That certainly seems to be the case for three stocks on my radar: Melrose Industries, Premier Foods, and Somero Enterprises (LSE:SOM). All three have failed to keep up with the wider market in 2025 despite robust underlying fundamentals. So could these present a buying opportunity?

Digging deeper

To determine whether or not these UK shares are indeed a bargain, we need to examine exactly what’s going on under the hood, and why investor sentiment’s proving weak. With that in mind, let’s take a closer look at the seemingly cheapest of the bunch – Somero Enterprises.

As a quick reminder, the company’s the global leader in laser-guided concrete screed machines. For non-residential construction projects, these devices are essential for achieving a high-quality flat finish in commercial properties like warehouses, data centres, and carparks, among others.

Despite being listed here in the UK, the bulk of Somero’s business is done in North America. And sadly, with persistently high interest rates, many of these construction projects are being delayed or put on pause. This headwind’s made growth exceptionally challenging, forcing management to revise its 2025 guidance downward – a move that sent its shares plummeting.

Is this an overreaction?

The slowdowns and broader economic uncertainties are understandably frustrating. And it’s a good reminder of how cyclical the construction market can be. Yet, short-term cyclicality concerns can create lucrative entry points for long-term focused investors.

Despite the challenges, the order book and list of project backlogs remain robust, suggesting that demand isn’t lost, merely postponed. And looking at the recent insider trading activity, management would appear to agree with this conclusion. In fact, Thomas Anderson, a non-executive director, has recently bought $73.5k of shares in May.

In the meantime, Somero’s still a highly cash-generative enterprise, with strong margins, a global market niche, and a wide competitive moat protected through constant innovation. As such, the balance sheet remains in tip-top shape, and dividends have continued to flow.

Of course, a prolonged cyclical downturn could eventually change that. And with uncertainty over how long it will take for US interest rates to fall and non-residential construction to ramp back up, Somero shares could tumble further as sentiment remains weak.

The bottom line

Given the undemanding valuation and the company’s top dog status within its niche, Somero’s looking quite attractive, in my opinion. That’s why I’m considering expanding my existing position in my portfolio. It’s a similar story for the other UK shares on this list, who also have their fair share of challenges and opportunities ahead.

While there are never any guarantees, all three stocks look well-positioned for a rebound in the coming years. As such, investors may want to start investigating further.

The post 3 beaten-down UK shares to consider before the rebound! appeared first on The Motley Fool UK.

Opportunities in commercial real estate

In a higher interest rate environment, real estate investment trusts like LondonMetric Property (LSE:LMP) and Safestore (LSE:SAFE) haven’t received a lot of love from investors. In fact, over the last five years, both landlords have seen their valuations slide by around 10%. And yet in both cases, dividends have continued to climb.

The growth drivers for these businesses are a little different. LondonMetric receives a good chunk of demand from the e-commerce sector with many tenants renting out warehousing space. On the other hand, Safestore is predominantly driven by consumer demand, which has waned in recent years, particularly due to a slowdown in home renovation projects.

However, even in a weakened environment, both businesses remain highly cash generative, enabling impressive resilience to external pressure. LondonMetric, in particular, has proven that even during a market downturn, it can continue to grow earnings at a double-digit pace and use that strength to snap up smaller, struggling rivals.

As for Safestore, while earnings growth has been tougher to achieve, it’s still expanding its territory in Europe, positioning itself for when market conditions eventually recover. And given that the European self-storage industry is still in its infancy, an enormous long-term growth opportunity exists to grow its cash flows and, in turn, dividends.

That’s why, despite the risks, both dividend stocks are already in my income portfolio.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

International exposure

Another cash-generative enterprise that’s been lacking some love lately is Somero Enterprise (LSE:SOM). The firm’s the global leader in laser-guided concrete levelling, contouring, and placing machines. While it’s hardly the most exciting business out there, it’s proven to be an essential player in the non-residential construction sector, especially in North America.

Beyond the benefits of geographic diversification, Somero’s seeking to capitalise on the enormous infrastructure spending plans by the US government over the coming years. And with an impressive line-up of new screed machines being launched throughout 2025, Somero’s maintaining its top-dog status.

