One company on my radar is full-service law firm Gateley Holdings (LSE:GTLY), which started life as a penny stock when it debuted on the London Stock Exchange nine years ago.

The Gateley share price isn’t trading in pennies currently — it’s £1.14 today. However, that’s much lower than its late-2021 peak above £2.57.

Here’s why I’m optimistic the shares could bounce back soon.

Industry innovator

Gateley presents a distinctive investment opportunity. Although UK law firms have been able to list on the stock market since 2011, only a handful have done so.

In fact, Gateley was the first to seek external investment with its AIM floatation. The vast majority of firms remain private businesses exclusively in the hands of lawyers.

It’s a lucrative sector, as I know from my days as a former City solicitor.

Choosing to go public isn’t the only way Gateley’s shown itself to be an industry pioneer. The firm’s completed 14 acquisitions over the past decade. Most of these have been non-legal enterprises, including chartered surveyors, property consultants, and tax incentive specialists.

These complementary services have been the main drivers of turnover growth recently and an important source of diversification. They now represent over a quarter of the group’s total revenue.

Many analysts believe this kind of hybrid business model will be increasingly common in the legal industry.

Indeed, the ‘big four’ accounting firms — KPMG, Deloitte, EY, and PwC — are a growing presence in the legal sector, having already become market leaders in consultancy.

I think it’s promising that Gateley’s recognised this trend early. It’s already ahead of many competitors in beefing up its consultancy offering and continued investment is a key priority for the board.

Ultimately, it may only be a matter of time before the firm’s expansion into new growth areas is reflected by a share price reversal.

Uncertainty and opportunity

However, a 15% slump in half-year adjusted operating profit to £8.6m, a drop in fee earner utilisation, and a certain degree of coyness about full-year guidance, have added uncertainty to the investment outlook.

In addition, some investors may have deeper concerns about buying shares in a listed law firm. Partnerships can be difficult to manage at the best of times, let alone when external shareholders are involved.

Nonetheless, I think these risks are amply compensated for by the chunky dividend yield. Pushed up by the share price fall, investors can now bag an 8.3% yield. That’s a very healthy dose of passive income.

Gateley’s valuation looks appealing too. A forward price-to-earnings (P/E) ratio of just 6.8 is well below the five-year average. That indicates to me there’s a chance the shares are now oversold.

The market might have reacted badly to the board’s comment that the full-year performance would be “more difficult than usual to forecast”, but lawyers are often cautious business people. Time will tell whether this was, in fact, prudent expectations management.

Overall, I think this stock’s worth considering before a potential share price recovery.

The post This ex-penny stock has an 8.3% yield and recovery potential! appeared first on The Motley Fool UK.

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Alliance Pharma

What it does: Alliance Pharma is in the healthcare market, and deals with the acquisition, marketing, and distribution of pharmaceutical products.

By Alan Oscroft. There’s no risky biotech or pharma research here. Alliance Pharma (LSE: APH) is in the consumer products business, and gets most of its revenue from Europe, the Middle East and Africa.

And it looks like it’s been a profitable business.

The stock has been highly valued in the past. But we’re looking at a forward price-to-earnings (P/E) ratio of around 13 now.

And with strong earnings rises expected in the next couple of years, that should drop to only a little bit over eight by 2025. If the analysts have it right, that is.

There are dividends, too, with a forecast 4.1% yield this year, rising to 4.7% by 2025 on current forecasts.

There are risks with this AIM stock, though. Profits have been a bit erratic, and we don’t know how solid these forecasts for earnings and dividends might turn out.

But I do like this combination of growth prospects and progressive dividends.

Alan Oscroft has no position in Alliance Pharma.

Gateley Holdings

What it does: Gateley is a full-service law firm with offices across the UK and a strategic overseas base in Dubai.

By Charlie Carman. Gateley (LSE:GTLY) became the UK’s first publicly listed law firm after its AIM flotation in 2015. Since most firms in the legal industry are structured as LLPs, rather than companies, Gateley shares offer investors a rare chance to gain exposure to this lucrative sector.

The Gateley share price has been on a downward trajectory in 2023, but strong H1 results suggest the sell-off might not be justified. Revenue grew 22% to £76.1m, underlying pre-tax profit increased 13% to £9.6m, and the dividend was boosted from 3.0p to 3.3p per share.

