A word of warning – AIM is more lightly regulated than the main market and also contains some high-risk speculative stocks. Careful research is needed to find the hidden gems, but I’ve found it’s worth the effort. Here are seven AIM market stocks that I’d consider buying for my portfolio today.

Safer profits from property

My first choice is AIM property developer Watkin Jones (LSE: WJG). This company specialises in building student accommodation and apartment blocks, which it then sells to big rental landlords. New buildings are often pre-sold before they’re built, so the risk of losing money on completed projects is low.

The main fear I have is that this business could face much tougher competition in the future. Purpose-built rental accommodation is a growing market with some big money behind it. But Watkin Jones is an established player with a good reputation. I think it should continue to do well.

The shares have slumped recently, and this stock now offers one of the higher dividend yields on the AIM market, at around 3.9%. I think Watkin Jones looks good value at current levels.

A potential bargain

My second pick is tableware and home fragrance group Portmeirion (LSE: PMP). This business grew out of a gift shop in North Wales, but today owns brands including Spode, Royal Worcester and Wax Lyrical.

One potential concern for me is that if it continues to buy up other businesses, Portmeirion could lose focus on its core pottery business. This still generates the majority of profits.

However, Portmeirion’s latest results suggest to me that this isn’t a problem yet. The group’s 2021 profits were only slightly below 2019 levels and City analysts expect profits to hit record highs this year.

The shares currently trade on just eight times earnings and offer a 4% dividend yield. I’m tempted to buy at current levels.

Promising newcomer

Franchise Brands (LSE: FRAN) only floated on AIM in 2016 but is growing fast and looks promising to me. This group owns a range of franchised businesses, including drain specialist Metro Rod.

Management recent expanded into the US with the acquisition of Filta, which provides commercial kitchen maintenance services through a franchise network in the UK and US.

Franchise Brands’ shares aren’t cheap, on 21 times 2022 forecast earnings. If growth slows, then the shares could fall sharply. But progress so far has been good, in my view.

Annual profit has risen from under £2m in 2017 to more than £5m last year. Franchise Brands is one AIM growth stock I’d consider buying for my portfolio.

Nuclear specialist

I normally avoid buying shares in building contractors. But I think that Renew Holdings is a bit different. This business specialises in essential infrastructure such as rail, water and nuclear energy.

Most of these areas are heavily regulated. Unlike housing and commercial property, they do not usually suffer from cyclical booms and busts. I’m particularly interested in the exposure to nuclear energy, which I think could be a growth area as the UK moves away from coal and gas.

Renew has delivered steady growth in recent years, with profits rising from £12m in 2017 to more than £30m last year. So far, management has been able to manage material shortages and rising costs without any impact on trading, we’re told.

If these problems continue, I think it might become more difficult for the company to manage them. That could cause profits to fall below expectations.

However, I’d see this as a short-term issue that would affect many competitors equally, so I’m not too worried. For now, I think Renew Holdings looks an interesting opportunity for continued growth.

A cash-backed 6% yield

Bank note authentication and brand protection specialist Spectra Systems has one of the highest dividend yields on AIM, at 6.4%.

This tempting payout looks fairly safe, in my view. Spectra has no debt and generates plenty of cash each year, thanks to its 35% operating profit margin. I think the main reason these shares don’t trade much higher is that the company’s growth rate has been fairly slow in recent years.

Investors worry that demand for bank notes and Spectra’s services could fall in future years. But there’s no sign of that this year and I think new products such as a machine-readable plastic banknote material could support long-term demand.

This is a niche business, but as an income investor I’m tempted to add a few to my portfolio.

Pharma growth

Healthcare is one of the long-term growth themes in my portfolio. One less well-known company in this sector is Alliance Pharma (LSE: APH).

Alliance specialises in buying mature consumer healthcare products and improving their distribution and marketing. The firm’s share price has doubled over the last five years.

This business may not sound that exciting, but profit margins have averaged over 20% since 2016 and sales have nearly doubled over this period.

I think management is a key risk here – misjudged future acquisitions could hit profits and damage the group’s growth record.

For now, though, I remain bullish about this company. I’d be happy to tuck a few shares away for the next five years.

25% growth forecast at this stock

My final pick is currency exchange specialist Argentex (LSE: AGFX). This small-cap specialises in providing foreign exchange services to corporate and private clients.

The business is led by founder and CEO Harry Adams, who has a 12% shareholding in the business. I reckon this should mean his interests are well-aligned with those of shareholders.

