So is there a potentially hidden buying opportunity here?

What’s going on with Videndum?

As a quick crash course, Videndum specialises in designing and manufacturing specialist hardware and software for broadcasters, film studios, and content creators. This includes camera rigs, LED lighting, and audio solutions, among others.

It’s a bit of a niche segment that’s been disrupted in recent years following the pandemic and project delays created by the shifting economics of the film industry. Sadly, in 2025, the situation continues to be tough. Demand remains relatively weak with revenues sliding in its interim results by 25% with the bottom line falling further into the red, year on year.

US tariffs have only compounded the headaches, with distributors hitting the pause on new orders. And while management did raise some cash through equity, the group’s balance sheet isn’t in a terrific state.

That certainly explains why the stock’s taken such an extreme tumble. But what about a potential recovery?

Despite the challenges, Videndum’s successfully started unlocking meaningful annual savings with a target of £15m by the end of 2025. At the same time, the group’s debt covenant reset in April has provided some wiggle room to start mending the balance sheet while also launching new products.

If these de-risking efforts are a success and North American orders begin to normalise, there could be a viable path to recovery moving forward.

And Mobico?

Mobico’s probably better known by its original name – National Express. And the bus, coach, and rail services operator has also had a tough time of late. Unlike Videndum, revenues are still moving in the right direction. But sadly, that hasn’t stopped net earnings from being elusive.

Admittedly, a large chunk of its losses are non-cash impairment charges, mostly linked to its North American School Bus business. This segment has long proven problematic, and management’s in the process of selling it off using the proceeds to pay down debt.

This is likely the wisest move. After all, Fitch – the credit rating agency – recently downgraded Mobico to a BB+ rating. That’s just below the threshold of investment-grade bonds and implies that any future borrowing activity will come with significantly higher interest rate payments.

The asset sale is expected to reduce the group’s gearing from 3.0 to 2.5. That’s still pretty high, but a lot more manageable. And with passenger demand elsewhere in the business remaining strong, along with upcoming price adjustments, management’s guidance suggests improvements in underlying operating income in the second half of 2025 – potentially signalling the start of a recovery.

The bottom line

Both Videndum and Mobico will need flawless execution to deliver on a strong rebound. Given their recent track records, that’s quite a big ask. As such, I don’t think investors should be considering these as top shares to buy right now.

However, if both businesses can demonstrate more progress towards recovery, then it might be worth taking a closer look. For now, I’m looking at other investing opportunities.

The post After crashing 65% are these some of the cheapest UK shares to buy today? appeared first on The Motley Fool UK.

Some of the worst-performing British stocks in 2025 include:

1. Videndum (LSE:VID) – down 69%
2. Mobico Group – down 66%
3. Petrofac – down 65%
4. Severfield – down 64%
5. John Wood Group – down 52%

In many cases, when a stock sees more than half its market-cap wiped out in the space of six months, there’s cause for concern. However in some cases, a sharp drop in share price can present a lucrative buying opportunity if the underlying business is able to recover.

What’s going on at Videndum?

As a quick crash course, Videndum focuses on making specialised premium hardware and software for the content creation industry. This includes camera supports, LED lighting, robotic camera systems, and live streaming solutions used by individual content creators as well as full-blown professional production studios.

Through a combination of macroeconomic factors paired with worker strikes last year, the media & entertainment industry’s in a bit of a cyclical pickle. And the impact of this has emerged in Videndum’s financials.

While market conditions have slowly begun recovering, Videndum’s revenue stream has been on a downward trajectory since 2022. And pairing this with a series of impairment, discontinued operations, and restructuring charges, the bottom line has tumbled into the red.

To top things off, management’s warned that sales in the first half of 2025 are also likely to continue falling year-on-year. Needless to say, this isn’t what investors like to see. However, there may be a glimmer of hope.

A rebound opportunity?