Granted, uncertainties exist regarding how listed law firms should be valued, including Gateley. After all, only a few have taken the IPO route, and the collapse of Ince Group earlier this year rattled investors in the niche sector.

Nonetheless, the AIM stock’s finances appear to be in good health. This could be a classic opportunity to be greedy when others are fearful.

Charlie Carman has no position in Gateley Holdings. 

Volex

What it does: Volex is a manufacturing company that specialises in power products. It serves customers in the healthcare, data centre, consumer electronics, and electric vehicle (EV) industries.

By Edward Sheldon, CFA. Volex (LSE: VLX) shares strike me as a great investment right now.

For starters, the company is doing well on the back of its exposure to the data centre and electric vehicle industries (it just partnered with Tesla). For the year ended 2 April 2023, revenue was up 17.6% year on year to $722.8m. Meanwhile, the company said that it was seeing high levels of customer demand in the current financial year.

Secondly, the stock is relatively cheap. At present, the forward-looking price-to-earnings (P/E) ratio here is about 13. I see that as quite low given the company’s level of growth. It’s worth noting that analysts at HSBC have a 510p price target for Volex, which is well above the current share price.

Finally, after a big pullback, the stock is now rising again. So, there’s positive share price momentum here.

Now, this AIM stock can be quite volatile at times. This is a risk to consider. However, I like the overall risk/reward setup. Taking a long-term view, I see a lot of potential.

Edward Sheldon owns shares in Volex.

The post Best AIM stocks to buy in September appeared first on The Motley Fool UK.

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Premier Miton

What it does: Premier Miton is a UK fund manager that provides a wide range of actively managed funds and investment trusts.

By Roland Head. Premier Miton (LSE: PMI) has had a tough year, but I think it could be the right time for me to buy shares in this well-respected firm.

It’s normal to see fund managers’ profits fall when markets slump. This is because their fee income is based on the value of assets under management.

However, while Premier’s share price has fallen by nearly 50% in 2022, pre-tax profit for the year to 30 September only fell by 15%. That’s left the stock looking cheap to me, trading on 13 times forecast earnings, with a dividend yield of 8.5%.

There’s obviously a risk that the dividend could be cut if market conditions worsen next year. However, I think it’s more likely that conditions will stabilise and the payout will be held.

In my view, this is a good opportunity to buy into this cyclical business. I think the shares could do well from current levels.

Roland Head does not own shares in Premier Miton.

Bioventix 

What it does: Bioventix produces monoclonal antibodies to sell to customers for use in commercial and research applications.  

By James J. McCombie: Bioventix (LSE: BVXP) is a £192m biotech stock that trades on the Alternative Investment Market (AIM). This small-cap biotech stock has growing sales and turns a profit. In fact, it’s been profitable for years and its bottom-line number is increasing. It generates plenty of free cash flow and pays a steadily increasing dividend. 

The stock is a little expensive compared to its industry and the wider market, trading at a P/E ratio of 23. However, for a company with increasing sales, a massive 79% operating margin, and consistent earnings power, I think it’s a price worth paying for the quality of the business. 

But new product development is a long and relatively expensive process to get all the way to approval. There is always a chance, as with all biotech and research-heavy companies, that what Bioventix risks today will not be rewarded in the future. 

James J. McCombie does not own shares in Bioventix 

On the Beach

What it does: On the Beach Group is a Manchester-based online retailer of beach holidays.

By Paul Summers. As a shareholder of On the Beach (LSE: OTB), I can’t say that 2022 has been all sunshine and fun. Notwithstanding this, I’m beginning to think the worst might be over.

Recent trading has been encouraging. Revenue for FY22 jumped 373% on the previous year and is back to pre-Covid levels. If this continues, I expect profit to seriously recover in 2023, especially as this small-cap already has a 20% share of its niche market.

That said, nothing can be guaranteed. Clearly, the consumer slowdown could delay a sustained rise in earnings and, ultimately, the share price.

I think the valuation of 12 times earnings takes account of this. Moreover, On the Beach’s finances look stable, helped by the fact that its online-only model means it can cut marketing spend quickly and painlessly if needed.

I’m considering topping up my position in this small-cap stock.

Paul Summers owns shares in On the Beach.

