Today, I’ve uncovered two mid-cap shares on the UK’s smaller indexes that could provide lucrative dividend returns.

But I’m not just going on the yield — both these shares have impressive return on equity (ROE) and a price-to-earnings growth (PEG) ratio below one. This shows they use their equity efficiently and are well-priced relative to earnings growth.

Let’s dive in.

Polar Capital

Polar Capital (LSE: POLR) seems like a small outfit on the face of things, with a market cap of only £400m. But it’s a major London-based fund manager with upward of £23bn in assets under management (AUM). Not only that, its AUM has grown almost 10% in the past year — during a period when many fund managers have experienced reduced AUM.

One risk is that the fund is largely focused on healthcare and technology, much of which derives revenue from the US. With new trade tariffs in place, these stocks may suffer, passing on losses to Polar Capital.

Price performance might not look that great at first; it’s up less than 10% in the past five years. But when adjusted for dividends, the full return on investment (ROI) rises to 57.23%. That equates to an annualised return of 9.86% per year — not bad!

Of course, there’s no guarantee that performance will continue. But annual dividends have increased 80% in the past 10 years, which is promising. Currently a meaty 11.4%, its dividend yield typically fluctuates between 7% and 15%.

Twenty-Four Income Fund

Twenty Four Income Fund (LSE: TFIF) is a relatively young investment company established in 2013 in Guernsey.

Its focus is on European asset-backed securities (ABS) with low liquidity and high yields. This strategy gives investors exposure to a segment of the fixed-income market that is often overlooked yet potentially valuable.

Consequently, the fund maintains a high and stable yield between 9% and 10%. Over the past decade, its final dividend has grown from 6.38p to 9.96p at a rate of 3.4% per year.

However, the focus on asset-backed securities (ABS) and mortgage-backed securities (MBS) also adds a moderate level of risk. Not only can they lack liquidity, but they are also sensitive to the quality of the underlying loans. If borrowers default, the fund’s income and capital could be affected. Reduced income can lead to dividend cuts.

As is common with dividend-focused funds, the share price has enjoyed only moderate growth of 30% in the past five years. However, total returns reach almost 87% when adjusted for dividends, equating to annualised returns of 13.3% per year.

While both the above stocks have experienced historical losses due to market downturns, I think they are worth considering for the high and reliable dividends. For investors looking to build a steady passive income stream, a reliable dividend history with consistent growth is a key element to look for.

The post With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio appeared first on The Motley Fool UK.

Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.

Why we like it: “Polar Capital (LSE: POLR) is a London headquartered fund management company that boasted £23.8bn in assets under management (AuM) as of December 2024. While the investment management space often gets a bad rap – with the assumption that it charges high fees for poor performance – we have no problem recommending asset managers with long-term, Foolish investment styles, and believe that Polar’s technology and healthcare focus is appealing.

“One of the attractions of fund management businesses is that they have massive operational leverage. Revenues typically grow at a rate that’s proportional to AuM, although costs stay much the same, so profits should grow at a faster rate. In the good times, when markets rise and revenues surge, then the company’s profits should grow even faster – which could potentially make owning the business a proxy for the market’s progress.”

Why we like it now: In the last nine months, Polar Capital’s AuM has improved from £19.2bn to £23.8bn, an increase of 9%. The company has enjoyed modest net inflows of £0.2bn and a £1.8bn increase due to market and investment performance. This is a highly credible performance compared to other UK asset managers which have seen outflows over the same period. Potentially, if Polar’s investment biases – technology and healthcare – keep delivering a strong performance it should help attract further investors into its funds. Despite the company’s performance putting it at the top of its peer group, it’s trading around just under 10x expected earnings, while a forecast 9.5% yield is worth considering for income investors.

The post Just released: our 3 top small-cap stocks to buy in January [PREMIUM PICKS] appeared first on The Motley Fool UK.

Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.

Why we like it: “Polar Capital (LSE: POLR) is a London headquartered fund management company that boasted £19.2bn in assets under management (AuM) as of January 2024. While the investment management space often gets a bad rap – with the assumption that it charges high fees for poor performance – we have no problem recommending asset managers with long-term, Foolish investment styles, and believe that Polar’s technology and healthcare focus is appealing.“One of the attractions of fund management businesses is that they have massive operational leverage. Revenues typically grow at a rate that’s proportional to AuM, although costs stay much the same, so profits should grow at a faster rate. In the good times, when markets rise and revenues surge, then the company’s profits should grow even faster – which could potentially make owning the business a proxy for the market’s progress.”