Sadly, the global construction market isn’t in an ideal spot. With higher interest rates, large-scale projects have been put on hold, lowering demand for the firm’s machines. And consequently, revenue growth in countries like Australia has been hit hard.

That’s obviously frustrating. But this isn’t the first time management has had to navigate through cyclical downturns. And with $29m of cash on its balance sheet with virtually no debt, its financial health remains in tip-top shape, as is the dividend. And with a yield of 6.9% on offer today, it’s a dividend stock that investors may want to consider investigating further, despite the challenges.

The post 3 cheap dividend stocks I bought for a lifetime of passive income appeared first on The Motley Fool UK.

Tanking share price

Bioventix (LSE: BVXP) is arguably one example. Shares in the developer and commercial supplier of monoclonal antibodies have tumbled over 40% in the last 12 months. While some of this is likely the result of broader market concerns, a lot is surely down to the company overstating revenues by £327,000 as a result of a customer error. In reality, the firm’s actual revenues came in below market expectations.

This news has clearly shaken confidence and pushed the stock down to a multi-year low.

However, I reckon this could be a great time to think about loading up. As worrying as recent form has been, this is still a company that reeks of quality. Margins and returns on capital remain sky-high, thanks in part to having very few employees. While this has led to the shares trading at a premium to the wider market, the current price-to-earnings (P/E) ratio of 16 is already significantly lower than the firm’s five-year average of 27.

Half-year numbers — due on 24 March — will be worth reading. I reckon it will take only a small chink of light to get the shares moving in the right direction again.

Sales down

Another niche AIM-listed company to consider that’s been battered is laser-guided equipment manufacturer Somero Enterprises (LSE: SOM). Its share price has fallen nearly 20% in 2025 already.

So what’s gone wrong here? Well, investors have become increasingly concerned about the general economic outlook, particularly in the US (where the company’s based) which makes up three-quarters of sales. There’s a chance that things will go from bad to worse if interest rates stay higher for longer and force clients to delay purchasing the company’s cement-levelling tech.

Like Bioventix however, this is another small-cap that scores consistently well on quality metrics. Supported by a strong balance sheet and very experienced management, Somero is also a market leader in what it does. Although never guaranteed, the dividend yield currently stands at a meaty 6.8% too.

Monster dividend yield

A final AIM stock that’s worth pondering is base metals producer Central Asia Metals (LSE: CAML). Like the other two mentioned here, its shares have fallen in recent times, down 14% or so in the last 12 months.

Again, much of this appears to be the result of general geopolitical concerns. That said, demand for lead has been lower. The company drills for this (and zinc) at its mine in North Macedonia. It also has copper operations in Kazakhstan.

On a more positive note, the shares now yield an incredible 10% for FY25. Quite whether investors will see all of this cash is open to debate if costs continue to rise. However, the total dividend is expected to be covered by profit as things stand. The stock looks very cheap too, changing hands at a P/E of just seven for FY25.

Full-year numbers are due tomorrow (20 March). It will be interesting to see how current holders react.

The post 3 top AIM stocks to consider buying before they recover appeared first on The Motley Fool UK.

Why Somero?

As a quick crash course, Somero Enterprises is a leading designer and manufacturer of laser-guided concrete laying screed machines. It’s not likely a tool individuals will come across very often.

However, for those working within the construction industry, Somero’s machines play a critical role in ensuring the flooring in non-residential buildings is as flat as possible. That’s crucial for warehouses, retail stores, hospitals, car parks and, most excitingly today, data centres.

As the US ramps up its investments into infrastructure, projects for new data centres and chip foundries are steadily being greenlit. That’s a particularly exciting prospect for Somero, given the US is the firm’s primary target market. And it’s a tailwind that’s already started to bear fruit, with management highlighting a backlog of US projects with activity finally ramping back up after enduring labour shortages and concrete rationing.

What’s up with the dividend?

Somero doesn’t look like a typical choice for dividend investment. Apart from paying dividends in a foreign currency, a quick glance at the group’s dividend history shows a constant fluctuation of hikes and cuts. The share price also seems to have followed a similar pattern of swinging up and down as well.

