Strong and stable

One option that jumps out at me is online trading platform provider and FTSE 250-listed IG Group (LSE:IGG). Its shares are currently set to yield 4.7%. This cash return has also been rising in recent years. The dividends look set to be comfortably covered by predicted profits too.

Since IG earns more in commission fees when traders are particularly active, this might also be a good play for riding out periods of volatility in the markets (and even profiting from them).

It’s not all gravy, though. This is a competitive space that frequently finds itself under the spotlight of regulators. So, there’s nothing to say that IG’s share price won’t yo-yo about the place every so often.

For someone intent on getting their money to work harder for them, however, I think it’s a great option to consider to kick things off. Despite the shares rising 50% in the last 12 months, a price-to-earnings (P/E) ratio of 10 still looks reasonable to me.

Massive yield

A second dividend growth stock worth pondering is molten metal flow engineering and technology specialist Vesuvius (LSE: VSVS).

Importantly, this firm operates in a completely different sector to IG Group. Again, that doesn’t mean the dividends are completely secure. But it does help to reduce the risk of no income at all being received. This £1bn cap business offers a stonking yield of nearly 6% for FY25. That’s getting on for nearly double the average across the FTSE 250.

One thing to be aware of is that steel and foundry markets in North America and Europe are expected to stay “subdued” for a while. This means profit from last year is likely to come in “slightly below” that achieved in 2023.

On a more positive note, management is reducing costs where it can and the balance sheet doesn’t look stretched as it stands.

Full-year numbers are due in March but I suspect a lot of negativity is already priced in.

Boring but beautiful

Completing the trio that I think are worth considering is old favourite — consumer goods giant, Unilever (LSE: ULVR).

Now, this isn’t a company that sets the pulse racing. But that’s surely not the goal. What matters more is whether a business boasts a better-than-average record of throwing increasing amounts of cash back to its investors.

Despite the occasional wobble, that’s been the case here. One of the UK’s biggest companies, Unilever has been a reliable source of passive income for decades thanks to our tendency to habitually buy Marmite, Persil and Lynx (and a whole lot more).

When times are tough, there’s certainly an argument for saying Unilever risks losing sales to retailers’ own-brand items. The 3.4% forecast yield is also good but not spectacular.

However, the company’s sprawling operations mean it’s not overly dependent on any one economy when it comes to earnings. I’d also argue that falling rates should mean previously-hesitant consumers will now be more willing to splash out on their favourite brands.

The post Interest rates fall again! Here are 3 FTSE dividend growth shares to consider buying appeared first on The Motley Fool UK.

Crocs

What it does: Crocs is the owner and distributor of footwear sold internationally under brands including Crocs and HeyDude.

By Christopher Ruane. I do not like Crocs (NASDAQ: CROX) shoes. But I do like the business.

Last year the iconic footwear firm saw revenues climb 14% while net income surged 46% to $793m. The current market capitalisation of $9bn makes the shares look cheap in my opinion.

The business benefits from strong international revenue growth (24% in the first quarter), positive momentum for the Crocs brand and increasing sales in other product lines such as HeyDude. I think there could be more value in this company than the current share price suggests.

Generic rivals to its core range of simple footwear is an ongoing risk to sales and profits. A weak retail environment in the US market could also hurt demand.

But Crocs is highly profitable and has a well-established business I think could keep growing. It is paying down debt and I expect it to continue buying back shares this year.

Christopher Ruane owns shares in Crocs.

Joby Aviation

What it does: Joby Aviation is an electric vertical take-off and landing (eVTOL) aircraft company building an air taxi service.

By Ben McPoland. I recently bought a few more shares of Joby Aviation (NYSE: JOBY). The Toyota-backed firm has built an electric air taxi designed to carry a pilot and four passengers. These eVTOLs fly at speeds of up to 200 mph and are near-silent, meaning there’s far less pollution and noise.

It plans to begin its ride-hailing service next year, initially in New York and Los Angeles. With partners Delta Air lines and Uber, it aims to reduce commutes between John F. Kennedy Airport and nearby areas from 1 hour to 7 minutes.

It has also signed an exclusive agreement to provide air taxi services in Dubai and sell aircraft to Mukamalah, the aviation arm of Saudi Aramco, which will introduce eVTOL aircraft to Saudi Arabia. Joby also delivered the first ever electric air taxi to the US Department of Defence last year. 

