British American Tobacco is a good example. Once considered a dividend darling, its yield has now slipped below 6% while its price-to-earnings (P/E) ratio has ballooned above 28. That looks expensive for a business still wrestling with declining cigarette demand and regulatory hurdles.

Property stocks have been another option, with firms like Primary Health Properties offering a near-8% yield. But a weak housing market has pressured profits and, more worryingly, dividends aren’t well-covered. That raises the possibility of cuts at precisely the time income investors are relying on them most.

Among this mix of overvalued blue-chips and shaky property stocks, one lesser-known FTSE share has caught my attention. It combines a reasonable valuation with a reliable, well-covered dividend that looks worth checking out.

Modern marketing

Next 15 Group (LSE: NFG) isn’t a household name, but it’s been around for more than 40 years. The company is a brand growth agency offering digital content, marketing, PR, software, research and communications. Its decentralised model is pitched as “tech-led, digital-first and data-voracious,” but underneath the jargon is a simple idea: a nimble marketing business that claims it can adapt faster than larger rivals in an AI-driven world.

The challenge is that its share price hasn’t reflected that promise. In late September 2024, the stock crashed by around 50% after losing one of its largest clients, which chose not to renew a three-year contract. That shook investor confidence, and even today, the share price remains down 41.9% over the past five years.

On the flip side, the decline has created value. Next 15 now trades on a forward P/E ratio of just 6.55, which looks cheap compared to other FTSE-listed marketing and tech firms. The dividend yield sits at 5.4%, not the highest on the market but certainly respectable. More importantly, it’s supported by a payout ratio of only 39% and backed by over two decades of consistent payments.

For income seekers, that makes it a stock worth thinking about.

Financial footing

Next 15 isn’t in perfect health. Earnings dropped sharply between H2 2023 and H2 2024, falling from £38.64m to £17.33m. Debt is also climbing, now at £150m – more than double its free cash flow. That means if profits don’t stabilise soon, pressure could mount on the balance sheet.

Still, the firm remains impressively profitable, with a return on equity (ROE) of 23.4%. Debt is covered by equity, and with £50m in cash and equivalents, it has some breathing space. The dividend, at least for now, looks well-supported.

My verdict

This isn’t a risk-free play. Competition in marketing and brand management is intense, and Next 15 must demonstrate its ability to integrate AI effectively while maintaining margins. But in a market where many FTSE shares now look overvalued or stretched, I think it’s one to weigh up.

The yield is covered, the valuation is attractive, and the long payment track record is reassuring. For those building a diversified income portfolio, it’s a FTSE share worth considering.

The post Down 25%, this undervalued FTSE share boasts a reliable, well-covered dividend yielding 5.4% appeared first on The Motley Fool UK.

The robust recovery in the marketing communications market has helped drive trading levels above all Next Fifteen’s expectations. The AIM company saw revenues shoot 40% higher in the three months to July, it said today, with organic sales improving 29% from a year earlier.

Improved trading in the second quarter pushed revenues for the half year 31% higher year-on-year (or 23% on an organic basis). Next Fifteen added that it had enjoyed “strong performances across all segments and geographies” too. Consequently it now expects results for the full fiscal year to January 2022 to beat its prior estimates.

At the moment this UK share trades on a slightly-toppy forward price-to-earnings (P/E) ratio of around 20 times. Next Fifteen said that it expects sales growth to moderate in the second half, though if trading slows faster than anticipated such an elevated valuation could bring the share price crashing down to earth again.

That said, I’d still buy the company for my own shares portfolio. City analysts expect earnings here to jump 14% in fiscal 2022. And today the business said it was planning to accelerate investment to bolster long-term growth, too. Its strong balance sheet could lead to further earnings-boosting acquisition activity as well.

A cheap UK share I’d also buy

Costain Group (LSE: COST) released fresh financial results on Tuesday. But investors haven’t been bowled over by news coming out of the UK infrastructure and engineering share and, at 62.3p per share, the small cap was last 1.6% lower on the day.