Perhaps the biggest risk I can see is that this is a fast-growing, competitive market. Will Argentex end up as a long-term winner or an also-ran?

I don’t know, but broker forecasts suggest it could report 25% earnings growth this year. Based on these estimates, I think the shares look very cheap on eight times forecast earnings. This AIM stock is on my list as a potential buy.

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But the reverse is also true. If I’m wrong with my analysis, or if unexpected negative news arrives, small-cap stocks can plunge fast and far. And it’s possible to suffer big losses in hours rather than days. There’s often little time to sell if I realise I’ve made a mistake.

Big-cap shares can be more forgiving. Often share movements tend to be slower and run for weeks on a theme, rather than mere hours. But all stock investing carries risk. However, my aim is to reduce the risk as much as possible by careful research before buying.

Why I’m considering these UK small-cap shares

And right now, I’m considering the merits of two UK small-cap shares. The first is digital specialist-fit fashion clothing and homewares retailer N Brown (LSE: BWNG). The company’s market capitalisation is near £326m.

The business has been struggling for years and there’s a record of patchy earnings. But the company raised a gross £100m in a placing and open offer at the end of 2020. And the directors used the net proceeds to repay all unsecured debt.

Perhaps the financial reset will combine with a tighter focus on cash management to improve the prospects of the business. The company plans to use some of the funds from the capital raise to invest more in its digital capabilities and “accelerate its growth strategy.”

Meanwhile, with the share price near 69p, the forward-looking earnings multiple is just below eight for the trading year to Feb 2020. That valuation looks undemanding, but N Brown has been something of a serial disappointer. And there’s no certainty that the operational recovery and growth in the business will continue.

The second UK small-cap share I’m looking at Portmeirion (LSE: PMP) with its market capitalisation near £81m. The company manufactures ceramic tableware, cookware, giftware, glassware, barware, home fragrance products and associated homewares for markets worldwide.

An optimistic outlook

In the full-year report released in March, chief executive Mike Raybould was optimistic about the prospects for the business. In 2020, the firm raised around £10m from the stock market. And the directors used the money to expand the online and digital marketing teams.

Raybould reckons more efficient operations will help the business deliver “consistent, sustainable sales growth”. And there will also likely be better operating margins ahead. Meanwhile, City analysts have pencilled in a rebound in earnings for 2022 in excess of 50%.

Measured against those anticipated earnings, the forward-looking earnings multiple is around 10.  However, Portmeirion’s business has delivered patchy profits in the past. And the share price has been volatile. There’s no guarantee the improved operational set-up will deliver better returns for shareholders ahead.

Both these UK small-cap shares have recently received extra funds from the market and could shift into a more efficient gear ahead following the boost to their finances. But of course, as with all shares, there are risks. Yet I’m watching these two closely with a view to buying for the long term.

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Today, I’m taking a look at three less-well-known stocks, all of whom provide a great source of income to their owners at the current time.

Under the radar

Small-cap ceramic tableware, cookware, giftware and tabletop accessory provider Portmeirion Group (LSE: PMP) might not raise pulses, but it’s done no harm at all to the wealth of its owners. Those who purchased the stock just one year ago would now be sitting on a 26% capital gain. 

Having delivered a “strong first half trading performance” — during which revenue and pre-tax profit grew by 11.4% and 29.1%, respectively — it looks likely this positive momentum will continue.

But Portmeirion is also no slouch when it comes to returning cash to its owners. While the forecast 3.3% yield for 2019 isn’t the biggest, it’s worth highlighting that the business boasts a solid history of hiking its payouts. As seasoned Fools will know, a consistently rising dividend is usually preferable to a large but stagnant one.

At 16 times forecast earnings, Portmeirion isn’t cheap, but returns on capital are invariably high, its finances look sound, and the decision to diversify into new markets should mean it continues growing. One to capture on general market sell-offs, perhaps. 

Next up is fellow AIM-listed stock Character (LSE: CCT) — a designer and distributor of toys for a number of established brands including Peppa Pig and Teletubbies.

Earlier this month, the market minnow released a reassuring trading update in which it highlighted “a return to its previous growth pattern during the second half.” Having recovered quickly from the administration of Toys R Us (a big customer), sales in the UK are at record levels, allowing the company to state that it will “comfortably reach market expectations” for the full year. 