Why we like it now: Polar Capital’s investment specialisms are helping it grow assets under management at a faster rate than peers. In its latest fiscal year, the company reported growth in assets under management of 14%, benefiting from strong gains in technology stocks. Potentially, AuM should continue rising as investors see its strategies delivering strong investment performance, which might attract more investors into its funds. While its technology focus has risks if the sector lurches downwards, the company boasts a strong balance sheet flush with net cash, which potentially makes it a less risky way for investor to gain technology exposure than investing in individual businesses.

The post Just released: our 3 top small-cap stocks to buy before August [PREMIUM PICKS] appeared first on The Motley Fool UK.

Today, I’m looking at three FTSE stocks that offer just that.

Taylor Wimpey

Based on the assumption that interest rate cuts will be good news for the housing market, I’ve been bullish on shares in housebuilder Taylor Wimpey (LSE: TW) for some time. Unfortunately, we’re still waiting for the first cut to arrive.

On a positive note, that day is surely getting closer. Inflation recently fell to 2.3% — the lowest for three years. Yes, the City had been expecting a bigger drop, but the direction of travel will surely be welcomed by prospective homeowners.

An eventual revival in trading at Taylor Wimpey would be good news for the sustainability of its cash payouts too, especially as this year’s full dividend isn’t likely to be covered by profit.

On the other hand, the shares currently offer a stonking forecast yield of 6.2%. By comparison, the FTSE 100 index yields ‘just’ 3.5%. So long as the situation improves soon(ish), I think that income should be safe.

The only reason I’m not loading up is that I already have a holding in peer Persimmon.

Polar Capital

Another high-yielding dividend share is fund management company Polar Capital (LSE: POLR).

Despite operating in a completely different sector, it’s also been affected by the high interest rate environment and cost-of-living crisis. It’s hard to save for the future when the wolves are at the door.

But the tide appears to be turning. Polar’s shares have soared nearly 30% in 2024. Much of this rise came in April when the asset manager reported net inflows of £56m during the final quarter of its financial year, bringing a sustained period of net outflows to an end.

Again, I reckon a lot hinges on those rate cuts arriving in the near future. If this doesn’t happen, those gains could be quickly evaporate.

But since the shares boast a monster 7.2% forecast dividend yield for FY25, that’s a risk I’m considering taking when cash becomes available.

Supermarket REIT

A third option is Supermarket Income Real Estate Investment Trust (LSE: SUPR).

This company owns properties used by all the familiar names including Tesco, Sainsbury’s and Asda. It’s then obligated by law to pay out the vast majority of what it makes to owners.

As reassuringly predictable as this sounds, things haven’t been easy of late. The shares have fallen 14% this year, demonstrating that there’s no sure thing when it comes to investing.

On the flip side, the dividend yield now stands at a huge 8.2%. You won’t get many stocks in the UK market offering more than that.

Such a high return would usually be a red flag for me. Then again, I just can’t see demand for the sort of assets it owns falling anytime soon. In addition to leases being very long, 93% of its portfolio stores operate online fulfilment via home delivery and/or click and collect. This means the trust is also exposed to the growing popularity of online sales.

It goes on my wishlist, alongside Polar Capital.

The post These FTSE dividend shares all offer 6%+ yields! appeared first on The Motley Fool UK.

Our monthly Best Buys Now are designed to highlight our team’s three favourite, most timely Buys from our growing list of small-cap recommendations, to help Fools build out their stock portfolios.

Why we like it: “Polar Capital (LSE: POLR) is a London headquartered fund management company that boasted £19.2bn in assets under management (AuM) as of January 2024. While the investment management space often gets a bad rap – with the assumption that it charges high fees for poor performance – we have no problem recommending asset managers with long-term, Foolish investment styles, and believe that Polar’s technology and healthcare focus is appealing.“One of the attractions of fund management businesses is that they have massive operational leverage. Revenues typically grow at a rate that’s proportional to AuM, although costs stay much the same, so profits should grow at a faster rate. In the good times, when markets rise and revenues surge, then the company’s profits should grow even faster – which could potentially make owning the business a proxy for the market’s progress.”