The media & entertainment industry’s expected to deliver a full recovery by the end of 2026. That could be the catalyst Videndum needs to re-spark growth. At the same time, the previously-mentioned restructuring efforts are anticipated to deliver a total of £18m in annualised savings, £15m of which are expected to be realised in 2025.

Pairing this with ongoing renegotiations regarding its debt covenants, management seems to be taking the necessary steps to get back on track. So with the shares trading close to their 52-week lows, is now the time to consider buying?

Looking at the latest forecasts, Videndum certainly appears to have explosive recovery potential. In fact, one analyst has projected the stock could venture as high as 425p, a 460% potential gain from current prices. However, the group’s weakened financial position and slow recovery of its target markets definitely introduce considerable risk to an investment today.

Personally, this isn’t a tempting proposition right now. But it’s still an interesting story to watch carefully moving forward.

The other stocks on this list also have their challenges to overcome. Operational headaches and profit warnings are creating uncertainty for Mobico and Severfield. Financial restructuring issues and delayed results have resulted in Petrofac shares getting temporarily suspended, and questionable accounting practices have raised concerns for John Wood Group.

None of these is good news for shareholders. So ‘screaming buys’ they may not be. But by digging deeper, investors may uncover potentially lucrative opportunities among all the chaos.

The post Are these 5 heavily-discounted UK shares secretly screaming buys to consider? appeared first on The Motley Fool UK.

For example, three that have caught my attention this month are Videndum (LSE:VID), Severfield (LSE:SFR), and Ultimate Products (LSE:ULTP).

Huge tumbles

In terms of business models, all three of these UK shares are quite different from each other. Videndum specialises in hardware and software solutions for content creators, Severfield’s focused on creating structural steelworks, while Ultimate Products sells a branded portfolio of homeware products. 

However, one common characteristic all these companies currently share is that their stock prices are in the gutter. And as a result, the forward price-to-earnings ratios are now looking quite attractive from a value investor perspective. So are these buying opportunities or value traps?

What went wrong?

Before jumping headfirst into a new value investment, it’s important to understand what’s driving the stock price down. Looking at these enterprises, there are a few factors at play.

However, the primary catalyst for each appears to be:

• A slower-than-expected rebound in the scripted TV markets following last year’s strikes has caused Videndum’s revenue to underperform, translating into profit warnings for shareholders
• Disruption within the construction industry has caused a number of Severfield’s key projects to be delayed or outright cancelled, with seemingly no sign of improvement on the horizon
• A combination of weaker UK consumer spending paired with retailer inventory destocking headwinds has caused demand for Ultimate Product’s offer to suffer while shipping costs continue to rise

There seems to be a common theme here. All three businesses are experiencing a cyclical downturn of some sort. But buying during a downcycle can potentially be lucrative if the firms are able to bounce back.

Time to buy?

Not all of these UK shares, even at their seemingly cheap valuations today, are tempting me to buy right now.

Severfield’s the cheapest, according to the forward earnings multiple. But these projected earnings for 2026 include profits for projects that should have materialised in 2025. And with construction headwinds looking unlikely to turn any time soon, the group’s downward journey might not yet be over.

Videndum seems to be in a better spot, cyclically speaking, as the film & TV industry’s recovering at a faster pace compared to the construction sector. Butthe co mpany’s also tackling debt and liquidity issues that management’s in the process of renegotiating.

As for Ultimate Products, the firm appears to offer a stronger financial offer with operational cash flow more than able to cover interest expenses and dividends to shareholders. Operating in a highly competitive industry does give me pause. However, its leading brands, such as Russell Hobbs, Salter, and Dreamtime, definitely give it a competitive edge.

With that in mind, value investors looking for cheap UK shares today might want to investigate Ultimate Products a bit more deeply.

The post Are these 3 heavily-discounted UK shares worth considering to buy in May? appeared first on The Motley Fool UK.

Rupert Hargreaves: Morgan Sindall

As the UK economy recovers from the pandemic, the construction sector seems to be taking off. As such, I’d buy Morgan Sindall (LSE: MGNS).