Like Portmeirion, Character also generates high returns on the capital it invests. Unlike Portmeirion, its stock is on sale for a more-than-palatable 10 times forecast earnings. For those who dislike firms loaded with debt, the £110m-cap boasts a net cash position. 

Character’s shares come with a fairly tasty forecast 4.5% yield at the current share price. With a habit of raising dividends by double-digit percentages, I suspect it will continue to be a reliable source of income going forward. 

A final stock that would likely pass many dividend hunters by is supply chain solutions provider Wincanton (LSE: WIN). 

Never one to shout from the rooftops, things have been fairly quiet on the news front since the company last reported on trading in late June. Back then, it was revealed that the £278m-cap continued to perform in line with expectations, with a new contract win with EDF Energy complementing a number of renewals.

While the business appears to be ticking along nicely, it’s the dividend stream I like most.

Wincanton is likely to return 10.5p per share this year — equating to an attractive 4.7% yield at its current share price. Having now resolved issues relating to its pension fund, there appears to be little preventing management from increasing payouts in the future.

The stock currently trades on an inviting price-to-earnings (P/E) ratio of 7 for the year ending 31 March. 

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Mulberry bushed

Today’s report showed reported profit before tax falling from £7.5m in 2017 to just £6.9m, although largely due to start-up costs in Asia. Profit before tax from existing business actually rose 36% to £11.3m, but that was before deducting start-up costs of £2m and net operating expenses of £2.4m.

There was good news in there, with gross margins increasing by 185 basis points to 63.5%, revenue up 1% to £169.7m and retail sales up 3%. The UK was broadly flat but international sales rose 20%. Digital revenues rose 14% and now make up 17% of group revenue (against 15% in 2017). The group’s cash balance stands at £25.1m, up from £21.1m. That is all to the good.

Round and round

CEO Thierry Andretta reported significant progress on its international strategy, creating new Mulberry subsidiaries in China, Hong Kong, Taiwan and Japan, and announcing today a new majority owned venture in South Korea. “Following another period of cash generation, our balance sheet is strong.  Although the UK market remains challenging, we will continue to invest in our strategy to develop Mulberry into a global luxury brand to deliver increased shareholder value.”

So can Mulberry finally show some swagger? I looked at the stock one year ago and said it still has a long way to go. One year on the journey remains market rocky. However, I am encouraged by increased international sales, greater penetration in Asia, and its omnichannel strategy, which is the only way for retailers to survive these days. However, the £465m stock still trades at a whopping 77 times earnings and the dividend yield is low at just 0.65%.

Next Port of call

I are more tempted by another consumer small stock with an outsize international presence, ceramics and cookware firm Portmeirion Group (LSE: PMP), whose brands include Royal Worcester, Spode and Wax Lyrical. My Foolish colleague Paul Summers is also an admirer, noting that although these brands are not big sellers in the UK, they are much more popular in North America.

Big in the States sounds good to me, especially given the strong dollar and weak pound. The stock is up 40% in the last year to 1,280p, and up 450% measured over 10 years. It is a tad expensive as a result, trading at a forecast valuation of 17.6 times earnings, but at least it offers a yield of 2.8%, covered twice.

Warming up

Earnings per share growth forecasts look promising, with 11% expected this year and 7% next. Strong return on capital employed of 23.6% and operating margins of 10.1% strengthen the case for this AIM-traded firm £119m company.

Portmeirion is continuing to grow steadily, in May it reported a 15% rise in total group sales for the first four months of 2018, with group sales up 20% on a constant currency basis over the year. Both stocks have potential, but for me, Portmeirion looks better placed to serve up success.

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I think the clear answer is to invest in shares in top UK companies, but even then I’d say you need to set one clear priority. Warren Buffett famously relies on his number one rule of investing, “never lose money”. But if you don’t beat inflation then you will lose money in real terms.

Here are two companies that have been helping their shareholders beat inflation, and I reckon they’ll continue to do so.

International success

Portmeirion Group (LSE: PMP), a pottery company based in Stoke-on-Trent (and founded by the daughter of the designer of the eponymous Italianate Welsh village), has a solid track record of growing its earnings and paying progressive dividends.

Those dividends have been providing yields of better than 3% per year, and the payment of 34.66p per share announced Thursday for the 2017 year amounts to a 3.3% yield on the current share price of 1,049p at the time of writing. That alone would keep your investment pot running ahead of inflation, especially as the latest dividend was lifted by 7.5%, which is way ahead of inflation that’s currently running around 3%.