Mulberry

What it does: Mulberry is a British fashion company best known for its luxury leather goods, particularly women’s handbags.

By John Choong. Luxury stocks tend to hold up rather well during a recession. This is because of the Veblen effect, which is a phenomenon where consumers perceive higher prices to constitute higher value. As such, I’m expecting Mulberry (LSE: MUL) to benefit from this.

Its share price may be down over 20% this year, but recent developments surrounding its key market, China could spell strength for the luxury brand. After all, analysts at Shore Capital noted that Mulberry is “well positioned to deliver on the Asian-focused geographical expansion and potential product extension strategy”.

Currently trading at a lucrative PEG ratio of 0.1, the luxury stock screams a bargain. This is especially the case when I consider the stock’s upside potential. As the world’s most affluent consumers wait to spend big in the coming months, it’s not difficult to see why Barclays has a price target for the stock at £3.40. This presents me with a 36% potential upside if I were to buy its shares today, and is something I’m deeply considering.

John Choong has no position in any of the shares mentioned.

Argentex

What it does: Argentex is a financial services company that provides foreign exchange (FX) services to institutions, corporates, and private individuals.

By Edward Sheldon, CFA. Argentex (LSE: AGFX) appears to have a lot of momentum right now.

In November, the company posted strong results for the six months to 30 September, with revenue coming in at £27.4m, up 75% year on year, and adjusted operating profit amounting to £7.3m, up 55% year on year.

Then, in December, the company told investors it expected revenue and earnings for 2022 to be ahead of market expectations.

I don’t think this strong momentum is factored into the share price, however. Currently, the stock has a relatively low valuation.

Going forward, revenue growth could moderate. In recent months, FX volatility has been elevated and the company will have benefitted from this.

I think the company has the potential to keep growing at a healthy rate though. And at the current valuation, I see a lot of appeal in the small-cap stock.

Edward Sheldon has no position in Argentex.

Gateley Holdings 

What it does: Gateley Holdings is an AIM-listed commercial law firm with 15 offices in Britain and one in Dubai. 

By Royston Wild. I think Gateley Holdings (LSE:GTLY) could be a top value stock for me to buy in January. The company is tipped to enjoy an 8% rise in annual earnings this fiscal year (which ends in April 2023). This leaves it trading on a forward price-to-earnings (P/E) ratio of 11 times. 

On top of this, the company offers up a tasty 5.5% dividend yield. 

Gateley provides a range of legal and professional services in sectors such as banking and financial services, property, and pensions and benefits. And right now the business (which has a market cap of £220m) is trading extremely strongly. 

Latest financials in November showed revenues up 22% in the six months to October and an 11% rise in underlying adjusted pre-tax profit.  

I’m expecting Gateley to announce that trading has remained robust when it next updates the market on Wednesday, 18 January. This could lead to fresh share price gains. 

Royston Wild does not own shares in Gateley Holdings. 

Anpario

What it does: Anpario designs and manufactures specialised animal feed additives to improve livestock healthcare.

By Zaven Boyrazian. Despite the rising popularity of plant-based foods, meat and fish protein consumption continues to surge. And that’s driven quite a bit of demand for small-cap stock Anpario (LSE:ANP).

The business is a manufacturer of specialised animal feed healthcare additives. Farmers blend Anpario’s products into their livestock’s food to achieve superior health, toxin management, hygiene, and insect control. The result is a better quality of life for the animals, reduced medical expenses for farmers, and higher quality protein for consumers.

The business has recently completed an expansion of its UK factory, drastically improving its production capacity. The timing is impeccable, given recent regulatory changes in China have banned a significant chunk of its competitors’ products, creating a window of opportunity.

The firm’s reliance on a single factory does introduce some risk. After all, any prolonged disruption at the facility could result in customer orders being fulfilled by rivals. But given the importance of its industry, this risk seems worthy of the potential long-term rewards.

Zaven Boyrazian does not own shares in Anpario.

The post Best British small-cap stocks to buy for January appeared first on The Motley Fool UK.

Premier Miton

AIM-listed asset manager Premier Miton (LSE: PMI) is first up.

Thanks to some great performances from its funds, the firm has been attracting more investors. By the end of March, Premier had £12.6bn in assets under management. This compares favourably to the £9.1bn by this point in 2020. At £6.2m, pre-tax profit over the last interim period came in 17% higher. 