As one of the country’s largest construction groups, the firm looks set to benefit from rising activity in the sector.  Indeed, according to a recent trading update, the firm expects to report profit-before tax in the first half of its financial year 46% above 2019 levels. Its backlog has also continued to grow. It is up 5% compared to the year-ago period.

These figures are encouraging, but the construction industry can be volatile. So, Morgan’s fortunes for the year could still change.

Nonetheless, with revenues expanding, I’d buy the stock today.

Rupert Hargreaves does not own shares in Morgan Sindall.

Edward Sheldon: Unilever

My top British stock for August is consumer goods giant Unilever (LSE: ULVR).

Unilever’s share price took a hit in July after the company published its half-year report. Investors didn’t like the fact that earnings were impacted by cost inflation.

I think this share price pullback has provided a nice entry point. Overall, the results showed that Unilever is heading in the right direction. Sales growth came in at 5.4%, while e-commerce sales were up 50%.

With the stock now trading on a forward-looking P/E ratio of less than 20 and offering a prospective yield of around 3.5%, I think it’s a good time to be buying.

Edward Sheldon owns shares in Unilever.

Kevin Godbold: IMI

IMI (LSE: IMI) makes “highly engineered” products such as actuators and valves.

The business scores well against quality indicators, such as return against equity and operating margin. There’s a robust record of operating cash flow and earnings barely faltered through the pandemic. Looking ahead, City analysts have pencilled in a double-digit percentage increase in earnings for 2022.

With the stock near 1725p, the forward-looking earnings multiple is around 18. That’s not cheap and the valuation adds risk for shareholders. But IMI has earned its rich rating. And I’d want it in my portfolio for August and beyond.

Kevin Godbold does not own shares in IMI.

Royston Wild: The Vitec Group 

The Vitec Group’s (LSE: VTC) share price has risen strongly over the past 12 months. And I think that the UK engineering share could gain more ground when first half results are posted on Thursday, 12 August.  

Demand for Vitec’s cameras and broadcast equipment is soaring right now. The firm saw product orders rocket 50% to record levels in the five months to May, it said in its latest statement. And this prompted the business to upgrade its forecasts for the full year.

It’s true that electronic equipment shortages could hamper Vitec’s sales recovery. However, I believe this risk is baked into the share price right now. Today the small cap trades on a forward price-to-earnings growth (PEG) ratio below 0.1. 

Royston Wild does not own shares in The Vitec Group.

Paul Summers: ASOS

Following the huge (overdone) fall of its share price in July, my top stock for August is fast-fashion firm ASOS (LSE: ASC). 

Sure, the company faces some near-term issues relating to its supply chain and slowing sales. There’s also the threat of an online sales tax to consider. However, the stock hasn’t been this cheap since last September. Margins are slowly improving and newly acquired brands will help boost growth in time. 

I’m confident this AIM-listed star will shine again once travel restrictions are lifted and we need fresh wardrobes for holidays. 

Paul Summers has no position in ASOS

Zaven Boyrazian: BP

With the world shifting to renewable energy solutions, BP (LSE:BP) is transforming itself into one of the largest green energy providers over the next decade. Its existing portfolio heavily relies on oil. However, due to increased environmental pressure, that may soon no longer be the case.

It’s already investing in wind, solar, bio and hydrogen energy solutions. And BP estimates it will be generating 50GW by 2030. That’s roughly enough to power 15 million homes.

The transition undoubtedly has risks that could cause short-term disruptions to profits. But over the long term, I believe BP stock and its 5.4% dividend yield will continue to rise in August and beyond.

Zaven Boyrazian does not own shares in BP.

Nadia Yaqub: Aviva

A lot has been happening at Aviva (LSE: AV). The new CEO, Amanda Blanc joined the firm last year. It has also been disposing of assets to focus on its core businesses. And the insurance company announced that it’s going to be making a substantial capital return to stockholders.

I like that the Board is shareholder friendly. Further details on this capital distribution will be released later on in the year. In my opinion, things are changing for the better. The shares pay a dividend yield of 7% and are trading on a cheap price-to-earnings (P/E) ratio of 7x.  