And though it’s had its ups and downs, the share price has gained 60% over the past five years, providing a total return of better than 75%.

The company, which owns the Royal Worcester and Spode brands (both of which are particularly popular in the USA), saw revenue climb by 10.6% during the year, with pre-tax profit up 13% and earnings per share up 9.2%. That seems easily enough to support the dividend, and with cash generation turning 2016’s year-end net borrowings of £2.3m into net cash of £1.6m, I view forecast rises for the next two years with confidence.

Growth plus dividends

Marshalls (LSE: MSLH) manufactures a range of materials and products for the home improvement and home building markets, supplying wholesale to a large number of builders and retailers among others. And it’s been a very profitable business for years.

Earnings per share more than trebled between 2013 and 2017, and over the same period the annual dividend roughly doubled to last year’s 10.2p per share. That provided a yield of 2.2%, and forecasters are predicting rises for this year and next which would lift the payment 28% by 2019, for a yield of 3%.

EPS has grown in double-digits for each of the past five years, and that’s likely to slow, which is expected, as growth can’t go on at that pace for ever. But I still see Marshalls as an attractive long-term investment which should eventually comfortably beat inflation. In fact, over the past five years, shareholders have seen their investments almost quadruple in value.

The company is strongly cash generative, and has the ability to grow by acquisition too — it acquired pre-cast concrete manufacturer CPM Group in November for £38.3m.

And along with full-year results this week, chief executive Martyn Coffey said: “The underlying drivers have remained positive in our main end markets and our sales and order intake have been strong in the first 2 months of 2018.“

If you stick to investing in companies like these which can beat inflation in the long run, you could even become a millionaire.

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In my opinion, it’s important to get off to a good start. For me, that means avoiding big losses and hopefully booking some steady profits. The two stocks I’m looking at today both have the potential to deliver handsome profits, but carry very different levels of risk.

Sales up 43% in one year

Shares in online music instrument retailer Gear4music Holdings (LSE: G4M) have risen by 377% over the last two years.

However, progress has stalled over the last year, and the shares slipped lower this morning after the company reported ‘only’ a 43% rise in sales for the year to 28 February. Is this a potential buying opportunity, or a sign that the good news is already in the price?

One potential answer is that the business is starting to mature. Growth has slowed over the last year. UK-specific sales rose by ‘just’ 27% last year, compared to 34% the previous year. And although international sales rose by 69%, this is less than half the 2016/17 figure of 124%.

What about profits?

To some extent, slowing sales are inevitable. Sales are growing from a bigger base, so larger percentages are harder to achieve. But there is a second concern, which is that the group isn’t achieving the kind of profitability investors might be hoping for.

Profits are expected to be broadly flat this year, despite the sales growth of 43%. This means profit margins have fallen. The company says that the main reason for this is investment — Gear4music invested heavily in warehousing and its online platform in 2017.

In today’s statement, chief executive Andrew Wass said that both revenue and profitability should improve in 2018, as last year’s investments pay off. I believe him. But with the shares already trading on 50 times 2018/19 forecast profits, the potential rewards seem outweighed by the risk that the shares could have further to fall. This is too expensive for me at current levels.

Simple and profitable

Homewares firm Portmeirion Group (LSE: PMP) sells ceramics, cookware and table accessories under brands including Royal Worcester, Spode and Wax Lyrical. Not all of these brands are huge in the UK, but they are very popular in North America, which accounts for nearly a quarter of sales.

Indeed, this is a surprisingly profitable business. Sales have risen by an average of 7.5% per year since 2011, while profits have risen by an average of 7% per year.

Return on capital employed — a measure of profitability favoured by long-term investors — is high, at over 15%. This is reflected in strong cash generation and five-year average dividend growth of 10%.

I expect the firm’s growth to continue. And its strong presence in the US market means that I wouldn’t rule out a takeover bid at some point.

You might expect these shares to be expensive. I don’t think they are. Portmeirion trades on a 2018 forecast P/E of 14 with a prospective yield of 3.5%. Given the financial strength of the group’s operations, I think that could prove to be a very good buy.

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Digital marketing and ad tech company Crossrider (LSE: CROS) has risen by 143% over the last year. The group’s share price hit a low of 25p in 2016 after investors appeared to lose faith in the firm’s growth plans. But Crossrider’s performance is improving. It is now developing a subscription-based business model, targeting high levels of recurring revenue.

Today’s results suggest the company is making progress. Revenue rose by 5% to $30.1m during the first half and the group’s operating loss fell slightly from $932k to $891k.