Costain bounced back into the black in the first half of 2021, it said, recording pre-tax profits of £9.1m for the period. This compares with the £92.3m loss it was forced to eat a year earlier.

Revenues at Costain rose 21% year-on-year to £556.8m, while the business chalked up £334.3m worth of new contracts in the first half. Its order book sits at around £4bn, meanwhile, giving the company strong visibility for the remainder of 2021 and beyond.

It’s possible that the UK share could struggle again if the Covid-19 crisis gets out of control. But as a long-term investor I think Costain offers plenty of investment potential as infrastructure spending in Britain takes off. Major projects include work with Highways England to upgrade the region’s road network, and with HS2 to get the huge railway project up and running.

Besides, at current prices I think Costain could be too cheap for me to miss. City brokers think earnings here will soar 33% in 2021. This leaves the small cap trading on a forward price-to-earnings growth (PEG) multiple of just 0.3. A reminder that any reading below 1 suggests that a stock could be undervalued. In addition to this Costain offers a juicy 4% dividend yield today, giving me something to sink my income-seeker teeth into.

The post Should I buy these UK shares after this news? appeared first on The Motley Fool UK.

Vitec — which makes cameras, camera equipment and broadcasting products — has leapt after announcing that trading momentum remains strong. It noted the business has “achieved a stronger than anticipated recovery” as markets have reopened.

This means it finished May with a record order book 50% higher than at the start of the year. As a consequence, the small-cap expects to report adjusted pre-tax profit of at least £19m for the first half of 2021. This compares with the £7m loss recorded during the Covid-19-hit six months to June 2020.

Vitec added that it expects adjusted profit before tax for the full year to be “materially above current market expectations.” City analysts think the UK share will generate profits of £35.6m in 2021.

Why I’d buy this UK share

I like Vitec Group a lot. An acquisition spree in recent years has significantly improved its range of technologies and its addressable markets. Consequently, it’s well-placed to exploit a raft of changes in the broadcasting and media markets. This includes the rise of independent content creators using the likes of YouTube, the increase in production spending by streaming giants Netflix and Amazon and the growth of wireless video transmission.

But Vitec may suffer some turbulence in trying to exploit these markets. As the company noted today, it faces “uncertainty around the impact of electronic component and raw material shortages.”

However, I still think the camera giant is a great buy today. And particularly at current prices. Despite today’s gains, the Vitec share price still commands a rock-bottom forward price-to-earnings growth (PEG) ratio of 0.1.

Another top British stock to buy

The Next Fifteen Communications (LSE: NFC) share price has also leapt following a positive reaction to latest trading numbers. The UK media share said revenues were up 21% in the first quarter, with organic revenues rising 17% year-on-year.

What’s more, Next Fifteen has seen growth accelerate during the following three months to July. This has pushed results above management’s expectations, it said, with the business enjoying robust trading in all segments and geographies.

However, Next Fifteen also said it expects organic growth to moderate in the second half “given the relatively strong performance we experienced in that period last year.” Still, the company expects results for the full fiscal year to January 2021 to come in above expectations. It’s forecast organic growth by low-double-digit percentages.

Next Fifteen’s share price has risen 7% Thursday to 954p per share. This takes 12-month gains to 140%. I’d buy this UK share as I think its technology-driven marketing approach could deliver solid long-term gains. But remember that any worsening of the Covid-19 crisis could blow its earnings recovery well off course.

The post Here’s why UK shares Vitec Group and Next Fifteen Communications are soaring! appeared first on The Motley Fool UK.

A high-risk FTSE 100 share

It’s perhaps no surprise to see the Barclays (LSE: BARC) share price go gangbusters in recent months. The bank is up 70% over the past year as impressive coronavirus vaccine rollouts in the company’s key British and US marketplaces have fuelled hopes of a strong economic recovery.

It’s quite possible that cyclical UK share Barclays will enjoy a strong earnings rebound in 2021 (City analysts think annual earnings will double). However, I’ve serious reservations over the FTSE 100 bank for the longer term.