Now, this is a high-risk stock because the innovative company is pre-revenue and still has to get the final sign-off from regulators to begin commercial operations. Perhaps there will be delays. But the firm remains well-capitalised, with $924m in cash on the balance sheet at the end of March.

Ben McPoland owns shares in Joby Aviation.   

Realty Income

What it does: Realty Income is a US real estate investment trust that leases a portfolio of retail properties.

By Stephen Wright. I’ve been buying shares in Realty Income (NYSE:O) recently. The company has an outstanding track record of dividend increases and I think it can be a good source of income going forward.

The current dividend yield is 6%. That’s high compared to where it has been over the last decade and I think there’s a real opportunity at the moment.

Things have been tough in the industry lately. And the latest news is that Walgreens Boots Alliance – one of the companies biggest tenants – is planning on closing some of its stores.

Walgreens might be one of Realty Income’s largest tenants, but it only accounts for around 2.5% of the total rent. As a result, the impact on the overall portfolio should be limited.

That’s the benefit of leasing to a diversified tenant base. It makes the company resilient and puts it in a good position to keep increasing its dividend going forward.

Stephen Wright owns shares in Realty Income.

Unilever

What it does: Unilever is a multinational consumer goods company. It has over 400 brands, including 30 Power Brands.

By Charlie Keough. I snapped up some shares in FTSE 100 giant Unilever (LSE: ULVR) last month. There are a few reasons why.

Firstly, I want to bulk out my portfolio with defensive stocks. I want the majority of my holdings to be companies that have the potential to provide steady returns over the long run. Unilever fits the bill.

I also think the stock looks like decent value at the moment, trading on 20.2 times earnings and below its historical average.

Then there’s its dividend yield. At 3.4%, it’s far from the highest in my portfolio. But it’s reliable. And to me, that’s incredibly important.

The risks are that Unilever tends to sell higher-end goods, which come at a price. Therefore, during a cost-of-living crisis, there’s the ongoing threat that consumers switch to cheaper non-branded alternatives.

But Unilever has strong branding and this gives it an edge. This showed in its latest results, where for the first quarter the business posted 4.4% underlying sales growth and 2.2% underlying volume growth.

Charlie Keough owns shares in Unilever.

Vesuvius

What it does: Vesuvius is a market leader in metal flow engineering, providing solutions to handle molten metal in iron and steel foundries.

By Roland Head. I added FTSE 250 member Vesuvius (LSE: VSVS) to my portfolio recently. In my view, this 108-year-old business looks decent value right now.

In a trading update in May, CEO Patrick André confirmed that he expected 2024 results to be in line with existing expectations.

Broker forecasts suggest profits are expected to return to modest growth in 2024, after last year’s decline. City analysts are predicting stronger earnings growth in 2025.

The big risk here is the company’s cyclical exposure. Demand for Vesuvius’s services is linked global construction and industrial activity. If this slows in major markets such as the USA or India, results could disappoint.

Personally, I think a cautious outlook is already priced in. I bought the shares on less than 10 times 2024 forecast earnings, with a well-supported 5.2% dividend yield.

At this level, I’m happy to collect the income and wait for market conditions to improve.

Roland Head owns shares in Vesuvius.

Xtrackers MSCI World Momentum UCITS ETF

What it does: Xtrackers MSCI World Momentum UCITS ETF invests in global shares that exhibit strong price momentum.

By Royston Wild. I’ve been seeking ways to diversify my portfolio in recent months. I’ve been looking for ways to manage risk and to grab a slice of some exciting investment opportunities.

Xtrackers MSCI World Momentum UCITS ETF (LSE:XDEM) is an exchange-traded fund (or ETF) I feel enables me to do this effectively. It holds shares in almost 350 different companies.

The fund is focused on the US — as I type, a whopping 68.5% of its capital is tied into New York-listed companies. Its five largest holdings are Nvidia, Meta, Amazon, Broadcom and Eli Lilly.

But as its name implies, it also takes a pan-global approach and has holdings in Japanese, German, Dutch and Danish stocks, among others. It also offers exposure to many sectors like semiconductors, software, banks and mining, providing my portfolio with added diversification.

As you can see, this Xtrackers product is highly exposed to several cyclical sectors. So if interest rates remain high, I could endure disappointing returns in the near term.

But over time, I think the fund could be an effective way to hit my investment goals.

Royston Wild owns Xtrackers MSCI World Momentum UCITS ETF.

The post 6 stocks that Fools have been buying! appeared first on The Motley Fool UK.