The group’s shares have risen by 5% today, which suggests to me that investors are encouraged by the progress made so far. However, I believe there’s also a second, potentially transformative, opportunity at Crossrider.

The group had net cash of $68.7m on its balance sheet at the end of June. That’s high compared to its market cap of £89m, (about $114m). Some of this cash will be used to fund growth and acquisitions. However, if the group breaks into profit this year, as expected, then I think this cash could acquire a new significance.

You see, analysts are forecasting adjusted earnings of 4.9 cents per share this year. These would put the stock on a forecast P/E of about 18. But if you adjust the group’s share price to ignore Crossrider’s net cash, then the effective forecast P/E is just 7.3.

That’s very cheap for a growth stock. So although I’d want to do some further research, investors who believe Crossrider’s management can deliver on its growth plans might want to consider snapping up a few of these shares.

A buy-and-forget stock

Crossrider’s growth may yet disappoint. But ceramics and giftware firm Portmeirion Group (LSE: PMP) — whose brands include Royal Worcester and Wax Lyrical — is a proven performer I’d be happy to buy for a long-term portfolio.

The shares are currently 10% below the 52-week high of 1,000p seen earlier this year, but in my view this sell-off could be a buying opportunity. This business is heavily seasonal, as a large proportion of sales take place at Christmas in the three main markets of the UK, North America and South Korea.

The next set of results will see the first full-year contribution from Wax Lyrical, which Portmeirion acquired last year.

Analysts covering the company expect to see revenue rise by around 9% to £83.3m this year, while earnings per share are expected to rise by about 10% to 66.3p per share. A 4% dividend hike has been pencilled in, giving a payout of 33.4p per share and a yield of 3.7%.

These figures are attractive enough, in my view, but they become more appealing when we consider the group has net debt of just £1.7m and consistently strong free cash flow.

I believe there’s also a possibility that Portmeirion could become a bid target at some point, due to its portfolio of valuable brands and strong cash generation. In my view, these shares offer a low-risk trade with the potential to deliver a healthy profit.

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World-famous brands

The group, based in Stoke-on-Trent at the heart of the world famous Staffordshire Potteries region, is engaged in providing ceramic tableware, cookware, giftware and tabletop accessories. Aside from the Portmeirion brand, the company is also home to other world-famous labels, namely Royal Worcester, Spode, Pimpernel, and newly-acquired Wax Lyrical, the UK’s largest manufacturer of home fragrances.

In this morning’s half-year report the AIM-listed group reported total sales of £33.1m for the six months ended 30 June, 16% ahead of the same period last year. Pre-tax profits for the first half came in at £1.6m, an 18% improvement on last year, with earnings (before interest, taxation, depreciation and amortisation) up 27% to £2.7m, compared to £2.1m in 2016.

Waxing Lyrical

The UK became the group’s largest geographical market this year following the acquisition of Lake District-based Wax Lyrical, and with sales in the US and South Korea, its second and third largest markets, remaining challenging, this would normally be an area of concern. But strong growth in Europe and Asia in particular means the company is reducing its reliance on its three key markets and continuing to diversify its sales to the rest of the world.

Despite its vintage image, I’m pleased to see the business isn’t standing still, introducing new products, launching new ranges, and refreshing and extending existing collections. I think the acquisition of Wax Lyrical was a shrewd one, as this should help drive sales and further diversify the company’s product range. At 14 times forecast earnings, the shares are well worth buying for the long term, in my opinion.

Ageing populations

Another London-listed firm announcing its half-year results this morning was FTSE 100 medical products business ConVatec (LSE: CTEC). I’ve been a fan of the group for some time, and indeed by the close of business yesterday, the shares were up 29% on my original recommendation at the start of 2017.

That said, this morning’s results were frankly a little disappointing. Group revenue rose 0.3% to £831.3m, but operating profit suffered a 7.4% slide to £193.5m as a result of increased expenses, offset by higher sales and margins. Mr Market wasn’t impressed and earlier in the day the shares were down by more than 9%.

But I sense a buying opportunity here, with long-term growth coming from ageing populations and the increased prevalence of the chronic conditions the company’s products help to manage. A P/E rating of 20 isn’t too demanding for a quality firm making inroads into an increasingly large market.