Nadia Yaqub does not own shares in Aviva

Roland Head: B&M European Value Retail

Discount retailer B&M European Value Retail (LSE: BME) has performed well over the last 18 months. Its stores qualified as essential retail and remained open, enjoying bumper trading.

Since its IPO in 2014, B&M has consistently been more profitable than the big supermarkets. I expect this to continue, even as the boost from Covid-19 fades away.

The main risk I can see is that B&M’s success will attract increased competition. So far, I don’t see much sign of this.

B&M’s share price has pulled back recently, as the market prices in slower growth. I think that’s left this business looking very affordable.

Roland Head has no position in B&M European Value Retail.

Tom Rodgers: Grafton Group

I see Grafton Group (LSE: GFTU) as one of the best FTSE 250 stocks to buy in August. The building materials and DIY retailer has profited from the home refurb boom and early shareholders have been rewarded with a 70%+ share price growth in 12 months.

I see much more upside on the cards, however, because the well-run business raised its profit forecast on 8 July after a strong first half of the year. Its buyout of Finland’s workwear distributor IKH also adds another income stream for 2021. Now seems to be a good time to buy to cash in on these profits. 

Tom Rodgers does not own shares in Grafton Group

Christopher Ruane:  Lloyds

High street bank Lloyds (LSE: LLOY) has recently slowed down after a strong share price performance this year. It’s up a third in 2021 and 60% over the past 12 months.

I see a buying opportunity. A possible price driver is the likelihood of a growing dividend. The bank has committed itself to a progressive dividend policy. It is now sitting on excess capital which could help fund it.

Any weakening in the housing market is a risk. As the UK’s leading mortgage provider, Lloyds is heavily exposed to housing.

Christopher Ruane owns shares in Lloyds.

G A Chester: Centamin 

The share price of gold miner Centamin (LSE: CEY) has more than halved since this time last year. It’s been the victim of two common risks that can dent such a stock. Namely, a weakening of the price of gold and an operational setback. 

However, I can see two reasons for optimism right now. First, continuing massive money printing by governments should be supportive of the gold price. Second, Centamin appears to have stabilised operations. 

It reiterated its production and costs guidance for 2021 in a report on 22 July. I reckon further positive noises in its half-year results on 5 August could see returning investor interest in the stock. 

G A Chester has no position in Centamin.

Manika Premsingh: BP

The FTSE 100 oil biggie BP (LSE: BP) will release its second quarter results at the start of August. They could come in strong. We need to look no farther than crude oil prices to know this, which are at pre-pandemic levels. Companies like BP are direct beneficiaries of this trend, as was already visible in the quarter before. The numbers could look better purely because of base effect as well. The same time last year was one of high restrictions, so there was little travel demand and oil prices were relatively low.

I reckon that its share price can rise as results come in, particularly if there are positive developments on the dividend front.

Manika Premsingh owns shares of BP

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

Of course, returns are never guaranteed with any investment approach. Still, I believe that buying stocks at low valuations is an approach that has helped my portfolio over the past decade.

And with that in mind, here are two super-cheap UK shares I’d add to my portfolio today. 

Super-cheap UK shares

When looking for cheap shares, investors often overlook growth companies. I think this is a big mistake. Stocks that look cheap compared to their prospective growth can be just as good investments as those that look cheap on other metrics. 

That’s why I’d buy Vitec (LSE: VTC) for my portfolio. At first glance, this stock doesn’t look cheap. It’s trading at a price-to-earnings (P/E)  ratio of 21.8. However, with earnings per share expected to rise substantially in 2021 and 2022, the stock is trading at a 2022 P/E of just 17. 

Vitec provides hardware products and software solutions to the rapidly expanding content creation market. The global digital market is expected to grow at a compound annual rate of 9.1% by 2025.