On dividends, Premier didn’t disappoint either. It recently hiked the interim payout by 48% to 3.7p per share. Such a jump is indicative of a very confident board. Right now, the small-cap’s shares have a chunky forecast yield of 5.2%. This payout is also safely covered 1.5 times by expected profits.

Although there can be no guarantees in the stock market (and Premier’s fortunes will be dictated by some things beyond its control), I think all this makes the company a good dividend pick. Taking into account its strong financial position, the shares are reasonably priced at 13 times earnings.

Gateley

Legal services firm Gateley (LSE: GTLY) looks to be another decent income stock from the small-cap world, in my opinion. 

In last week’s trading update, the business stated that trading had “continued to improve” over H2. It’s now predicting that full-year revenue will be at least £120m — up 9.3% on the previous year. Pre-tax profits will also be up at least 8.1% to £16m.

Analysts have the company returning 7.98p per share in dividends. That becomes a yield of 4% based on last Friday’s closing share price. Again, the payout looks likely to be sufficiently covered by profits (1.6 times). Like Premier, Gately has a reassuringly large net cash position (£20m). 

As far as drawbacks go, I do need to remember that Covid-19 could continue impacting companies offering professional services. It’s also worth mentioning that the free float (the number of shares available to buy on the market) is relatively low, making it a fairly illiquid stock. This can potentially lead to big increases in the share price. Sadly, the reverse is also possible. 

H&T

Pawnbroker, gold purchaser and jewellery retailer H&T (LSE: HAT) may not be everyone’s cup of tea, but I think it has good dividend credentials.

While only a prediction, analysts have it returning 7.46p per share in FY21. That gives the lowest yield of the three income stocks discussed here (2.7%). However, H&T also has the highest amount of dividend cover (2.6 times profits). Of course, the payout could end up being better if trading goes well over the rest of the year.

Clearly, H&T’s outlook is also dependent to some extent on what happens regarding Covid. Even though the firm provides “essential financial services” and has an online presence, it really needs high streets to remain open. Based on the success of the vaccination programme so far, I’m optimistic. Even so, Boris Johnson may still end up changing his road map in June. 

On a more positive note, a strong balance sheet suggests H&T is capable of weathering further storms. A rebounding gold price won’t do any harm either.  

The post 3 secret income stocks to buy in June appeared first on The Motley Fool UK.

The number of UK share market millionaires has rocketed over the past decade. Eagle-eyed investors bought quality stocks in the depths of the 2008/2009 banking crisis. And then they watched them soar in value as economic conditions improved and corporate earnings rebounded.

It’s a strategy that investors today can replicate following the Covid-19-related crash of early 2020. I’ve bought UK shares that have fallen sharply in value in my Stocks and Shares ISA. And there are plenty more I’m thinking of adding to my shares portfolio for 2021 too.

2 top UK shares on my ISA watchlist

Here are a couple of top stocks on my ISA radar today. I reckon they could help me make a fortune during the new bull market:

#1: Gateley Holdings

Merger and acquisition (M&A) activity has slowed to a trickle in 2020. It’s no surprise as profits outlooks have become muddied and balance sheets experienced severe pressure. But it looks like things could be about to turn significantly higher as the global economic recovery kicks in.

Comments from Ross Mitchinson, co-chief executive of Numis Corporation, illustrate how takeover fever is beginning to take off. He’s just said that “we’ve quite a bit of M&A picking up… [and] there will definitely be a pick-up in inbound M&A.” This all bodes well for Gateley Holdings (LSE: GTLY). This UK share is the country’s most active M&A legal advisor by deal volume.

City analysts expect Gateley to record a fractional earnings rise in this financial year (ending April 2021). But things are likely to heat up as that M&A action improves and ongoing expansion boosts profits. I think a forward price-to-earnings (P/E) ratio of 16 times represents an attractive entry point for long-term investors to buy in at.

#2: Wizz Air

2021 could be an explosive year for Europe’s airlines should a mass rollout of Covid-19 vaccines successfully transpire. It might be too late for many flyers, sure. But those with strong balance sheets like Wizz Air Holdings (LSE: WIZZ) stand to gain from a further thinning of the competition next year and beyond.