Low, profits-crushing interest rates appear to be here to stay following the global economic meltdown of 2020. And the business faces increasing competitive pressures as the number of challenger banks grows. Price comparison website Finder says 14m adults now own an account with a digital-only bank. And it predicts the number could rise to 23m by 2026.

A better UK stock to buy?

I’d be much happier to add B&M European Value Retail (LSE: BME) shares to my Stocks and Shares ISA. The budget retailer has risen around two-thirds in value over the past 12 months. And there’s many reasons why I think it’ll outperform the Barclays share price over the long term.

The growing market shares of grocers Aldi and Lidl show value remains an important factor for consumers. It’s one that’ll be particularly critical following the blow Covid-19 has inflicted on consumer confidence and spending power too.

What’s more, B&M is expanding rapidly to make the most of this opportunity (it opened a net 16 new stores in the final three months of 2020). Be aware, however. The British Retail Consortium has recently warned that cost pressures are likely to rise across the sector. This is due to Brexit red tape, higher shipping costs, and rising commodity prices. It’s something that could take a large chunk out of B&M’s profit margins.

A reassuring read-across

I also think the Next Fifteen Communications (LSE: NFC) share price could also add to recent strength. This UK media share has gained a whopping 130% in value over the past year. And fresh trading details from rival ad agency WPP this week led me to believe Next Fifteen could continue to soar. On Wednesday, the FTSE 100 firm said that it has enjoyed “a strong start to the year with a return to growth in all business lines and most major markets.”

It follows Next Fifteen’s full-year results announcement this month in which it said it’s currently trading ahead of expectations. I like the look of both these UK shares from a long-term perspective. But remember that they face significant threats as companies decide to bring their advertising and marketing activities increasingly in-house.

The post These UK share prices are soaring! Should I buy these stocks in my ISA in May? appeared first on The Motley Fool UK.

Therefore, alongside another growth share which released results on Tuesday, now could be the time to buy it.

Improving prospects

The company in question is digital communications specialist Next Fifteen (LSE: NFC). Its 2019 results showed a rise in net revenue of 14% to £224.1m, while adjusted profit before tax increased by 23% to £36m. The company was able to deliver significant client wins during the period, while its net debt level has more than halved to just £5.2m.

It has continued to make progress in the delivery of its strategy. It anticipates that it could be in a strong position to add value to companies which struggle with the impact that technology is having on their own business models.

With Next Fifteen forecast to post a rise in earnings of 8% in the current year, it appears to be performing well. The world economy’s growth outlook remains relatively robust, while the investment it is making in its platform of businesses and products could help it to adapt to constant change in a number of key markets. As such, with a price-to-earnings (P/E) ratio of 15.6, it could offer investment potential for the long run.

Growth potential

As mentioned, the BAE share price has experienced a turbulent period in recent months. There are concerns regarding one of its largest customers, Saudi Arabia, with it being possible that the company may not be able to fully service demand from the country for its products as a result of geopolitical risks. While this uncertainty persists, the company’s shares could continue to lag a number of other defence stocks.

However, the result of its share price fall is a low valuation. It now trades on a P/E ratio of just 10.4, which suggests that it offers a wide margin of safety. It is due to post a rise in net profit of 8% in the current year, while further strong growth could be ahead over the long run. In fact, the global defence industry is expected to step up in its growth rate after a decade of slow growth. This could provide improved operating conditions for businesses across the sector.

While buying any stock during an uncertain period can mean additional risk, it may also equate to higher potential returns. Since BAE has a strong position in what is a fast-growing market, its long-term investment prospects appear to be bright. With bottom-line growth of 8% forecast for the current year, it could deliver improving share price performance in the coming years.

The post Got £1,000 for a Stocks and Shares ISA? I’d buy the BAE share price today appeared first on The Motley Fool UK.

Now, though, the stock appears to offer a wide margin of safety, as well as improving growth prospects. As such, it could be worth buying alongside another potential recovery stock which released an encouraging update on Tuesday.