This fluctuating pattern perfectly demonstrates the cyclical nature of Somero’s business. Since operations are entirely driven by activity within the construction industry, bad weather, higher interest rates and macroeconomic headwinds can be disruptive.

However, this isn’t anything new. And management’s prudent capital allocation and financial planning skills have kept the balance sheet debt-free despite the constant swings in cash flows.

Leadership’s changing hands

Smart capital allocation is a rare skill to come by. So it’s a sad revelation that CEO Jack Cooney is stepping down at the end of 20 March. After 27 years of growing the company to a £153m enterprise, Cooney is off to enjoy a well-deserved retirement. And chairman Larry Horsch, who joined Somero in 2009, will also be departing at the same time.

It seems the firm is losing a lot of talent due to age. But succession planning has actually been in the works for a while. The first steps were taken last June with the promotion of Jesse Aho to chief operating officer of Global Operations and then president of the entire company six months later.

It’s still unclear who will move into the corner office. Somero’s currently exploring external options with a third-party executive search firm. However, whether any of these candidates will be capable of filling Cooney’s shoes remains to be seen.

It’s a risk investor’s need to consider carefully when exploring Somero as a potential investment today. Yet, personally, I remain optimistic about the firm’s long-term trajectory. Given my already sizable stake in the business, it’s not a stock I’m rushing to buy right now.

However, for investors seeking exposure to the construction industry ahead of artificial intelligence (AI) infrastructure investments, Somero could be worth a closer look.

The post My largest dividend stock investment is… appeared first on The Motley Fool UK.

This explosive rebound in performance is hardly a surprise. After all, we’ve just come out of a pretty severe market correction. And the stock market has historically always delivered impressive growth when starting from a low base. However, looking at the macroeconomic landscape, the growth seen today may be just the tip of the iceberg.

There are a lot of encouraging trends that could make 2025 an exciting year for investors. So, let’s take a look at what could send stock prices skyrocketing next year, as well as what could go wrong.

The bull case

With inflation largely back under control, central banks like the Bank of England and the US Federal Reserve have finally begun cutting interest rates. While that does mean savings accounts won’t be as lucrative, it also decreases the cost of debt. That makes mortgages as well as business loans more affordable, helping spark economic growth.

For many businesses, this is wonderful news, even for those with no debt on their balance sheets, like Somero Enterprises (LSE:SOM).

The company has suffered a significant slowdown in demand for its concrete-laying screed machines for construction projects, particularly in the US. It seems that most of its customers are delaying projects in anticipation of lower interest rates next year.

While it’s certainly frustrating to see growth slow in the near term, it’s exciting to see explosive potential just around the corner. A rebound in inflation would obviously delay this expected comeback, and it’s a risk that Somero is currently contending with. However, management has a fairly extensive history of dealing with the cyclicality of the construction sector, giving me cautious optimism.

Beyond interest rates, continuous innovation in the technology sector also holds promise. While AI spending has arguably gotten out of hand, current consensus expects to see early signs of margin expansion and improved efficiency as AI-powered solutions are deployed throughout various business models. And when pairing higher economic growth with increasing profitability, the result is a powerful stock market catalyst.

What could go wrong?

Just as there are lots of things to be excited about, there are quite a few concerns brewing as well. We can’t ignore the escalating conflicts plaguing Eastern Europe and the Middle East. After all, both tragic wars have already adversely impacted global supply chains and created enormous shipment delays.

In the meantime, the political uncertainty of the upcoming US election is also creating concern relating to economic policy. The threat of widespread global tariffs could trigger a new round of US inflation, while higher corporation taxes could significantly negatively impact business earnings.

The bottom line

It’s impossible to know for certain what’s going to happen over the next 12 months. Personally, I wouldn’t be surprised to continue seeing volatility in the stock market moving forward. But despite the short-term hurdles, high-quality companies should be able to adapt and thrive in the long run. That’s why, even with some justifiable concerns about the stock market, I’m feeling quite bullish right now.

The post Are we soon to see a skyrocketing stock market? appeared first on The Motley Fool UK.