Why we like it now: The last 12 months have seen technology stocks rise, as macroeconomic worries eased and investors have again appreciated the qualities of businesses that boast potentially world-changing technologies. Amid that backdrop, Polar Capital’s investment performance was strong in its third quarter, resulting in investment gains of £2.1bn. Performance fees jumped by 5x to £9.6m, which should give a boost to full-year earnings. My feeling is that many businesses in Polar’s universe might benefit from transformational technologies – such as AI – and that investors could also want to benefit from these themes in the long run. This should benefit Polar’s business both if the valuation of its investments improve and its funds see improving demand. Its forward P/E of around 11 could offer good value for patient investors willing to hold the business across the market cycle.

The post Just released: our 3 top small-cap stocks to buy in April [PREMIUM PICKS] appeared first on The Motley Fool UK.

Additionally, I think the shares could be considered cheap at the moment. Here are the main pros and cons I saw while deciding whether to invest in it.

What’s the company?

But first, which stock am I talking about? Polar Capital Holdings (LSE:POLR). It’s an investment management firm offering professionals and institutions a range of funds.

As of 29 December 2023, the company had £19.6bn of assets under management.

Rather than analysing price charts, the organisation is focused on investing based on financial reports. It has 13 teams operating different portfolios, and it generates a lot of its revenue through management fees.

A 10% yield

Polar Capital’s dividend yield fell significantly in 2020, around the time of the pandemic. But today, the yield is 10.2%, a large increase from the 5.8% low reported around four years ago.

That’s primarily due to the firm’s share price being down almost 50% since August 2021.

This is because the yield is calculated by dividing the stock price by the dividend paid out per share.

And the firm has increased its dividend payment even as the share price has fallen. In fact, Polar Capital’s policy is to distribute at least 80% of its earnings as passive income to shareholders.

Also, share price volatility is often temporary. Therefore, the lower price right now could be a buying opportunity for me if I want dividends.

Other financials I’m considering

At the moment, the company has a price-to-earnings ratio of around 13. That’s not bad, considering an industry median of 13.5.

However, it’s not exactly cheap. Also, its net margin is 21% right now.

While that may sound high on the surface, the median for the company is 25%. So it’s earning less than usual at the moment.

The good news is the balance sheet looks quite strong to me. It has 63% of its assets balanced by equity, creating stability if the company encounters any economic hardships in the future.

A closer look at the risks

While the business has some good things going for it, I think there are some significant concerns that I need to keep in mind if I invest.

The revenue growth rate of 6% on average over the last three years isn’t ideal. Also, its free cash flow has only grown at 1.6% over the same period.

And I’m concerned about the high volatility that isn’t exactly uncommon in the share price. Personally, I prefer to choose stocks that don’t rise and crash in value too often.

Is this one for me?

Don’t get me wrong, I think Polar Capital has a lot going for it.

However, mainly due to that instability in the price of the shares, I don’t feel that comfortable owning it as a long-term investment.

I think of it as more similar to a short-term trade based on price, with the dividend an added bonus.

Short-term trades just aren’t The Motley Fool way. Therefore, I’m not considering Polar Capital for my portfolio at this time.

The post With a 10% yield, is this dividend stock worth me buying? appeared first on The Motley Fool UK.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

British American Tobacco

What it does: British American Tobacco manufactures and sells cigarettes, tobacco and other nicotine products.

By Harshil Patel: British American Tobacco (LSE:BATS) currently offers a 6.5% dividend yield. Having consistently paid dividends every year for over 25 years, I’m comfortable that this cash-generative business will be able to continue to do so over the coming years.

It’s a cheap and profitable business that achieved almost £10bn of free cash flow last year. Much of that has benefited shareholders through dividends and share buybacks.

I’d note that this industry is affected by tight regulation and high levels of taxations. Also, cigarette sales are slowly falling. That said, much of this is more than offset by higher prices. The end result for British American Tobacco is higher profit.

Looking forward, BAT is well placed to benefit from trends towards e-cigarettes. It expects this part of the business to reach £5bn in sales in the next three years.

Overall, these income shares still look attractive to me, and warrant an increase in my current position.

Harshil Patel owns shares in British American Tobacco.

Tritax Big Box REIT

What it does: Tritax Big Box REIT is a real estate company that invests in large-scale logistics warehouses and lets these out to retailers. 

By Edward Sheldon, CFA. I have chosen Tritax Big Box REIT (LSE: BBOX) as my top income stock to buy this month. It currently offers a prospective dividend yield of around 4.5%.