If Vitec’s growth continues at this rate, the stock could currently be selling at a low-teens multiple of 2025 earnings. That looks cheap to me compared to the valuations of stocks in the same sector around the world. These stocks are trading at multiples around 25 times forward earnings. 

This potential is why I believe this is one of the best cheap UK shares to buy now. That said, the company isn’t guaranteed to hit these growth targets. If growth stumbles, investors may decide to avoid the stock and push its valuation lower. That’s the most significant risk of investing in Vitec today. 

Still, I’d buy the stock today based on its growth potential. 

Deep value 

The other company I’d buy for my portfolio of cheap UK shares is Town Centre Securities (LSE: TOWN). In fact, I already own shares in the business. 

I should start by saying this isn’t an investment for the faint-hearted. The real estate investment trust owns a portfolio of commercial property assets in Leeds and Manchester. Unfortunately, these have seen their valuations and income decline over the past 14 months.

It’s also a relatively small business with a market capitalisation of just £72m, at the time of writing. 

Aside from these risks, the stock is selling at a price to book ratio of 0.5. I think that looks incredibly attractive. Moreover, its largest shareholders are also the founding family, which means they’re incentivised to achieve a good outcome for all investors. 

Based on these reasons, I’d buy more of the stock for my portfolio of cheap UK shares, despite the risks outlined above. Of course, the company may encounter further turbulence as the economy recovers from the pandemic, but I’m encouraged by its low valuation and management ownership. 

The post 2 super-cheap UK shares I’d buy today appeared first on The Motley Fool UK.

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

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

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

Why I’d buy this UK share

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

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

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

Another top British stock to buy

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

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

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

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

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

It’s up 120% in that time on hopes that demand for its broadcasting equipment will pick up again as the Covid-19 threat recedes. Indeed, it just closed at record highs above £14 per share.

A top reopening stock?

News coming out of Vitec of late has been encouraging rather than spectacular. And I’m not expecting anything jaw-dropping when the reopening stock releases new trading numbers Thursday (6 May). Last month, the company said “order intake and revenue [is] broadly in line with the same period in 2019.” This was despite its markets not fully reopened.

However, there’s a huge danger to Vitec’s ability to keep this solid momentum going. A surge in coronavirus cases among participants of the Indian Premier League has caused organisers to now indefinitely suspend this year’s edition of the cricket tournament.

Other major sporting events like this summer’s Tokyo Olympics are also under threat as the number of global Covid-19 cases keep rising. And this could again hit demand for the company’s cameras and other equipment hard.

On the plus side however, successful vaccine rollouts in the US mean that film and scripted programme production could be set for a sustained recovery. The business saw a vast trading improvement in the second half of 2020 as production output recovered.

Picture perfect

I still think Vitec is an attractive reopening stock to buy today despite the threat of more coronavirus-related turbulence. First of all, I think this UK share offers the sort of value that’s hard to ignore.

For the reasons I’ve outlined, there’s a risk that broker forecasts for 2021 might be blown off course. Current estimates suggest Vitec’s annual earnings will rise 450%. However, this leaves the business trading on a forward price-to-earnings growth (PEG) multiple of 0.1. Any reading below 1 suggests a stock might be undervalued. This leaves a broad margin of safety for value investors, even if estimates are scaled back.

What’s more, Vitec has wriggle room on the balance sheet to help it overcome more temporary trading troubles. Net debt fell by around £5m last year to £90.8m, even as revenues collapsed. In fact, the reopening stock’s strong financial position means it’s remained active on the acquisition stage to improve its long-term market opportunities.

Vitec has a broad and expanding range of products to help it capitalise on a myriad of structural opportunities. The amount of homegrown content from streaming giants such as Netflix and Amazon looks set to keep booming. The growth of ‘on location’ filming is also boosting demand for Vitec’s specialised tech. The rise of vlogging and homeworking means the sales outlook for its smartphone and compact camera accessories remains bright too.

So this is a reopening stock I’d happily buy this May.

The post A cheap UK reopening stock I’d buy in May appeared first on The Motley Fool UK.