Huge yield

I lost faith in Broadcaster ITV (LSE: ITV) a few years ago. To date, it was a wise decision to sell. The FTSE 250 member’s share price has been stuck between 60p and 80p for about two-and-a-half years.

I do miss the passive income, though. Would I go back?

Well, the dividend yield remains juicy at 6.4%. That’s very impressive considering the shares are actually up 25% since January.

If City analysts have got their sums right, this income also looks set to be covered by full-year profit. This is despite total revenue dipping 3% during the first half of 2024 due to a slightly sticky patch for its Studios arm.

Bargain valuation?

This slight wobble isn’t sufficient to scare me off. But one thing that does bother me is that ITV has become rather inconsistent in terms of shelling out those dividends. It now returns far less per share than it did before the pandemic struck. On top of this, popular sporting events like Euro 24 don’t happen every year and expensive productions can still fail to grab viewer interest.

A price-to-earnings — or P/E — ratio of just nine arguably takes some of this into account. And with the UK economy seemingly chugging into life again as inflation concerns wane, recent positive momentum could continue.

That said, I’m not rushing to buy until I read the next trading update, due 7 November.

Until then, it goes on my watchlist.

Profit warning

Another company I’ve returned to look at is laser-guided equipment manufactuer Somero Enterprises (LSE: SOM). Despite being a tiddler compared to ITV, the AIM-listed firm also generated a lovely income stream for my portfolio for the years that I owned it.

Unfortunately, a stodgy period of trading, thanks in part to rising interest rates, caused those dividends to yo-yo about the place since I sold. That’s a shame. They can never be guaranteed, of course. But I really look for consistency from anything I buy for income.

It’s fair to say 2024 hasn’t been great so far either. In July, holders were hit in the chops with a profit warning. At the time, management believed that trading would improve in H2. But with sales in its main market — North America — impacted by project delays, Somero might still struggle to meet full-year forecasts.

‘Quality’ dividend stock

Analysts have a 24 cents per share total dividends pencilled in for this financial year. Although I’ve already missed out on the first portion of this, such a return would translate to a big ol’ yield of 6.3%.

Elsewhere, I see that the small-cap still boasts a lot of the hallmarks that I look for: big margins, high returns on the money it puts to work and a solid balance sheet.

Like ITV, I’ll keep an eye on this stock going forward, especially as the valuation is very similar. But I think there are better passive income opportunities out there right now.

The post Which of these cheap dividend stocks would I buy again for passive income? appeared first on The Motley Fool UK.

Yet, while this might be true for some top-performing stocks in 2024, not all shares have been so fortunate. And many continue to trade at seemingly cheap valuations.

We’ve already seen countless times the power of investing in quality companies trading at a discount. So, for investors with little to no retirement savings, snapping up bargains right now could significantly improve their long-term financial position.

The best place to invest right now?

When it comes to hunting down terrific buying opportunities, history has shown countless times the best place to start looking is where nobody else is. Therefore, zooming in on beaten-down enterprises and unpopular sectors could be a smart move today.

Companies that have fallen out of favour often end up seeing their stock prices sink. In a lot of cases, this downward trajectory is justified. If business conditions worsen or a new threat emerges, falling sales and profits can be a clear signal to stay away.

But sometimes, such disruptions are only temporary. And providing the underlying business has the resources and talent to navigate the storm. Downward volatility can create tremendous opportunity. So, what are some of these unpopular sectors right now?

Real estate, manufacturing, and construction seem to be strong contenders for weakest performance right now. All have seen their demand get hit hard by higher inflation and interest rates over the last few years. Yet despite economic conditions steadily improving, valuations within these sectors are still largely depressed.

A buying opportunity for patient investors?

Looking at my own portfolio, Somero Enterprises (LSE:SOM) is a prime example of a business suffering from short-term headwinds. The stock is down almost 50% since the start of 2022, and it’s not difficult to see why.

As a manufacturer and distributor of laser-guided concrete laying screed machines, Somero’s business is sensitive to the US construction industry. However, with interest rates still elevated, companies have been postponing projects until 2025, when better rates are expected to emerge.

Consequently, its latest trading update revealed that sales and earnings are likely to be lower compared to a year ago. And with shareholders understandably disappointed, the shares have slid by another 20% since the start of the year.