One reason I like BBOX is that the company is well placed to benefit from the long-term growth of online shopping. Looking ahead, retailers are likely to need more access to strategically-located distribution warehouses as online sales increase. 

Another reason is that the company’s warehouses are let out to blue-chip tenants such as Tesco, M&S, and Amazon. These kinds of tenants are quite defensive in nature. It’s unlikely that they would be unable to pay their rent. 

It’s worth noting that Tritax sometimes needs to raise additional money from investors through share placings to expand its real estate portfolio. These can push its share price down temporarily. 

I’m comfortable with this risk, though. That’s because these share placings ultimately fuel long-term growth. 

Edward Sheldon owns shares in Tritax Big Box REIT and Amazon.

Airtel Africa 

What it does: Airtel Africa provides telecoms and mobile money services primarily across East and West Africa. 

By Royston Wild. The Airtel Africa (LSE:AAF) share price remains in the doldrums following half-year financials in late October. 

As a value investor, I think this stock represents a top dip buying opportunity for me. Firstly, the telecoms firm’s current forward dividend yield of 4% beats the FTSE 100 average of 3.7%. 

The yield gets markedly better over the next two years, too, as City analysts tip healthy dividend growth. Yields sit at 4.9% and 5.3% for the financial years to March 2024 and 2025 respectively. 

Secondly, Airtel Africa trades on a rock-bottom prospective P/E ratio following recent share price weakness. It trades on a multiple of just 7.7 times. 

I think the business is a great way to profit from soaring wealth levels in its 14 African markets. Revenues at constant currencies shot 16.9% higher in the six months to September, driven by strong growth across both its data and mobile money businesses. 

I’d buy Airtel even though a strong US dollar is a threat to future profits.

Royston Wild does not own shares in Airtel Africa. 

GSK

What it does: GSK is a healthcare business that offers medicines and vaccines that are used by patients worldwide.  

By Charlie Keough. GSK (LSE: GSK) shares have, like many, been a victim of falling investor confidence. This year has seen the stock fall by over 14%. However, I think December could be the time to buy.  

Despite the drop in share price, the business has posted some strong results in 2022. It raised its guidance in its half-year results. And when it updated investors with its Q3 results in early November, a continuation of this strong performance meant it raised it once again. It now expects growth in sales to come in between 8%-10%. With sales rising 9% in Q3, GSK looks like it’s fully on its way to achieving this. 

On top of this, the stock also offers a substantial dividend yield of around 7%. With inflation continuing to surge in the UK, the passive income created from this offers me, to some degree, a hedge against inflation.  

In the months ahead, the business may see its cost rise as inflation continues to spike. However, I’m still looking to potentially buy GSK stock in December. 

Charlie Keough does not own shares in GSK.  

Smurfit Kappa Group

What it does: Smurfit Kappa Group is a manufacturer of paper-based packing products operating in the UK, Europe, and America.

By Gabriel McKeown. In my opinion, Smurfit Kappa Group (LSE: SKG) is a prime example of an unlikely income stock, and this has led to the market neglecting the opportunity. This year has been challenging for Smurfit, with the stock price falling almost 25%. However, the underlying fundamentals remain attractive, with solid forecast earnings growth and reasonable profit margins.

Yet it is the dividend potential that drew my attention to the company, offering a current yield of 3.6%, which has been paid consistently for the last 11 years and has grown for the previous 10. Furthermore, this yield is forecast to grow by 14.5% next year, hitting 4%.

The recent sell-off in stock price has meant that the company has a P/E ratio of just 13. So when combining the strong fundamentals, with the dividend potential, I believe this could be a prime income opportunity.

Gabriel McKeown does not own shares in Smurfit Kappa Group.

XP Power

What it does: XP Power is a leading designer and manufacturer of specialist electronic components for numerous industries.

By Zaven Boyrazian. XP Power (LSE:XPP) is a specialist designer and manufacturer of electronic components critical to many devices. The group primarily focuses on supplying the healthcare, industrial, and semiconductor manufacturing industries.

In recent years, global supply chain disruptions have wreaked havoc on the group’s manufacturing lead times. Meanwhile, XP Power recently lost a legal battle over a competitor’s trade secrets which sent the share price down the drain.

However, according to its latest quarterly results, the underlying business remains financially robust, with order intake and revenue growing at an impressive pace.