That’s what Vitec Group (LSE: VTC) offers, and its yield just got slightly better after the shares fell 12% on the back of a profit warning. That’s pushed the dividend yield up to 3.9% if it’s maintained at the forecast 39.5p per share.

Earnings forecasts put cover at 2.2 times, so the almost certain earnings per share downgrade to come won’t necessarily hurt the dividend.

The company, which makes photographic and video equipment, including tripods, filters, and lights, was hit by a fire at its SmallHD division in 2018, and recovery has been slower than expected. On top of that, “retail de-stocking in Imaging Solutions has been unusually severe,” and that’s hit revenue.

Downgrade

Adjusted pre-tax profit for the year is now expected to be in the range of £47m to £50m, which is down from the £53m analyst consensus. If EPS falls by a similar level, it would still cover the predicted dividend more than twice, so I don’t see any need for panic right now.

Net debt does concern me a little, though, standing at £108.4m at the halfway point at 30 June, though a portion of that was due to a £21.6m impact from IFRS 16 lease accounting. We’ll have to wait to see how debt pans out in the longer term.

Chief executive Stephen Bird says he expects “2020 to be a year of progress for the Group, benefitting from the Summer Olympics, US Presidential elections, and the targeted growth initiatives already underway,” even if the aftermath of the fire will still have an impact.

Vitec’s current weakness looks to me to be down to one-offs, and I think we’re looking at good long-term income buy.

Price weakness

Shares in Playtech (LSE: PTEC) have been sliding since it warned us on 22 November that it was going fall short of analyst expectations, and the negativity continued Thursday with a further 6% drop. Playtech shares are now down 55% over the past two years.

The gaming software provider’s spread-betting division, TradeTech, hit “highly challenging” trading conditions in September and October, and the company now reckons overall EBITDA will come in “a little below current consensus,” with TradeTech’s results specifically set to come in “well below management’s expectations.”

Crackdown

Spread betting is not a good business to be in these days, I think, with financial regulators increasingly scrutinising all manner of financial derivatives and betting offerings. The European Securities and Markets Authority, in particular, has been cracking down on such products.

 Playtech says it is “evaluating all options for the business.” So it sounds like TradeTech could be offloaded, which doesn’t sound like a bad plan to me. A renewed focus on its gaming software would, I think, put the company more into the ‘picks and shovels’ field, and I reckon that could provide better core strength.

The 4.3% dividend yield forecast for this year would be more than 2.5 times covered by the existing consensus, so it’s another that I think should be resilient in the face of likely downgrades. I see Playtech as another tempting income buy.

The post A progressive dividend stock I’d buy after 10% share price fall appeared first on The Motley Fool UK.

Understandably, most private investors gravitate towards the biggest and best-known companies (think Lloyds Bank, Royal Dutch Shell and GlaxoSmithKline), either through buying their shares directly or by purchasing a fund that focuses on holding a selection of these giants.

Today, however, I’ve picked out two far smaller businesses that not only have great income credentials but also, I suspect, offer the possibility of decent capital growth.

Focused on 2020

Based on recent trading, you might wonder why I’m positive on “image capture and content creation solutions” provider (that’s camera accessories, supports, prompters, monitors and lighting to you and me) Vitec Group (LSE: VTC).

Results for the first half of 2019 weren’t particularly inspiring. The US/China trade war and “some disruption to the photographic market” left revenue pretty much flat at £184.2m compared to the previous year. Pre-tax profit fell almost 16% to £16.6m and net debt increased to £108.4m from £43m, partly as a result of acquisitions.

In spite of this, it’s important to highlight that Vitec made no changes to its FY19 guidance. At 14%, adjusted operating margins also remained decent and in line with the company’s mid-teens-digit target.

By far the biggest positive in my view, however, was the fact that wireless chip maker Amimon (purchased in November last year) has now been fully integrated. This means Vitec’s plan to launch wireless video products into the broadcast sports market next year is on track. This development, coupled with the company being heavily involved with the Tokyo Olympics (as well as the US Election), leads me to suspect that the current valuation of 14 times earnings could turn out to be rather cheap by next year.