This particular airline is the best way to play booming wealth levels in Central and Eastern Europe. Its planes jet all over the continent but the Hungarian flyer has the best footprint in these emerging regions than any other in the fast-growing budget segment. Forget about Wizz Air’s huge losses that it’ll rack up in this unusual fiscal year (to March 2021). I think this UK share has ‘millionaire maker’ printed through it.

The post Want to make millions? 2 UK shares I’d buy in my ISA for 2021 and hold for a decade appeared first on The Motley Fool UK.

It’s true that you take on some risk by buying shares because share prices and dividends can fall as well as rise. But in many cases, an underlying business that is performing well can deliver a rising share price and annual increases in the dividend payment. So, as well as taking on the extra risk, by holding shares in companies, you expose yourself to extra opportunities as well.

Good figures and an impressive record

When things click on the stock market, there’s nothing nicer than seeing your capital increase as a stock rises, alongside an income stream from dividends that increases in size a bit each year. One share that I think looks capable of delivering those benefits to shareholders in the coming years is Gateley Holdings (LSE: GTLY), the professional and legal services company.

I find the figures in today’s full-year results report to be encouraging. Revenue rose just over 20% compared to the previous year and adjusted diluted earnings per share increased by almost 18%. The directors expressed their satisfaction and confidence in the outlook by slapping an extra 14.3% on the total dividend for the year.

Since arriving on the stock market around four years ago, the firm has been making strong operational progress. The dividend is now more than 40% higher than the maiden payment in 2016, and the share price has risen just over 60% since the stock first traded on the stock market in 2015. Those strike me as impressive returns for shareholders so far, and City analysts following the firm expect earnings to advance by a mid-single-digit percentage during the current trading year to April 2020, suggesting further progress ahead.

Trading well and a positive outlook

The year was a busy one for Gateley during which it achieved “record-breaking” revenue above £100m, its highest-ever staff numbers, and three acquisitions. Looking ahead, trading in the current year has started well and the directors are confident of achieving further growth in the business in the years to come.

Despite the robust growth and strong operational momentum, Gateley is maintaining, the valuation doesn’t look stretched to me. With the share price at 165p, the forward-looking price-to-earnings multiple for the trading year to April 2020 runs close to 12 and the anticipated dividend yield is around 5.3%.

Gateley is no giant with its market capitalisation running near £182m, but I’m impressed by its trading record as a public limited company and believe it could grow to become a much larger enterprise. I wouldn’t bet the farm on it, but I think the combination of income and growth that the stock appears to offer makes it eligible for a place in a diversified portfolio.

The post Forget a Cash ISA! I’d buy this 5% dividend paying growth stock today appeared first on The Motley Fool UK.

You may not have heard of Gateley Holdings (LSE: GTLY) or VP (LSE: VP) so here’s why they’re worthy of your investment cash.

More great news

Gateley is a share I’m particularly excited about. Since it listed on AIM four years ago, it’s been rapidly growing its headcount across the UK and the Middle East to capitalise on the soaring demand for legal services. This has helped to power earnings — and thus dividends — higher over the period.

I’m pleased to say that its strong bottom-line momentum is yet to show signs of running out of steam. Indeed, the release of more excellent trading details on Tuesday illustrated that energy. Revenues soared 20.1% in the six months to October to £46.4m, a period which also saw organic sales rise by 10.2%. Pre-tax profit also jumped 18.6% to £5m.

What’s more, with cash conversion at the firm improving by 2.1% year-on-year to 87.4%, the business elected to hike the interim dividend by an eye-popping 18.2%, to 2.6p per share.

The headcount at Gateley’s core legal operations has risen by almost 50% since its IPO in 2015, underpinning the relentless profit growth of recent years. Looking away from the steady expansion at its bread-and-butter divisions, the company’s foray into other professional services, like tax and accountancy matters, adds another layer of growth potential for the years ahead.

In the meantime, City analysts forecast an earnings increases of 11% for the year to April 2019 and 9% for fiscal 2020. And these projections underpin dividend predictions of 7.8p and 8.4p per share for these respective years, up from 7p last year, yielding a jumbo 5.6% and 6%.

Despite the recent share price bump, Gateley still trades on a low, low forward P/E ratio of 11.4 times. I believe that this rating is far too cheap given the company’s breakneck top-line momentum.