Furthermore, the collapse in valuation has pushed the dividend yield to reach an attractive 4.6%. With order fulfilment slowly accelerating again, and the damage of the legal dispute already priced into the market capitalisation, XP Power stock looks like a lucrative long-term income buying opportunity for my portfolio.

Zaven Boyrazian owns shares in XP Power.

Polar Capital Holdings

What it does: Polar Capital Holdings plc is a specialist fund management company listed on the Alternative Investment Market (AIM).

By Paul Summers: My dividend pick for December is Polar Capital Management (LSE:POLR). Like other asset managers, Polar’s shares have plummeted in value in 2022 as investors have become fearful over rising prices, the Russia/Ukraine conflict, and just about everything else. This leaves the shares trading at 13 times earnings and yielding over 9% in the current financial year.

There’s clearly risk here. If things go from bad to worse, Polar could be forced to cut its payouts. As such, it goes without saying that I’d need to ensure that the rest of my portfolio is sufficiently diversified away from this industry before taking the plunge. 

Then again, it’s worth noting that the interim dividend was maintained in November’s half-year numbers. That’s despite the company seeing a significant but arguably expected reduction in pre-tax profit. This gives me confidence that Polar’s income stream will emerge from the storm unscathed.

Paul Summers has no position in Polar Capital Management.

Dunelm

What it does: Dunelm is a homewares retailer serving the British market through a network of stores and online

By Christopher Ruane. In the past few months I have been buying Dunelm (LSE: DNLM) stock. Even after rising lately, the shares are 27% cheaper than they were a year ago.

I do see a risk that people having less spare cash could lead to falling sales at the chain. But I see long-term potential in the well-run business, which is highly cash generative. Last year Dunelm generated £153m of free cash flow, helping fund around £75m in ordinary dividends.

The company also paid a generous special dividend. If business is tougher this year, there may be no special dividend. But the ordinary dividend yield is already 4%, which I see as attractive. It was covered twice over by earnings last year.

In the long term I am also optimistic there may be more special dividends to come. Dunelm is an income-generating machine. I’d buy more of its shares this December if I had spare cash to invest.

Christopher Ruane owns shares in Dunelm.

Primary Health Properties 

What it does: Primary Health Properties is a leading investor in modern primary healthcare facilities in the UK and Ireland, with the majority of rental income underpinned by government bodies. 

By G A Chester. Primary Health Properties (LSE: PHP) has attractive qualities for dividend investors. Long leases, with rental income backed by the NHS (and the HSE in Ireland), make for predictable cash flows to support growing dividends. In fact, PHP has just delivered a 26th consecutive annual increase. 

Historically, investors have been willing to pay a premium to the company’s net asset value (NAV) and accept a sub-5% — and at times sub-4% — dividend yield. 

However, at a recent share price of 116p, the stock is at a 4% discount to last reported NAV of 120.8p. And with quarterly dividends totalling 6.5p, the running yield is 5.6%. Furthermore, for buyers of the shares today, the prospective yield is 5.9% on expectations (if met) of an increased payout to 6.8p in 2023. 

A radical change in government policy curtailing private sector involvement in the NHS would hurt PHP, but I think this is a low risk. 

G A Chester does not own shares in Primary Health Properties. 

Taylor Wimpey

What it does: Taylor Wimpey is one of the UK’s biggest housebuilders and has a rather big exposure to most regions of the country.

By John Choong. Taylor Wimpey (LSE: TW) shares have lost almost half their value this year due to fears of a house market crash with sky-high mortgage rates. As such, the housebuilder has seen its order book shrink and cancellations tick up.

Despite that, its position as an income stock for my portfolio remains lucrative as management is yet to rebase its dividend. The strength of its balance sheet allows it to cover its current dividend yield of 8.8%, twice. Therefore, I’m only expecting a small cut to its dividend in the near term.

Most importantly, however, I think its share price may have bottomed. With the Bank of England set to pause its rate hikes soon, mortgage rates may have hit a peak. This could ease the downward pressure on house prices and allow me to capitalise on a rebound in the medium term. Not to mention, Deutsche rates the stock a ‘buy’ with a price target of £1.15.

John Choong has no position in Taylor Wimpey.

National Grid 

What it does: National Grid owns and operates energy transmission and distribution networks in the UK and US and is the electricity system operator across the UK. 