However, the long bear market we’ve endured could be coming to an end. Several fallen stocks are turning back up and it may soon be too late to nail down some of the bargains (although nothing is ever certain in the stock market).

An earnings weak patch

Nevertheless, Vesuvius (LSE: VSVS) looks like it’s worth further research. The FTSE 250 company makes its living from providing equipment, products and services for the steel and foundry industries. 

Earnings look set to come in around 44% lower in 2023, according to City analysts’ estimates. But there’s likely to be a double-digit percentage rebound in 2024, if assumptions prove to be correct.

Judging by the financial record, one of the features of the business is volatility in earnings from year to year. That situation suggests there’s a cyclical element to operations making the company perhaps unworthy of a rich valuation.

Fluctuating earnings add a layer of risk for potential shareholders. Back in July, the directors said lower profits arose because of subdued market conditions in the steel industry. 

Volumes declined for Vesuvius, but pricing held up and that saved earnings from falling further than they did in the period.

Meanwhile, the firm’s foundry division continued to recover. And looking ahead, the directors expect the positive trend to continue in 2024. That’s because customers in the industry will likely restock after a period of running down their supplies.

Targeting growth

Vesuvius is aiming to gain market share via technological differentiation. And because of that investment programme the directors were cautiously optimistic about the outlook for the whole of 2023. Although they did acknowledge the current environment of macroeconomic uncertainty.

Meanwhile, with the share price near 410p, the forward-looking earnings multiple for 2024 is just above eight. And the anticipated dividend yield is an attractive-looking 5.9%, or so.

Vesuvius has done a pretty good job growing the shareholder payment in recent years, despite its record of fluctuating earnings. There was a wobble in the dividend around the time of the pandemic but the payments came roaring back soon after.

Mid-single-digit percentage increases look likely in 2003 and 2004. And that makes the company interesting as a potential long-term income investment for shareholders.

Earnings and cash flow may strengthen further in the months and years ahead if the macro-economic picture improves and if the company sees ongoing recovery in its steel division.  Although positive outcomes are not guaranteed, it’s possible Vesuvius could become more highly valued by the market if the business performs well.

The directors seem determined to build the company’s market share. And it’s possible growth and recovery could combine to drive the share price and the dividends higher in the coming years.

Positive long-term investing outcomes are never guaranteed for any company’s shareholders. But the modest valuation here looks like a good starting point when combined with the directors’ optimism regarding the outlook. 

This one strikes me as being worth further and deeper research right now.

The post 1 value stock to consider before it’s too late appeared first on The Motley Fool UK.

Here, we asked our Foolish freelancers for the most attractive investment opportunity for them right now!

Alphabet

What it does: Alphabet is a holding company that owns Google. This tech titan is the world’s fourth-largest business with a market cap of $1.59 trillion.

By Charlie Carman. If I could invest in just one stock today, it would be Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL).

Search engine digital advertising revenue is the lifeblood of the business. Although it faces cyclical market risks, Google dominates this space. Microsoft‘s Bing is still a very distant competitor.

A suite of new artificial intelligence products shows Alphabet is well-placed to benefit from technology’s next frontier.

An email writing tool for Gmail, cutting-edge technology for Google Translate, immersive views for Google Maps, and an AI-powered ‘Magic Editor’ for Google Photos all form integral parts of the company’s growing arsenal.

What’s more, new hardware devices including the Pixel Fold and more budget-friendly Pixel 7A, should help to diversify Alphabet’s revenue sources.

The stock isn’t cheap with a price-to-earnings ratio of 28, but it’s not much more expensive than the S&P 500, which trades at 22 times earnings. I believe a premium company deserves a premium valuation.

Charlie Carman has positions in Alphabet and Microsoft.

Anglo American

What it does: Anglo American is one of the UK’s largest listed mining companies. It operates across 56 sites in 15 regions and employs over 90,000 people.

By Cliff D’Arcy. Why am I keen to buy Anglo American (LSE:AAL) shares? First, I don’t own any, but we do have a family holding in rival Rio Tinto.

Second, Anglo’s share price has plunged since peaking a year ago. This stock hit a 52-week high of 4,036p on 7 June 2022. By 31 May 2023, it had crashed to just 2,223.5p.

Third, this group might be a ‘fallen angel’ — a sound company whose shares have fallen out of favour. Furthermore, this stock’s fundamentals support my hunch.

Fourth, the shares trade on a lowly price-to-earnings ratio of 8.2, for an earnings yield of 12.2%. That’s over 1.5 times the FTSE 100‘s yield.