It’s frustrating to see earnings get disrupted. However, the reaction from shareholders suggests that most are too focused on the short-term issues. In the long run, demand for Somero still looks rock solid, especially given the trillions of dollars being poured into renewing US national infrastructure.

Pairing this with a healthy cash-rich balance sheet and a price-to-earnings ratio of just 9.3 suggests that a buying opportunity has emerged for long-term investors to consider. At least, that’s what I think, given the firm’s near 40-year track record of navigating the cyclical construction industry.

The post No savings at 40? I’d buy cheap UK shares to try and retire richer appeared first on The Motley Fool UK.

#1 Fintech’s on the march!

I first invested in Alpha Group International (LSE:ALPH) in 2020. What started out as an affordable currency-risk management service for small- and medium-sized businesses has evolved into a full-on alternative banking platform.

The group now supports a vast array of services, from international payments to alternative investment management. And this business success has also translated into jaw-dropping share price returns, making it one of my largest portfolio positions today.

Recent macroeconomic headwinds have proven challenging as they’ve wreaked havoc on Alpha’s customers. The business has managed to maintain double-digit growth in spite of these headwinds. But it’s been considerably slower than its usual rate of expansion. And continued uncertainty within the financial markets could handicap growth and boost competitors.

Fortunately, the latest results revealed encouraging trends, with July and August showing signs of improvement. And with the shares taking a recent tumble, I may think about buying more.

#2 An ad surge is coming

Following the boom of e-commerce activity after Covid-19, digital advertisers have been stuck in a long winter of customer budget cuts. With high inflation sending discretionary spending into the gutter, firms like dotDigital (LSE:DOTD) haven’t had a fun time of late.

The company runs a digital advertising automation platform where businesses can manage existing and convert potential customers. The client base is largely made up of online retailers, which makes dotDigital highly susceptible to the e-commerce cycle. Growth evaporated once the axe came for marketing budgets.

However, economic conditions have improved this year. And companies have slowly started resuming marketing campaigns, thawing the advertising winter. This is evident when looking at dotDigital’s financials, with double-digit growth already making a comeback.

Yet the share price is basically flat over the last 12 months. Looking at other marketing-based enterprises, it seems to be a recurring story suggesting that investors are still out of love with the sector. But in my experience, investing in unpopular high-quality stocks can be quite lucrative in the long run, even with the added risks of cyclicality.

#3 Infrastructure projects set to explode in 2025

Somero Enterprises (LSE:SOM) has some incredibly lumpy earnings. Unlike most businesses that tend to achieve relatively smooth results, a quick glance at Somero shows revenue, profits, and cash flows have been all over the place.

But such is the nature of operating within the construction industry. As a manufacturer of laser-guided concrete screed machines, management’s a long history of successfully navigating market downturns. And the effects of prudent capital allocation are clear when looking at the last 15 years, with shares climbing more than 1,350%.

With the bulk of its business dependent on construction, project delays due to higher interest rates have been quite a headache for shareholders. And it’s why the shares have tumbled 50% since the start of 2022.

But now rates are starting to fall, the backlog of construction projects is expected to start clearing next year. So a surge in demand could be on the horizon. Obviously, there are no guarantees. But at a price-to-earnings ratio of 8.6, it’s a risk I’d be comfortable taking.

The post £3k to invest? 3 UK shares I’d buy in an ISA in 2024 appeared first on The Motley Fool UK.

Right now, the company’s offering an impressive 7.6% yield. And at a share price of 322p, investors only need to snap up 4,920 shares to start earning an extra £100 each month.

An under-the-radar industry leader

Somero’s not a household name. The firm designs and manufactures laser-guided concrete screed machines used by the construction industry, particularly when building infrastructure or large commercial properties. Think shopping malls, car parks, warehouses and the like.

Traditionally, concrete laying can be done by hand. But with Somero’s machines, the job can be completed significantly faster and to a much higher quality, saving time and money. So much so, that the company has outgrown its competitors by a wide margin.

But in the last few years, it’s been a bit of a bumpy ride for Somero. Higher interest rates have pushed back a lot of projects. And these delays have ultimately hampered demand for its screed machines. Pairing that with awkward weather conditions, the stock’s understandably taken a tumble as growth becomes challenging.

