of the best dividend shares on the market today. This stock is on the shortlist to buy for my portfolio.

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Newsflow surrounding a specific company can unexpectedly disappoint the market, causing it to plummet in value. Unforeseen external problems, like industry changes or broader economic upheaval, can also cause a stock to sink.

Last year’s stock market crash following the Covid-19 outbreak is a perfect example of this. Great UK shares were sold off heavily along with the bad.

That said, there’s no harm in buying stocks which could rise in value in the following days, weeks or months on one condition. That these UK shares will provide me with decent long-term returns irrespective of whether or not they rise in price in the near future.

Here are three of what I consider to be the best UK shares to buy for solid share prices in July. I’d buy them today and be happy to hold them for years.

#1: A tasty business

I think the Devro share price could rise strongly when it releases half-year results on Tuesday, 27 July. The sausage skins-maker has the wind in its sails right now, thanks to strong demand in Asia and Latin America.

Sales to these regions were up 15% in the four months to January 29, latest financials showed. And I think these emerging regions could deliver terrific profits at the UK share in the years ahead as wealth levels increase.

Devro is targeting average annual growth of 6-10% in developing territories through ongoing investment in headcount and production capacity. I think this firm’s a great buy despite the threat the growing popularity of meat-free diets pose.

#2: A top UK dividend share

I also think DCC’s share price could balloon when it releases its own trading update tomorrow (16 July). But this isn’t why I’d buy the FTSE 100 share for my own stocks portfolio right now. Instead, I’d buy it for the fact it’s raised dividends every year for more than a quarter of a century.

DCC provides sales, marketing and support services across four divisions (LPG, Retail & Oil, Technology and Healthcare). And its long and exceptional record when it comes to acquisitions has enabled it to keep growing profits despite the pressures created by the Covid-19 crisis.

I’d buy this UK share despite the threat to the oil and gas industries as green energy becomes increasingly popular.

#3: Home run

Emergency callout specialist Homeserve is also set to update the market on Friday, 16 July. And I’m expecting another encouraging update here too as its North American operations click through the gears.

Revenues on the other side of the Atlantic jumped 22% in the financial year to March as customer numbers increased by 300,000 to 4.7m. It’s true that this UK share has a lot of debt on its books that causes some concern. But I’d still buy as its trading performance overseas gets steadily stronger.

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I’m aware that dividend income is never guaranteed. Investors may not always get back as much as they invest when buying stocks and shares. As such, buying dividend stocks may not be suitable for all. Nevertheless, I’m comfortable with the level of risk involved. That’s why I would buy the two UK dividend stocks below for my portfolio today. 

UK dividend stocks on offer

The first company I would buy, with a dividend yield of 6.7%, is PayPoint (LSE: PAY). I think this is an overlooked electronic payments champion in the UK.

The company provides point-of-payment services and other facilities that let consumers pay for services, such as utilities, electronically. It provides a vital bridge between those in the economy who have digital skills and those who don’t. 

The business is highly profitable. Last year it reported an operating profit margin of 27%. This provides plenty of cash to facilitate the dividend to investors.

At the time of writing, the stock is trading at a forward price-to-earnings (P/E) multiple of 11.4. Analysts at Canaccord Genuity have a price target on it of 800p to 825p. 

The company faces some challenges as well. The digital sector is highly competitive, and it may be only a matter of time before a competitor comes to steal PayPoint’s lunch. Larger competitors such as PayPal have deeper pockets and more substantial brand recognition. 

Still, despite these risks, I would buy the stock for my portfolio of UK dividend stocks today, considering its market-beating dividend yield and valuation. 

Beating expectations

At the end of April, meat casings manufacturer Devro (LSE: DVO) announced that its sales had increased 4.6% in the first quarter of 2021. That followed a relatively robust 2020, despite the pandemic. 

Overall, analysts believe the group will report a modest decline in earnings this year. However, these are just projections at this stage. Based on the company’s first-quarter performance, it could be on track to outperform the City’s target. 

The City has also pencilled in a dividend yield of 4.4% for the year ahead. Once again, this is just a forecast, and there’s no guarantee the company will hit this target. The group has already warned that another wave of coronavirus could cause it to report a substantial decline in sales and profits for the year. This is the most considerable risk the business faces right now.