Growth potential

Next Fifteen (LSE: NFC) delivered a positive trading update, with the digital marketing and communications company reporting its results for the 2019 financial year will be in line with expectations. It’s seen organic growth in the second half of the year continue to beat sector averages, acquisitions made during the period have further catalysed its growth rate, while it continues to invest in its transition to digital marketing products and services.

The company intends to merge its Bite and Text 100 businesses globally in order to create a new agency. It will also reorganise its collection of data businesses under the MIG brand in the coming months as it seeks to offer customers a more tightly integrated set of services.

With Next Fifteen expected to post a rise in earnings of 8% in the next financial year, it appears to offer a bright financial outlook. Having declined by 17% since early September, it could offer significant recovery potential as it implements what appears to be a sound strategy. With the global economy’s growth outlook relatively upbeat, it may experience positive trading conditions in future.

Improving outlook

While Aviva’s share price may have disappointed in the last year, the company appears to be making strong progress from a business perspective. It is due to record a rise in earnings of 8% in the current year, while it has been able to deploy around £2bn of excess capital. This is being used to reduce leverage, as well as engage in a £600m share buyback programme. It will also continue to make acquisitions, which could provide an additional growth catalyst on its bottom line.

Since the stock has fallen heavily during recent months, the company now trades on a price-to-earnings (P/E) ratio of 6.5. This indicates that investors may be uncertain about its future prospects, although recent updates from the company have generally been positive and suggest it’s performing in line with expectations.

A dividend yield of almost 8% is relatively high, with the company’s shareholder payout covered twice by profit. Although its dividend policy and wider strategy may be subject to change once a permanent CEO is appointed, the company appears to have a solid growth outlook. Its exposure to a variety of markets means that it may offer diversification, while a low valuation indicates that it has the potential to recover and outperform the FTSE 100 during the course of 2019.

The post Why I think the Aviva share price could crush the FTSE 100 in 2019 appeared first on The Motley Fool UK.

Within the FTSE 100, there appear to be a number of dividend growth shares which could be worth buying. Here’s a prime example of a stock that could offer an improving income outlook, which may be worth holding over the long run.

Growth potential

The company in question is global consumer goods business Reckitt Benckiser (LSE: RB). It has a relatively strong track record of earnings growth, with its bottom line rising in each of the last four years. During that time, earnings have risen at an annualised rate of 9%, which suggests that it’s found a successful strategy to deliver an improving financial performance.

Looking ahead, further growth could be on the cards for the business. Its exposure to emerging markets could help to catalyse its financial prospects. In China, for example, its recent acquisition of Mead Johnson could provide access to the lucrative infant formula marketplace, where growth potential is likely to be high. And with it enjoying a high degree of customer loyalty across its stable of brands, its overall growth outlook appears to be positive.

Reckitt Benckiser recently undertook a restructuring which seems to have created a more efficient business for the long run. It may have a dividend yield of only 2.6%, but with dividends being covered twice by profit, they seem to have scope to rise rapidly, longer term.

Improving prospects

Also offering the potential to generate high returns in the long run is AIM-listed media stock Next Fifteen (LSE: NFC). It reported impressive half-year results on Tuesday, which highlighted its growth potential. Revenue grew by 14%, with organic revenue moving 8.7% higher. Adjusted profit before tax increased by 26% to £15.1m, with the company registering several major client wins during the period.

The pace of change in the marketing sector has remained high during the period. As a result, the company is focused on adapting to changing consumer tastes, with the focus on digital channels and mobile platforms. It also intends to grow organically and to engage in further M&A activity, should it be required.

With Next Fifteen having a strong position in a number of key markets, it appears well-placed to generate impressive long-term growth. Its bottom line is due to rise by 8% in the next financial year, which suggests that it has a bright medium-term outlook. With the world economy set to perform well over the next few years, it could be a strong performer.