However, the cyclical nature of the construction sector’s nothing new to Somero. Management’s navigated such adverse conditions plenty of times in the past. Pairing this experience with a highly cash generative business model when times are good, the group has no debt on its balance sheet and a healthy cash war chest to keep it afloat during the bad times.

That’s how dividends have kept flowing even during the pandemic. And when paired with a falling share price, investors now have the opportunity to reap a massive yield.

The risks of cyclicality

Somero’s cash flow’s almost entirely tied to the status of the construction sector across the globe, especially in its core North American market. And this dependency’s clearly shown in its financial statements. Revenue and profits have been quite lumpy, as have dividends.

The history of Somero’s shareholder payouts has been a bit of a rollercoaster ride, rising and falling constantly. And in most cases, the lack of consistency doesn’t exactly sound inviting to most income investors. That’s likely a leading reason why shares have and continue to trade at a relatively low price-to-earnings ratio for most of its history.

Yet, despite all this volatility, dividends, over the long run, have trended upward. And now that interest rates are starting to fall, the company’s presented with a massive backlog of construction projects that could put it in a post-inflation boom if management can successfully capitalise on it.

That’s why, despite the inconsistency, I’m eager to top up my position in this enterprise once again and potentially reap what could be enormous passive income over the next few years.

The post I’d buy 4,920 shares of this stock for a £100 monthly passive income appeared first on The Motley Fool UK.

The London Stock Exchange is home to a vast array of dividend-paying stocks. But finding future Aristocrats is no easy feat. And in most cases, a business will fall short. But I’ve spotted a few promising enterprises that might have what it takes. With that in mind, let’s explore three that are already in my income portfolio.

Energy, renovation and infrastructure

Greencoat UK Wind (LSE:UKW), Howden Joinery (LSE:HWDN), and Somero Enterprises (LSE:SOM) are three distinctly different businesses operating with their own unique approach. However, there are some similarities.

Greencoat is capitalising on the renewable energy revolution, Howdens on home renovation, and Somero on industrial infrastructure. While technology’s rapidly changing the world as we know it, all three sectors are likely to be around for decades. And with their market-leading positions, these companies should follow suit.

Greencoat’s portfolio of wind farms is already the largest in the UK. And since demand for electricity’s only going up, the company has little trouble generating vast amounts of free cash flow at a high margin.

Howden’s in a similar position. The UK continues to suffer from a housing shortage, resulting in almost half of all properties being older than 50 years. Subsequently, the demand for home renovation continues to rise.

As for Somero’s laser-guided concrete laying screed machines, the group’s having little trouble finding opportunities to sell or lease its technologies to construction teams around the globe. The US is proving to be a particularly fruitful market thanks to the government’s enormous $1trn investment in revamping public infrastructure across the country.

Digging into dividends

Out of the three stocks, Greencoat’s currently leading the charge in terms of consecutive payout hikes. The group’s increased the dividend per share for nine years in a row, while Howden Joinery’s sitting at four years. Although it’s worth pointing out that before the pandemic came along, shareholders were enjoying an eight-year streak.

The odd one out is Somero, who has been a bit all over the place when it comes to shareholder returns. But digging a bit deeper reveals why. Unlike the other two businesses, cash generation from screed machines is far lumpier. Apart from being exposed to the cyclical nature of construction, the firm also has to deal with unpredictable weather conditions, which can delay projects.

Yet despite this volatility, compared to 10 years ago, dividends have increased by almost 10 times – a trend that looks set to continue in the long run.

Of course, these businesses aren’t without their weaknesses. Greencoat is highly dependent on energy prices, which are controlled and regulated, eliminating any form of pricing power. Howden’s is at the mercy of raw material price inflation. And Somero, as previously highlighted has been getting continuously handicapped by bad weather conditions.

Nevertheless, all three dividend shares look set to deliver long term value and passive income, in my opinion. That’s why I feel these risks are worth taking for the potential reward.

The post 3 dividend shares I’ve bought for the next decade! appeared first on The Motley Fool UK.