Despite this, I would buy the company for my portfolio of UK dividend stocks. The dividend yield of 4.4% looks attractive, and the firm is trading at a forward P/E of 12.6, which is not too demanding in my eyes. 

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Passive income for my Stocks and Shares ISA

When searching for dividend stocks, I always look at their track records to see whether the payments have been reliable. After all, there is no point in buying shares of a high-yielding business if that dividend is likely to be cut later.

This is how I stumbled across Devro (LSE:DVO). The company manufactures and sells collagen sausage casings. As unglamorous and boring as that sounds, it has proven to be an incredibly resilient business.

The pandemic created a challenging operating environment, and Devro’s Chinese facilities suffered continual disruptions. Yet despite this, the total revenue for the year only fell by 1%. And upon closer inspection, this drop appears to be linked to a slight decline in sausage prices rather than any problems with production volumes.

Devro is by no means a growth stock. But it’s certainly been acting like one lately. Over the last 12 months, the share price has increased by nearly 50%, rising far higher than its pre-pandemic levels. Combining that with an average annual 8% growth in dividends over the last 20 years makes Devro look like an excellent candidate for my Stocks and Shares ISA.

Risks to consider

Collagen is the primary ingredient in all of Devro’s products. It has established long-term contracts with specialised suppliers. But it is still exposed to potential supply chain disruptions and price fluctuations. The ingredient currently represents around 20% of the firm’s operating expenses. Therefore even small increases in price could have a significant impact on profit margins.

The firm also has to comply with food and safety regulations across multiple countries. These are in place to protect the health of Devro’s customers. But any changes could result in restricted product movement between territories and introduce complications to the manufacturing process. If the company cannot keep up with changing standards or accidentally breaches them, it could lead to competitors taking advantage and stealing market share.

The bottom line

Despite the rising share price, Devro still offers an attractive 4.6% dividend yield to its investors. That looks particularly enticing to me for my passive income portfolio, especially since the firm hasn’t cut or suspended any payments in over 20 years.

With the 2021 dividend already declared, and the demand for sausages not disappearing any time soon, I’m definitely considering adding the company to my Stocks and Shares ISA before the new tax year.

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I’ve continued to buy UK shares for my Stocks and Shares ISA despite the uncertain economic outlook. And I plan to add to my shares portfolio before that early April deadline comes into effect too.

Here are two quality British stocks that I’m thinking of buying in the near future.

#1: A high-tech UK share

I think businesses like Avast (LSE: AVST) could be some of the hottest growth shares for this decade. The broader IT services space is ripe with opportunity for UK share investors as the digital revolution rolls on. And those that specialise in tackling the growing threat of cyber attacks could prove exceptionally strong profits generators during the 2020s.

A new report from Vodafone illustrates the huge potential cost to British business alone of such attacks. It suggests that up to a quarter (or 1.3m to be exact) of small UK companies would collapse under the cost of a typical cyber hit. Incredibly the study suggests that 31% of domestic SMEs have seen an increase in online attacks since the first Covid-19 lockdown of last March.

I’m backing Avast to enjoy strong and sustained demand for its products in the post-pandemic landscape. Bear in mind though that this UK share doesn’t come cheap, trading on an elevated price-to-earnings (P/E) ratio of 21 times. This could cause a sharp share reversal if trading performance worsens for any reason. For example, US tech titans like Apple, Google and Microsoft all have the scale and the knowhow to potentially wallop smaller operators like Avast in their own backyard.

#2: Get some porky dividends!

I’m also considering buying sausage skin maker Devro (LSE: DVO) for my Stocks and Shares ISA. This UK share’s products aren’t anywhere near as complex as those of Avast. But they are also timeless and rising in popularity in fast-growing emerging markets as the wealth of these markets’ consumers continues to expand.

It’s why Devro built a new factory in China in 2016, and why I expect the food producer to keep investing heavily in Asia. A word of warning, however — the growing popularity of meat-free diets on ethical and environmental considerations may put a dent in future profits growth. Market researcher Euromonitor International predicts that demand for meat substitutes in Asia Pacific soared 11.6% year on year in 2020.

I think that Devro still merits serious attention at current prices though. Not only does the food share trade on an undemanding forward P/E ratio of around 12 times. The company boasts a meaty 5.5% dividend yield for 2021 too.