Fifth, Anglo stock offers a bumper dividend yield of 6.8% a year — nearly twice the Footsie’s yearly cash yield of 3.7%. Also, this cash payout is covered 1.8 times by earnings, for some margin of safety.

However, mining earnings and dividends can be highly volatile. Indeed, Anglo cut its dividend in 2015, 2016, 2020 and 2022. Nevertheless, I’m still keen to buy!

Cliff D’Arcy has positions in Rio Tinto.

Arista Networks

What it does: Arista designs critical hardware for cloud server infrastructure used in data centres worldwide.

By Zaven Boyrazian. Arista Networks (NYSE:ANET) may not be a name commonly heard in everyday life. And yet, without its technology, the cloud upon which almost all smart devices are dependent would cease to function.

The company designs ethernet switches and routing devices that provide the critical bandwidth needed for the internet to function.

Powered by its open-ended EOS software, Arista has been steadily stealing market share from Cisco over the last decade and now controls almost 42% of the global market. And with management increasing its focus on hyperscalers like Microsoft Azure, Arista’s global expansion could just be getting started.

However, this strategy does have a glaring weak spot. There are very few hyperscalers on the planet. And consequently, 42% of the revenue stream now stems from just Microsoft and Meta Platforms. Should Arista’s technology start to fall behind, it could have dire consequences on the bottom line.

Nevertheless, the potential long-term reward and consistent track record of defying expectations make this a risk worth taking — at least for my portfolio.

Zaven Boyrazian owns shares in Arista Networks.

Legal & General 

What it does: Legal & General is a UK-based financial and insurance firm offering services such as life insurance and investment management.  

By Charlie Keough. If I could buy only one stock right now, it would be Legal & General (LSE: LGEN). As I write, the firm’s share price has taken a near 6% hit in 2023. However, I think the stock offers great value.  

Firstly, it looks cheap, with a price-to-earnings ratio of just 6.3. 

Its lower share price also means the stock offers an incredibly attractive dividend yield of 8.4%. This sits comfortably above the FTSE 100 average. And with ongoing inflation concerns, the passive income generated from this investment seems like a smart play. 

The business also has plenty of cash to hand. Cash generation for 2022 sat at £1.9bn, a 14% jump from the year prior. And it’s putting this to good use with its ambitious dividend plan.  

The firm may see investors tighten their belts and shy away from making investments in the foreseeable future as inflation persists.  

However, as a long-term buy, I deem Legal & General a smart play.  

Charlie Keough owns shares in Legal & General.

Vesuvius

What it does: Vesuvius specialises in metal flow engineering and provides services and solutions for the steel and foundry industries.

By Kevin Godbold. Vesuvius (LSE: VSVS) has recovery and growth potential. But one of the negatives affecting the business is its sensitivity to economic weakness in its end markets.

However, if recovery is coming as the directors believe, that same sensitivity potentially becomes a strength.

Trading was weak in 2022 and earnings dropped. But in May the company reported “resilient” trading in the first four months of 2023.

Looking ahead, Chief executive Patrick Andre said despite short-term uncertainty, the directors are “highly confident” in the company’s growth potential. And with good reason: the firm is continuing its capital investments for growth and in research and development (R&D).

Nevertheless, the pace of recovery in the company’s end markets is “slow and uncertain”. However, the directors expect acceleration ahead.

Meanwhile, with the share price in the ballpark of 413p, the forward-looking dividend yield for 2024 is just under 6% suggesting a modest valuation that tempts me.

Kevin Godbold does not own shares in Vesuvius.

The post “If I could buy only one stock right now, it would be…” appeared first on The Motley Fool UK.

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

Legal & General

What it does: Legal & General is a financial services company providing services across savings, retirement and life insurance.

By Matthew Dumigan. The UK stock market is home to a handful of companies boasting juicy yields, but my favourite by a country mile at the moment is Legal & General (LSE:LGEN).

What I particularly like about the company is that its dividend is well covered by earnings (1.6x to be precise).

Not only does this mean that the company has enough cash to sustain its current dividend, but it also gives management a bit of scope to potentially increase shareholder payouts in future.

And that’s exactly what the group did earlier this year when the board proposed a full-year dividend of 19.37p, up 5% on the back of a robust full-year performance.

I was also impressed that the group’s cash generation of £1.9bn was up 14%, which means that its balance sheet looks nice and healthy to me.