And the dividends? The 3.1% yield might appear very average, but it’s been consistently hiked over the years — exactly what those looking for regular income should be searching for. What’s more, this year’s cash returns should be covered well over twice by profits.

Galloping dividends

A second stock that I think warrants further investigation is RM (LSE: RM) — a company that supplies products and services to education markets, both here and abroad. 

This small-cap’s shares have been in excellent form over the last 12 months, rising a little over 50%. Based on July’s interim results, I think there could be more good news ahead.

Although revenue rose only 1% (to £95.5m) thanks to “a difficult UK schools market“, international sales rose 33%. Adjusted operating profit also jumped 17% to £9.7m, helped in part by improvements in RM’s Results and Education divisions. Margins rose to 10.2% from 8.8% and net debt dropped by £2.2m to £21.2m. Lots of good numbers there.

The great thing about all this is that RM’s shares can still be picked up for just 11 times expected earnings. Considering the company generates high returns on capital employed on a consistent basis, that looks rather cheap to me. 

Like Vitec, RM’s 3% yield isn’t exactly worth writing home about on its own. Look underneath the bonnet, however, and you’ll discover that the business has doubled its total cash return since 2013 and is expected to grow this amount by another 10% in FY20. Forget the sky-high yielders elsewhere in the market — this is what should get dividend hunters salivating.

The post Looking for dividends? I think these secret small-cap stocks look great value appeared first on The Motley Fool UK.

Why? Well I consider it to be far too cheap right now. It’s forward P/E ratio of 12.7 times, falling well below the accepted value watermark of 15 times and below.

As we all know, broadcasting is changing at a rapid pace too. Whether it’s because of the growing army of vloggers communicating to their growing audiences via YouTube, traditional broadcasters looking to bring watchers into the heart of the action, or virtual reality taking over as the next big thing in the viewer experience.

Vitec is a company that’s in great shape to exploit these trends. Its broad range of cameras, lighting, monitors and other technologies, capture the imagination of both independent content creators and broadcasters, paying testament to the vast investment this small-cap dedicates to R&D as well as the expertise of its product design teams.

Tech titan

There’s a reason why Vitec’s profits hit record peaks in 2018 and, judging by commentary last week, it remains on course to keep delivering all-time highs. It said its previous forecast for further progress in 2019 “remains unchanged” and that it expects “a strong 2020,” with sales likely to be supported by the Summer Olympics and the US Presidential election.

The camera colossus has proved a hit with income chasers in recent years and, in 2018 alone, hiked the full-year dividend by more than 20% to 37p per share. City analysts are currently predicting a 39.3p reward for 2019, one which yields a chubby 3.4%. But I reckon this is looking a bit light.

I fully expect, given Vitec’s bright profits outlook for the near-term and beyond, not to mention its stunning ability to build cash (free cash generation swelled by £10m to £33.5m last year) for the actual payout to storm past current consensus estimates.

Travel tsar

WH Smith (LSE: SMWH) is another top dividend grower where I think payouts may surprise to the upside, a factor which makes it a great income stock despite its modest forward yield of 2.9%.

The retailer raised the full-year dividend 12% in the year to August 2018 to 54.1p, and City forecasts currently suggest a smaller rise, to 57.9p payout, is on the cards for fiscal 2019.

Like Vitec though, a bright profits picture stretching long beyond the near term should give WH Smith the confidence to introduce another hefty dividend hike.

This was laid bare in newest trading details last week in which it advised sales at its Travel business were up 26% in the 11 weeks to mid-May. That reflects the massive investment made in its UK and international operations, and the vast revenues potential here as the number of global travellers booms.

The FTSE 250 firm certainly has the balance sheet strength to effect another meaty change too.

So while WH Smith deals on a not-exactly-cheap forward P/E multiple of 17.4 times, I reckon its sudden price slump over the past six weeks makes it a highly-attractive dip buy today.

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