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There’s no guarantee that any of us will make big returns from share investing, of course. Unforeseen macroeconomic and company-specific factors can blow my expected returns well off course. But by doing diligent research and building a diversified portfolio, I have a great chance of creating some decent cash. The average stock market return sits at around 8% per year over an extended time horizon (say 10 years or more), studies show.

Here are two UK shares I see as great long-term buys for my ISA. And I think their share prices could spring higher in the days to come.

#1: A FTSE 100 hero

A string of positive trading updates from the housebuilders suggest that now could be the time for me to increase my holdings in Taylor Wimpey (LSE: TW). This FTSE 100 construction stock is due to release its own next set of financials on Tuesday, March 2.

Taylor Wimpey said last month that “sales and production [recovered] strongly towards the end of the year” as Covid-19 restrictions on building activity and property viewings were rolled back. It’s a result that also illustrates the strength of underlying demand. Indeed, favourable lending conditions and a long-running shortage of homes helped drive the company’s order book to a vast £2.7bn as of December. I’m expecting that upcoming release to confirm that interest in its homes has remained robust since the turn of 2021.

No UK share is completely without risk of course. And Taylor Wimpey is no exception. The eventual return of the Stamp Duty and changes to Help to Buy might hamper sales rates from the second half of the year. A long economic hangover from Covid-19 and our European Union withdrawal might also impact sales of its new-build properties.

#2: Another impressive UK share

Devro (LSE: DVO) is another quality UK share with the wind in its sails. The sausage skins maker declared in January that underlying operating profits for 2020 would be at the “upper end” of broker forecasts. It seems to have strong momentum going into next week when it will be unpacking full-year results. These are also slated for Tuesday.

Both sales and margins have continued moving higher at the food producer. This pays testament to market share gains with existing customers and new business wins in emerging markets. It also reflects the long-running success Devro is still enjoying in stripping down costs.

Devro might suffer in the short term from the ongoing Covid-19 crisis in Europe and the US. This has already caused production issues due to staff and meat shortages, and dented revenues due to the shuttered hospitality sector. I still think this UK share is a very-attractive growth stock for long-term investors like me though, thanks to its rising position in fast-growing emerging markets and its strong track record of developing popular cutting-edge products.

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Here’s a British stock, and a soon-to-be-listed US share, that are on my buying radar today.

#1: All aboard!

There’s a variety of ways investors can ride the electric vehicle (EV) revolution. One is to buy shares in Arrival, whose IPO is slated for the coming weeks.

This business has its operations in rural Oxfordshire but it’s about to begin trading on the NASDAQ with a value of $5.4bn. It has racked up $1.2bn worth of orders for its buses and its light commercial vehicles. The first of these are due to roll off the production line in late 2021.

Data from Allied Market Research suggests that Arrival is about to enter a hugely-lucrative market. It reckons the electric bus market will be worth a whopping $31.5bn by 2027. This is up from $18bn in 2019.

There are obviously risks associated with investing in Arrival at the time of its IPO. Stock prices can be extremely volatile in the few months following listing. And the true value of a UK or US share might not be fully apparent until the market excitement dies down. Said company might not actually be worth as much as you thought when you first bought in.

There’s also the fact that getting all the information you need to make a sound investment decision isn’t always available pre-IPO. Only once Arrival goes public will the nuts and bolts of its operations be fully open for the public to pore over. And often only after a prolonged period do any warning signs often begin to emerge. Not that I’m suggesting that some hidden nasties will come out of Arrival down the road, of course.

#2: A cheap UK food share

Now Devro’s (LSE: DVO) operations might not be as exciting as those of Arrival. This UK share is a giant in the field of making sausage casings. But its humble operations don’t make it any less of an attractive share, in my opinion.

Rising wealth levels in emerging markets provide excellent long-term profits opportunities for Devro. It’s boosting the amount that people in these far-flung regions spend on more-expensive meat-based food products. The business already has sales offices and manufacturing plants in China. And further expansion in developing regions can be expected later down the line.

The rising popularity of plant-based diets on ethical and environmental grounds provides some risk to Devro’s long-term profits outlook. There’s no guarantee that demand for pork products specifically will rocket in the years ahead either. Right now beef and poultry are the fastest-growing meat segments in Asia, for instance.

But City analysts reckon the UK share will enjoy 8% annual earnings growth in 2021. This leaves it trading on a low price-to-earnings (P/E) ratio of just 12 times. With the business also boasting a 5.4% dividend yield, I reckon it’s a very-attractive stock.

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