The post A FTSE 100 dividend growth stock that I’d buy today and hold for the next 20 years appeared first on The Motley Fool UK.

Certainly there’s no guarantee that the recent declines in share prices will now end. Investor sentiment could worsen if the prospects for the world economy come under pressure. But the long-term investment opportunities on offer now appear to be more widespread.

With that in mind, these two growth stocks could be worth buying now for the long term. And both companies appear to offer growth at a reasonable price.

Improving performance

Reporting on Wednesday was digital communications company Next Fifteen (LSE: NFC). The business enjoyed a strong performance in its financial year to 31 January, with revenue increasing by 15% and operating profit moving 20% higher. Organic revenue growth was 5.2%, thanks to a surge in the second half of the year. This trend has continued into the new financial year, which suggests that further growth could be ahead for the business.

Next Fifteen’s acquisition strategy also appears to be working well. Its financial position provides opportunities for the company to boost its revenue and profitability, and this could help it perform well in future years.

With a price-to-earnings (P/E) ratio of around 14, it seems to offer good value for money at present. Although interest rate rises and higher inflation could hold back world economy performance to some degree, the overall prospects for global growth seem to be positive. With a low valuation and a solid strategy that has performed well in previous years, Next Fifteen now seems to be a worthwhile buy.

Potential turnaround

While a number of companies have enjoyed strong performance in recent years, easyJet (LSE: EZJ) is not one of them. It has experienced highly challenging trading conditions that have caused two consecutive years of declining earnings. Reduced demand from passengers — due in part to the threat of terrorism — has contributed to its disappointing performance. This has left investor sentiment relatively low.

However, with easyJet expected to generate earnings growth of 28% in the current year, followed by 20% next year, it looks set to deliver a turnaround. This could lead to improving investor sentiment, with its price-to-earnings growth (PEG) ratio of 0.6 suggesting that it may offer a wide margin of safety.

Additionally, easyJet is due to increase dividends per share at a rapid rate over the medium term. For example, it’s expected to yield 4% in the next financial year. And with dividend payments forecast to be covered twice by profit, they seem to be highly affordable. This could lead to significant income investing potential – especially since the company’s bottom line is forecast to rise at a fast pace as passenger numbers increase.

The post 2 cheap growth stocks I’d buy in April appeared first on The Motley Fool UK.

I’m drawn to two today, and the first is marketing communications and PR group Next Fifteen Communications (LSE: NFC) which I liked the look of when I last examined it in September. It’s still offering only relatively low yields of around 1.5%, but they’re strongly progressive — forecasts suggest dividend payments will have almost trebled between 2013 and 2020.

Growth by acquisition

The company has been taking advantage of the fragile post-Brexit economic outlook by making canny acquisitions at attractive prices, and it announced another one on Wednesday. The latest target is Brandwidth Group Limited, which is to be snapped up for an initial £6.2m — comprising £4.9m in cash and 292,000 new Next Fifteen shares.

There will also potentially be further payments depending on performance, which could take the total to £10.3m. The firm rates that at around 5.5 times Brandwidth’s adjusted 2017 EBIT, and says the deal should be earnings enhancing in 2019.

With a company growing partly by acquisition, it’s essential to keep an eye on liquidity — Carillion is the most painful recent example of what can go wrong when you overstretch. Next Fifteen reported £20.8m in net debt at the halfway stage at 31 July, which was 1.4 times EBITDA. That was up from £12.2m a year previously and needs to be watched, but I see it as comfortable.

Overall, I think there’s a future cash cow here. And with the shares at 416p, I see a forward P/E valuation of around 14 as attractive.

Cash today

No dividend portfolio can be complete without a few of today’s top FTSE 100 payers, can it? I see SSE (LSE: SSE) as being among the most reliable and one I’d tuck away for the very long term. 

The big utility companies enjoy clear visibility of future earnings and of future capital expenditure, which enables them to pay out a steady portion of their earnings as dividends. In its latest January update, SSE reiterated its target of lifting its 2017/18 dividend at least in line with RPI inflation, which to me only adds to the attraction.