By James J. McCombie: National Grid (LSE: NG) shares offer a dividend yield of 5.1%. The company has consistently increased its payments to shareholders every year since at least 2000, making it a true dividend aristocrat.

As a utility company, National Grid is unavoidably asset-heavy. Building and maintaining those assets is expensive and has resulted in relatively high debt levels. For example, connecting new renewable sources to the grid might cost £35bn over the next three years. The business is also highly regulated. There are profit caps and potential windfall taxes, and the scrutiny makes deals and growth challenging. 

However, it is heavily regulated precisely because of its privileged position. At the heart of the UK’s energy industry, it enjoys pretty steady and predictable cash flows and revenues that should closely track inflation, making increasing dividend payments a more straightforward task than most other companies.

James J. McCombie does own shares in National Grid.

BP plc 8% Cum 1^st Prf

What it does: BP is one of the major oil companies that finds, extracts, refines, and supplies oil products.

By Stephen Wright. My dividend stock of choice for December is BP plc 8% Cum 1^st Prf shares. I think that the stock offers a steady return that is attractive at today’s prices.

I’ve opted for the preferred shares over the common equity for two reasons. First, I think that the price of oil is uncertain at the moment. Second, I think that the preferred stock trades at an attractive price.

Unlike the common equity, the preferred shares pay a fixed dividend. That means that even if BP’s profits drop, an owner of the preferred stock will still receive the same dividend (unless the company suspends its dividend entirely).

At today’s prices, that return amounts to an annual return of over 5%. To me, that looks attractive compared to the returns on offer elsewhere on the UK stock market. That’s why I’d look to buy it as my dividend stock for December.

Stephen Wright owns shares in BP plc 8% Cum 1^st Prf

The post Best British dividend stocks to buy for December appeared first on The Motley Fool UK.

Royston Wild: SSE

The possibility of more extreme stock market volatility would encourage me to buy FTSE 100 stock SSE (LSE: SSE) for April. Soaring inflation in the UK means that many consumers may have to trim their spending. But light and heat are two of the last things people will want to cut down on, meaning profits at companies like SSE should remain rock solid. Utilities shares like this could become popular lifeboats for investors as macroeconomic and geopolitical fears increase.

I think SSE’s essential operations make it a great investment for investors seeking healthy passive income streams like me, too. Dividend yields here sit at a bulky 5.2% and 5.4% for the financial years to March 2022 and 2023 respectively.

Royston Wild does not own shares in SSE.

Stuart Blair: National Express

It finally seems that National Express (LSE: NEX) is overcoming the worst of the pandemic. In fact, in 2021, the coach operator managed to report an underlying operating profit of £87m, in comparison to a £50m loss in 2020. At the same time, free cash flow became positive, reaching over £120m. While the dividend has not yet returned, this is expected next year.

Risks include the rising costs, due to soaring prices of oil and wage inflation. But National Express has fully hedged oil through 2022 and 2023, which reduces its current exposure to the high prices. I’ll continue to buy this FTSE 250 stock for my portfolio.

Stuart Blair owns shares in National Express.

Stephen Wright: Endeavour Mining

My top stock for April is Endeavour Mining (LSE:EDV). The company owns and operates gold mines in West Africa. I like this stock because I think that the underlying business has some really attractive qualities.

With mining companies, I look for an ability to extract its product cheaply. Endeavour has one of the lowest costs of operations of any gold miner. The last time I checked, Endeavour’s cost per ounce was around $873. With the price of gold currently at $1,915 per ounce, I think that Endeavour is in a strong position.

Stephen Wright does not own shares in Endeavour Mining.

Zaven Boyrazian: Domino’s Pizza Group

With the pandemic loosening its grip on the world, Domino’s Pizza Group (LSE:DOM) has resumed its traditional double-digit growth in gross pizza sales. And now that the long-standing dispute with franchisees has finally been resolved, the group is primed to boost its total sales to as high as £1.9bn!

What’s more, the digitalisation of operations has simultaneously improved customer experience, as well as profitability. This does make the group more susceptible to cyber-attacks. But with the engine seemingly firing on all cylinders, Domino’s looks like it could be an excellent addition to my portfolio.

Zaven Boyrazian does not own shares in Domino’s Pizza Group.

Rupert Hargreaves: Intercontinental Hotels

My top stock for April is Intercontinental Hotels (LSE: IHG).