Another income star

Like Gateley, VP has also been splashing the cash to expand its geographical and operational base. The benefits of this programme were laid bare in November’s latest financial statement.

Following the acquisition of Brandon Hire last year, both revenues and profits boomed between April and September — by 42% and 22%, respectively. As a consequence, the half-time dividend was hiked by more than a fifth year-on-year to 8.2p per share.

An expected 10% earnings hike for the full year to this March results in a prediction for a 30.3p total dividend, yielding a chubby 3.1% and suggesting a meaty upgrade from last year’s 26p reward. And the yield moves to 3.3% for fiscal 2020 as a predicted 7% profits rise by City analysts leads to an anticipated 32p dividend.

The rental equipment company has proved immune to the wider implications of Brexit so far. Yet this resilience is not reflected in its low valuation, in my opinion, with a forward P/E multiple of 10.2 times. Like Gateley, I reckon VP is a great budget buy right now, particularly for those seeking excellent dividend growth.

The post 2 unknown but amazing (and cheap!) dividend stocks I’d buy for 2019 appeared first on The Motley Fool UK.

Whether you’re hunting for big dividend yields or proven profit generators there’s no shortage of contenders amongst the capital’s smaller indices. In fact, if you’re looking for both right now then a quick glance at Gateley Holdings (LSE: GTLY) is definitely worth your while.

The firm is a specialist in commercial law with operations spanning from the UK to Dubai. Since listing on AIM back in 2015 — it was the first business of its kind to do so — it has continued its long story of churning out robust earnings growth, culminating in last year’s impressive double-digit-percentage advance.

And trading at the business remains extremely robust, leading brokers to suggest more sustained earnings growth (rises of 8% and 9% are predicted for the years to April 2019 and 2020 respectively). A critical driver of its strong performances has been its dedication to investing across the business.

Expanding its labour base is one such way that Gateley continues to thrive, and last year it bulked up the average fee-earning staff numbers on its books to 509 from 457 the year before, up 11.4% year-on-year. But what has really lit a fire under the bottom line is the company’s dedication to hunting down tasty acquisitions.

Acquisitions coming thick and fast

After making its first two acquisitions back in fiscal 2016 Gateley now has the bit firmly between its teeth. The legal eagle made a further two takeovers in the last 12-month period and since then it has seized business psychologist Kiddy & Partners to boost its employment services portfolio.

The business is showing little appetite to slow down on the M&A front. At this week’s AGM, non-executive chairman Nigel Payne said it continues to hunt for “additional complementary businesses which are earnings accretive and assist in diversifying the Group even further.”

Gateley certainly has the financial clout to keep its spending spree on the boil. Cash generation remained impressive last year and operating cash flow rose to £12.2m, up from £7.7m in fiscal 2017, while net debt tumbled £4.1 year-on-year to just £0.7m.

Delicious dividend yields rise to 5%

To the delight of income investors, Gateley’s rock-hard balance sheet and bright earnings prospects are leading the City to predict that dividends can keep growing and that it can offer inflation-busting yields as well.

Last year’s 7p per share total dividend is anticipated to advance to 7.5p in the present period, and again to 8.2p in the following year. As a consequence, yields stand at 4.6% and 5% for fiscal 2019 and 2020 respectively.

The market seems fairly oblivious to Gateley’s exceptional growth (and income) prospects, however, and this is reflected in the company’s cheap forward P/E ratio of 13.8 times. I’m convinced that the law specialist is a share that offers plenty of upside at current prices.

The post An impressive 5%-yielding dividend growth stock you’re probably overlooking appeared first on The Motley Fool UK.

Thanks to its multi-year Devro 100 growth strategy, designed to supercharge sales growth and slash costs, the business has seen revenues from emerging markets rebound sharply, and especially from China, Russia and South East Asia.

The strong progress the sausage casings maker is seeing in these territories was underlined by latest trading details released this week in which the firm said: “The Devro 100 programme continues to progress well, with actions on track to deliver the targeted cost savings for the year.” It added that it made “good progress” with its productivity and output targets at its US plant, while its China factory continues to “perform well” too.

Porky dividends

My optimistic take on Devro’s profits outlook is copper bottomed by City analysts’ consensus, which also suggests strong earnings growth from here. Indeed, rises of 12% are forecast for both 2018 and 2019 respectively.