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City analysts expect the company to report further growth this year with revenue of £119.6m projected, and off the back of this growth, analysts are expecting an earnings per share rise of 16% to 15.9p. If the company hits these targets, pre-tax profit will have grown by around 190% in six years, and earnings per share will be up 70%. 

As earnings have expanded over the past five years, shareholders have reaped the rewards. Management has hiked the company’s dividend payout per share by 200% since 2013 and shares in the company have produced a total return of around 240% since mid-2012.

Further growth ahead? 

I believe Walker’s returns can continue as the company builds on its existing presence to reach new customers. In October last year management completed the acquisition of Clarke & Clarke, an innovative design, fabrics and furnishing company with an international presence. 

Thanks to this acquisition, sales for the six months ended 31 July 2017 grew 35.6%. Excluding the new business, on a like-for-like basis sales increased 3.6% in reported currency. International sales are growing at a double-digit rate. During the reporting period, sales in Europe and the US rose 11.9% and 12.9% in reported currency, but sales in the UK declined by 1.8%. More lucrative licence income rose 18% in constant currency year-on-year for the period.

Despite Walker’s impressive growth, shares in the company trade at a relatively modest valuation of only 14.7 times forward earnings and support a dividend yield of 1.9%. As the company continues to use its reputation to drive global organic sales, while acquiring additional bolt-on growth, the group should be able to expand for many years to come.

Growth through acquisition 

Like Walker, Portmeirion Group’s (LSE: PMP) reputation and bespoke products have helped it grow steadily over the past five years, and these traits should ensure that the group has many more years of expansion ahead of it.

Over half a decade, Portmeirion’s revenue has grown by 50%, and over the same period, earnings per share increased 40%. Over the next two years, City analysts expect the company to report earnings growth of 11% for 2017 and 9% for 2018. These are hardly the market’s best growth rates. But Portmeirion has a strong reputation that should allow the group to continue to grow steadily over many years, so as a long-term investment the firm looks highly attractive. Shares in the company currently trade at a forward P/E of 13.8 and support a dividend yield of 3.7%.

Portmeirion is also executing select acquisitions to boost organic growth. Thanks to the purchase of Wax Lyrical, the UK’s largest manufacturer of home fragrances, for the six months ended 30 June 2017, total group sales rose 16%. With net debt of only £2.3m at the of the end of 2016 and a bank facility of £21m, the firm has plenty of financial headroom for further acquisitions to drive growth.

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The company is a bit of a classic conglomerate of yesteryear with its focus on so many disparate business lines that all have little overlap. And while many City analysts would rightly find flaws with this business model it has worked wonders for NWF by diversifying and smoothing out the lumpy profits that come from the feed and fuels business, which are highly dependent on commodity prices.  

Indeed, in the year to May the group was able to achieve record earnings despite operating profits from the core feeds business falling from £2.1m to £1.5m year-on-year (y/y) due to rising commodity prices impacting margins. The food business, which provides warehousing for grocers, recorded another year of enviably dependable profitability with operating profits rising from £2.7m to £3m y/y as capacity was maintained at record levels. Finally, the fuels business benefitted from increased volumes shipped from its depots and raised operating profits from £3.9m to £4.5m.

Now, it must be said that these businesses all have very low margins with group underlying operating margins just 1.6% last year. This provides little room for error, but NWF’s management team has proved adept at growing the business even through tough trading conditions by acquiring smaller competitors. And with cash flow safely covering last year’s dividend payouts several times over and net debt just one times EBITDA, income investors who aren’t afraid of a little volatility may find NWF an appealing long-term holding.

Selling Britain abroad 

A second small-cap income stock worth looking at is porcelain maker Portmeirion (LSE: PMP), which offers shareholders a 3.4% dividend yield and is valued at 14 times forward earnings. Since listing in 1988, the group has never had to cut its dividend thanks to a management team that has successfully sought out overseas markets that demand the quintessentially British porcelain it can produce.

Growth in overseas markets and continuous small acquisitions have proven a winning combination for Portmeirion with revenue up 16% y/y in H1. That said, it did run into some problems last year as lapping a tough comparative period in India and falling demand for luxury products in South Korea dented sales growth. Still, despite problems in these two large markets, total revenue increased 11.7% y/y due to an acquisition and growth in more developed markets.

There is still plenty of room for expansion through acquisition to complement organic growth as the company had net debt of just £2.4m at year-end, compared to operations that generated £8.7m in cash. With decent cash flow, high growth potential and very safe dividend payments, I believe Portmeirion could be a hidden gem for income and growth investors alike.

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