As such, combined with a whopping 8.4% yield, Legal & General gets my vote for the best British dividend stock for investors to consider in June.

Matthew Dumigan does not own shares in Legal & General.

Moneysupermarket.com

What it does: Moneysupermarket.com operates price-comparison sites for insurance, money, home services, and other products. 

By Kevin Godbold. Moneysupermarket.com (LSE:MONY) could sit well in a diversified portfolio of dividend-paying stocks.

The price-comparison habit is a habitual part of life for many consumers. And the company owns popular brands such as MoneySuperMarket, MoneySavingExpert, Quidco, Icelolly, Decision Tech and Travelsupermarket.

My guess is the business will keep on attracting customers to its sites. And the strong stream of cash flowing into the operation will likely continue.

City analysts are optimistic and have pencilled in double-digit percentage increases in earnings for this year and next. And although such estimates are not set in stone, the directors have been upbeat in their recent outlook statements.

There’s a stable, generally growing multi-year record of dividend payments. And shareholder payments continued right through the pandemic years.

I reckon that outcome demonstrates the ongoing strength of the enterprise.

Meanwhile, with the share price near 263p, the forward-looking dividend yield is attractive at almost 4.7% for 2024.

Kevin Godbold does not own shares in Moneysupermarket.com.

Topps Tiles

What it does: Topps Tiles owns 304 shops, three showrooms and six websites selling tiles to consumers and tradespeople.

By James Beard. Topps Tiles (LSE:TPT) shares are presently yielding an impressive 7%. But over the next two years, the company plans to increase its dividend from 50% to 67% of earnings.

Record-breaking revenue of £131m was reported during the 26 weeks to 1 April 2023. This suggests the company is on track to achieve its stated ambition of increasing its UK market share from 17% to 20%.

However, Topps Tiles is a small company — it has a market cap of £101m — which makes it vulnerable should there be an unexpected shock to the business. If there’s a downturn in earnings, the dividend will likely be the first thing to be cut. I also have concerns that it’s too reliant on physical stores. But the company claims 98% of its sales involve at least one visit to a shop.

Even so, with the UK economy expected to grow over the next couple of years, I think the dividend stock is well placed to deliver generous returns to shareholders.

James Beard does not own shares in Topps Tiles

Vesuvius

What it does: Vesuvius produces equipment used to handle molten metal, mainly serving the steel and foundry industries.

By Roland Head. FTSE 250 group Vesuvius (LSE: VSVS) says that both pricing and sales volumes for its products were “modestly ahead” of expectations during the first quarter of this year.

Management says that customer demand has “started to recover” from the low levels seen at the end of last year.

Financially, the business looks in reasonably good health to me. My only worry is that inventories are a little higher than normal. That could be a problem if demand slumps again. However, the company says this situation is starting to improve.

Profits are expected to fall this year from last year’s record levels, but I think this is already priced in. Vesuvius shares trade on just nine times forecast earnings with an expected dividend yield of 5.4%.

This payout should be covered 1.9 times by earnings, so looks quite safe to me. I see Vesuvius as a good income opportunity for June.

Roland Head does not own shares in Vesuvius.

The post Best British dividend stocks to buy in June appeared first on The Motley Fool UK.

The market for UK stocks remains choppy. And it’s been hard for many investors to make much overall progress lately with their portfolios.

However, suppressed market conditions can be the friend of the investor who’s focused on long-term returns. And that’s because an unenthusiastic market can lead to depressed valuations.

In one example, super-investor Warren Buffett has earned a reputation for shopping for stocks in markets like these. And that’s because he aims to buy quality businesses with decent growth prospects when their valuations are modest.

Investing in R&D

I may not have his resources, but right now, I like the look of molten metal flow engineering and technology company Vesuvius (LSE: VSVS).

The business develops and makes high-technology products and solutions mainly for the steel and foundry casting industries. And as part of that, it has a sizeable Research and Development (R&D) operation.

With the share price near 413p, the market capitalisation sits around £1.12bn. And the valuation looks undemanding.

City analysts expect a modest rebound in earning of around 16% in 2024. But that’s after a drop of nearly 48% this year. Indeed, one of the risks with this enterprise is its apparent cyclicality. Indeed, the multi-year record of earnings is volatile.

Nevertheless, set against analysts’ expectations, the forward-looking earnings multiple for next year is just above eight. And the anticipated dividend yield is a little under 6%.