This is one of the best companies to play the global reopening trade, in my opinion. Analysts expect the group’s earnings to jump 60% this year and 25% in 2023. Based on these projections, the stock is dealing at an undemanding forward price-to-earnings (P/E) multiple of 20.

Of course, this growth is far from guaranteed. The pandemic is not over yet, and there could be further disruption on the cards for the global economy. Rising prices may also hit the firm’s bottom line.

Despite these risks, I would buy the stock today.

Rupert Hargreaves does not own shares in Intercontinental Hotels.

Christopher Ruane: JD Sports Fashion

With a simple business model, strong brand and large potential market, I continue to like the look of JD Sports (LSE:JD). But the shares have lost around a third of their value so far in 2022 and are down 15% in the past year at the time of writing.

That fall partly reflects concerns of reduced consumer spending hurting revenues and profits. But I think it gives me a buying opportunity in a well-run company with global ambitions. Its brand and retail expertise help set it apart from rivals.

Christopher Ruane owns shares in JD Sports.

Roland Head: HSBC Holdings

I think Asia-focused banking giant HSBC Holdings (LSE: HSBA) could benefit from rising interest rates and the easing of pandemic restrictions over the coming months.

The FTSE 100 bank’s underlying profits returned to 2019 levels last year. I think the changes being pushed through by CEO Noel Quinn should help to support more focused and profitable performance in the future.

The risk of a global slowdown is a concern, as are reports of further lockdowns in China. But I think HSBC shares continue to offer good value, trading below book value with a dividend yield of 4.2%.

Roland Head does not own shares in HSBC Holdings.

Andrew Mackie: Glencore

My top stock for April is Glencore (LSE: GLEN). Having recently hit a 10-year high on the back of soaring base metal prices, analysts have been rushing to upgrade their outlook for this leading commodities producer and marketer.

In its full-year results, it declared a combined dividend and share buyback amounting to $0.30 a share. At today’s price, that equates to an impressive dividend yield of 4.7%.

As institutional investors continue to rotate out of growth and into value stocks, together with many of the 60+ commodities that it produces playing a critical role in the energy transition, I expect to see its share price continue to rise not only this month, but well into this decade too.

Andrew Mackie owns shares in Glencore.

Paul Summers: Polar Capital Holdings

The share price of investment manager Polar Capital Holdings (LSE: POLR) has tumbled in value in 2022 so far, partly due to investors’ sudden aversion to high-growth tech stocks. I’m tempted to begin loading up.

The valuation of 10 times forecast earnings is certainly attractive. Throw in a monster dividend yield of 7% for FY23 (at the time of writing) and a strong balance sheet, and I can think of worse places to leave my capital.

Although a swift rebound in the shares is far from guaranteed, this is one ‘value’ stock I’d be happy to own.

Paul Summers has no position in Polar Capital Holdings

Andrew Woods: Rio Tinto

My stock pick for April is Rio Tinto (LSE:RIO). This is a mining company specialising in iron ore, copper, and aluminium. It operates in Australia, Guinea, and Brazil.

During the 2021 calendar year, pre-tax profit nearly doubled to $30bn. The firm then paid a record dividend of $10.40 per share.

As commodity prices remain high due to global events, I fully expect this trend to continue, with demand outweighing supply.

What’s more, many metals and minerals mined by the company may be used in decarbonisation efforts, with copper being a central component in electric vehicles.

Andrew Woods has no position in any of the shares mentioned.

Alan Oscroft: Purplebricks

Why would I buy into an estate agent whose share price has crashed over the past 12 months? Well, at the interim stage, Purplebricks (LSE: PURP) revealed a disappointing operating loss. But it reported only a very small underlying EBITDA loss.

Oh, and company insiders have bought up nearly a million shares between them in the past couple of weeks.

It’s obviously risky buying into a property business while inflation is soaring and interest rate rises are pushing up mortgage costs. But Purplebricks’ year ends in April, and I’m cautiously optimistic for decent results.

Alan Oscroft has no position in Purplebricks.

The post Top British stocks for April appeared first on The Motley Fool UK.

One of best shares to buy now

SSE (LSE: SSE) is a value share that seems to combine income with steady future growth potential. A dividend yield of 5.2% is very healthy and well ahead of the average for the FTSE 100, which is 3.6%.