Given the terrific long-term cash performance I’m seeing here, I’m at a loss to understand SSE’s share price fall — at 1,198p as I write for a 22% fall over the past 12 months. The recent Footsie dip hasn’t helped, but forward P/E multiples of around 10 just look crazily low to me.

Big yields

The price fall has boosted prospective dividend yields too, and we’re looking at forecasts for 7.5% and rising.

This low valuation is surely partly down to the malaise affecting the whole of the regulated utilities market, with populist politicians once again waving sabres in its general direction. But, as happens every time, this will pass.

Increasing competition and SSE’s restructuring will add uncertainty to the mix, but I agree with my Foolish colleague Peter Stephens that the spin-off of its domestic energy supply business has the potential to leave SSE as a more focused company.

Looking further back, SSE shares are down 15% in five years — a period that provided a 31% return in dividends. SSE looks cheap to me.

The post One future dividend stock I’d buy alongside Footsie star SSE plc appeared first on The Motley Fool UK.

And in that time, the annual dividend has grown from 2.3p in 2013 to 5.25p for the year to January 2017, with forecasts suggesting rises to 7.2p by 2019 — that would be a trebling in six years. The yield isn’t massive, forecast at under 2%, but that’s down to the soaring share price. And it’s four times covered by earnings, so there’s great potential for a long-term cash-cow future here.

That’s borne out by interim results released Tuesday, which show a 13% rise in pre-tax profit to £12m from a 16% hike in revenue to £93.5m. The shareholders’ bottom line saw diluted earnings per share gain 9% to 11.4p, and the firm proposed a 20% uplift in the first-half dividend to 1.8p per share.

Acquisitions too

In addition, the same day brought news of the acquisition of Charterhouse Research Limited, a “leading specialist financial market research consultancy.” The deal cost £2.75m, so it’s a relatively modest purchase.

Important new client deals, including LG Electronics, Grubhub, Marvell and NTT Data, together with a few canny acquisitions, show both sides of Next Fifteen’s growth potential — organic growth and acquisitions are surely both going to play big parts.

On the valuation front, even the stunning price growth of the past few years has not taken the shares beyond an attractive valuation in my view.

We’re looking at a 2018 P/E of 16, dropping to 14.4 on 2019 forecasts – and I reckon that’s cheap for such a strong growth candidate.

Bigger dividends

If you want bigger dividend yields, S&U (LSE: SUS) could be a good pick.

The sub-prime motor finance lender reminded us today it has achieved “17 consecutive years of increasing profit” as it reported on a first half that brought in a 20% rise in pre-tax profit to £14.3m, which provided a 21% boost for earnings per share to 96p. The interim dividend was lifted by 17% to 28p per share.

Fears of difficulties in collecting on loan payments have left the City’s big investors somewhat bearish towards S&U in the recent past, and we’ve seen an 18% share price drop over the past 12 months — though there’s been a 4.6% rebound to 2,074p on the day.

But those fears do not appear to be materialising, as S&S reported “record monthly Advantage collections of £10m achieved in July,” and chairman Anthony Coombs told us “S&U continues to experience robust and good quality demand.” 

What fears?

In fact, new Advantage motor finance agreements rose by 21% in the first half, which it seems is another new record, with improving “initial quality score.”

The annual dividend almost doubled from 46p to 91p between January 2013 and 2017, and a further increase mooted for the current year would take it to around 102.3p. That’s a twice-covered yield of 5%, which would be pushed as high as 5.7% on next year’s forecasts.

If that’s not enough, the market’s aversion to S&U shares has led to slowly falling P/E multiples — from around 16 in early 2014, current forecasts suggest a meagre 9.5 for the current year — and 8.2 next year.

I can see an upwards re-rating coming soon. But even if we don’t get that, long-term growth potential plus that progressive dividend makes S&U look attractive.

The post 2 bargain growth stocks offering rising dividends too appeared first on The Motley Fool UK.