Current forecasts leave the business dealing on a forward P/E ratio of 15.4 times, a pretty undemanding valuation in my opinion, given that its revenues-boosting plan is clicking through the gears and population increases will likely deliver strong demand growth for its edible collagen tubes.

It is in the dividend stakes where Devro really sets itself apart, however. With the business finally on course for sustained profits growth again, and cash generation also steadily improves, dividends are expected to get moving again after years of being locked at 8.8p per share.

A 9.1p reward is forecast for 2018 and this jumps to 9.4p for next year. As a consequence, yields stand at a chubby 4.2% and 4.4% for this year and next.

Take this advice

Investors on the hunt for punchy payout growth should also pay Gateley Holdings (LSE: GTLY) close attention today.

Supported by broker predictions of further earnings growth with rises of 16% and 7% predicted for the years to April 2018 and 2019, dividends are expected to keep growing as well, keeping yields well above the market average.

A 7.1p per share reward is estimated for the current period, up from 6.6p last year and yielding an impressive 4.5%. And the 7.5p dividend anticipated for next year drives the yield to 4.8%.

An added bonus for those considering Gateley is that the business trades on a forward P/E ratio of 14.4 times, comfortably inside the accepted value terrain of 15 times or below.

And this rating is far too cheap in my opinion. Demand for Gateley’s legal and professional services continues to grow at a splendid rate, and the business remains dedicated to building scale to keep business rolling in (its headcount swelled 6.4% year-on-year during July-December to 763).  I reckon the AIM-quoted company is in great shape to deliver solid profits and dividend growth in the years ahead.

The post 2 dividend stocks I’d buy and hold for the next 50 years appeared first on The Motley Fool UK.

However, even though this business is relatively young, it is growing like a weed, and at its current speed, it won’t be long before it graduates off AIM and moves into the big league. 

The results are in 

Today Tatton published its maiden interim results for the six-month period ended 30 September following its IPO in July. 

During the period, discretionary assets under management expanded 15% (since March 2017), and AUM grew by 33% year-on-year. Growth in AUM helped the company expand revenue by 31% to £7.3m and adjusted earnings before interest and tax lept by 56% year-on-year. 

Due to the costs associated with its IPO, Tatton reported a profit before tax of only £0.5m for the period, but going forward, IPO costs should not be repeated indicating strong profit growth in the years ahead. 

As well as robust underlying earnings growth, the firm reported a cash balance of £10.5m at the end of the period. 

Growth ahead

Tatton’s solid results have enabled management to announce today an inaugural interim dividend of 2.2p per share. This looks as if it could be a sign of things to come. 

The group is a relatively unique business as it offers on-platform-only discretionary fund management, regulatory, compliance and business consulting services to investment advisors across the UK. These services allow investment advisors to lower costs and concentrate on clients’ needs, rather than focusing on time-consuming, costly compliance issues. 

As more advisors flock to the firm’s offering, City analysts expect Tatton’s earnings per share to grow by 6% this year, and 19% for the fiscal year ending 31 March 2019. Considering the young age of the company, and the growth reported today, I believe that these could be conservative forecasts. Based on the current City estimates, however, the shares are trading at a forward (YE 31 March 2018) P/E of 20.4, which seems to me to undervalue this high-growth business. 

Reach for the stars

Over the past 12 months, shares in Gateley Holdings (LSE: GTLY) have charged higher by 55% as the law firm has improved its offering through acquisitions. Today the company announced that revenue for the six months ended 31 October grew 9.8% and adjusted EBITDA expanded 6.3%. Substantial investment in its client offering held back the group’s overall performance. 

Still, for the full year City analysts are predicting earnings per share growth of 13%, followed by an increase of 7% for the fiscal year ending 30 April 2019. On the back of these forecasts, the shares are trading at a forward P/E of 15.8 falling to 14.9. Considering the company’s steady earnings growth, a mid-teens multiple seems to me to be suitable for the shares. 

I believe the outlook for the group is bright because the market for professional services (it provides legal advice to the financial, corporate and property sectors) has only grown for the past few decades, and it does not look as if this trend will end anytime soon. And as financial sector regulation becomes more complex, it should be able to capitalise on this opportunity.

As well as steady growth, it also supports a dividend yield of 4.2%.

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