According to the SSE website, it has 4GW of onshore wind, offshore wind, and hydro. It’s currently very focused on the UK and Ireland, but the group says that it’s actively exploring opportunities to extend into new markets. If successful, that could boost growth and help the company keep paying a high level of dividends. 

Investors like companies that can upgrade earnings. In most cases, it leads to share price rises. In February, SSE told investors that it was upgrading its full-year 2021/22 adjusted earnings per share to at least 90p from at least 83p. 

Regarding the dividend, it is expected to be rebased, so it will fall. Nonetheless, that does not affect my perception of SSE as a good income share.

SSE does carry a lot of debt (£9bn at 31 March 2022), which as interest rates increase could put pressure on its profits and the dividend, even if it’s lowered.

The income from SSE is very healthy and currently well above the FTSE 100 average, but it does also offer growth because of its significant involvement in helping the UK reach net zero on emissions and the possibility of international expansion. I’m very tempted to buy SSE shares.

Well out of favour and with poor momentum

Polar Capital (LSE: POLR) is a share that is well out of favour with investors. The shares have very poor momentum, but possibly much better long-term potential. The recent share price slump does mean the shares now yield 7%. The share price fall also provides the opportunity for a recovery – perhaps later on this year once inflation becomes more normal and tech valuations reach a lower level.

To understand why Polar Capital may be poised for share price growth, it’s worth understanding why it’s currently falling. It’s primarily because it has a large tech fund. As tech shares fall, investors fear that fund will shrink with a knock on impact on Polar’s profitability and earnings per share. It seems though like a short-term issue.

Actually, Polar Capital has a very decent track record. It has been expanding organically and by acquisitions and is more than just a tech fund. It has funds across other areas, notably healthcare.

Valuation-wise it seems cheap. The P/E is nine and the EV to EBITDA, which contrasts a company’s enterprise value with its EBITDA, is five. For comparison, Liontrust Asset Management‘s figures are 15 and 10.5 respectively.

Polar Capital shares have poor momentum and sentiment has turned against them. There’s a very real risk the shares could fall further. However, the combination of a high and rising dividend yield, well covered by earnings (cover is about 1.5x), along with a low valuation, make me think it could be a top income and growth share. That’s why I’ll keep adding to my holding.

The post The best shares to buy now to get income and share price growth appeared first on The Motley Fool UK.

Why has the share price been falling?

The Polar Capital share price has had a torrid six months. Over that timeframe, the shares have fallen 35%, and over the last three months by 25%. Over the last 12 months, the share price is down about 14%. The shares peaked last summer, but since the trajectory has been downwards.

What’s been driving the falls most recently, I think, is the fact that Polar Capital has a big technology fund under management. With share prices falling, I’d imagine investors are concerned that this fund and its associated fees may shrink. That would possibly make Polar’s future growth lower than previously expected.

Yet a trading update in July last year was pretty positive so I don’t see a really good reason why the shares started falling. My best guess is a good run for the shares that potentially led to some profit-taking. This was coupled more recently with inflation and falling tech stock prices to add to the damage.

Is it a good long-term buy?

This all makes me think the situation is not going to last too long. Polar Capital could well be a good longer-term buy, given its high dividend yield and low valuation. Turning to the former, the dividend yield is now 7%, much higher than just a few months ago because the share price has dropped. And the shares trade on a P/E of nine. That’s low in itself but really low compared to a competitor like Liontrust, which trades on a P/E of 17.

Polar Capital has been acquisitive in recent years, diversifying its assets under management and growing. It has 25 funds that aren’t specifically related to technology. So there’s a lot more under the bonnet. The healthcare opportunities fund, for example, has assets under management of £1.4bn, although it should be said it’s one of the larger non-tech funds. Other funds have a lot of room to grow. 

It has historically had a strong run of revenue and profit growth, along with high margins. Combined, these potentially show it to be a high-quality business and probably not one that deserves to see its shares down 25% in just three months. To me, the sell-off looks overdone.

Polar Capital — a top UK share? 

Nonetheless, the Polar Capital share price could remain under pressure for a while if technology stocks also remain under pressure because of inflation and interest rate rises. Yet I believe the shares are good value and the business is much more than a technology fund. For these reasons, I’m going to keep adding to my holding. For me, the share price has become disconnected from the performance of the business. It appears to be a top UK share and I think it should do very well in the coming years. 

The post This UK share has fallen 25% in just 3 months. Is it now an absolute bargain? appeared first on The Motley Fool UK.