I see that shareholder payment as attractive. And it’s been notching up each year since 2020. However, the dividend will likely be cut or trimmed in any future general economic downturn.

Resilient trading

In May, the company reported “resilient” trading in the first four months of 2023. And the directors said the improvement was down to better volume and pricing performance.

There’s been some recovery in the company’s end markets after a poor fourth quarter in 2022. But the directors warned that the pace of recovery is “slow and uncertain”. And those observations underline how sensitive Vesuvius is to the general health of the economy and its industrial markets.

Nevertheless, looking ahead, the company said its growth capital investment programme is proceeding as planned. And that will likely support the performance of the business when the market recovery “accelerates”.

I’m optimistic about the prospects for the UK and world economies. And because of that I see the Vesuvius business as having stored-up potential to grow in the coming years.

Chief executive Patrick Andre said that despite short-term uncertainty, the directors are “highly confident” in the company’s growth potential. And the “industry leading” investment in R&D and the growth capital investment programme will continue “at pace”.

My view is that R&D can be a big driver of returns for shareholders in any business over time. However, positive outcomes aren’t guaranteed with any stock.

Nevertheless, Vesuvius is currently at the top of my list for further investigation and research. And if I had £5,000 to invest, I’d consider buying it now.

The post If I had £5,000 to invest, here’s the top UK stock I’d consider buying now appeared first on The Motley Fool UK.

I think there may be a sustainable stock market rally coming next year. And if I had spare cash to invest I’d consider buying stocks such as these three now.

Strong trading

On 8 December, Mears (LSE: MER) released an upbeat trading update.

The company provides housing services, such as maintenance, management and care facilities. And there’s been “strong” trading since the summer prompting the directors to upgrade their expectations for revenues and profits.

The contract pipeline looks robust and the company has been seeing some success with recent bids. Indeed, City analysts have pencilled in an almost doubling of earnings for 2022 compared to the prior year.

Meanwhile, with the share price in the ballpark of 200p, the market capitalisation is around £214m making the business a small-cap enterprise. And that adds some risks for investors. 

It’s also possible for Mears to have less bidding success ahead. However, I like the forecast dividend yield running just above 5% and the stock tempts me now.

Upgraded expectations

Meanwhile, Vesuvius (LSE: VSVS) issued a trading statement on 15 November. The company specialises in molten metal flow engineering and technology. And it said the steel and foundry end-markets are continuing to weaken in the short term.

But the directors upgraded their expectations for the full year. And they said the trading strength arose because of “market share gains, dynamic price management, cost reduction actions and a more gradual unwind of inventory.” 

For 2023, they said visibility is low and “the precise timing of a return to growth is very difficult to predict.” However, my takeaway is that the company expects growth ahead. 

Meanwhile, with the share price around the 400p level, it’s down from its 2019 highs above 600p. And the stock has climbed back close to where it was a year ago putting the market capitalisation near £1bn. 

City analysts forecast a dividend yield above 5%. Although earnings look set to decrease by around 14% for 2023. And it’s possible for a downturn in the company’s markets to increase in severity.

There are risks. But I’d be inclined to consider Vesuvius now to hold for the eventual recovery in its business and growth in the years ahead.

Impressive results

I’m also keen on sustainable packaging solutions provider DS Smith (LSE: SMDS). On 8 December, the company posted an impressive set of half-year results featuring strong growth in revenue and earnings.

Chief executive Miles Roberts said the outcome arose because of gains in market share driven by a “constant focus” on the evolving needs of customers. 

Roberts expects the full-year performance to April 2023 to be ahead of previous expectations. And that’s despite the “challenging” macro-economic outlook. 

City analysts have pencilled in a rise in earnings of just under 70% for the year followed by a flat outcome the year after. Meanwhile, with the share price near the 320p level, the forward-looking dividend yield is over 5%.

It’s possible for the business to experience a poorer result next year if economies weaken. And there’s a fair bit of competition in the sector. But I think the dividend from DS Smith is attractive. And the stock temps me now. So, I’d be inclined to embrace the risks and hold with an eye on the longer term.

The post 3 of the best shares I’d buy now for a stock market rally in 2023 appeared first on The Motley Fool UK.

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

DS Smith

What it does:  A provider of sustainable packaging solutions, paper products and recycling services. 

By Paul Summers: Down a third in value in the last year. DS Smith (LSE: SMDS) has given up most of the share price gains it made in the post-pandemic recovery. 

But I wonder if the market has become too bearish. The new financial year has “started well” according to the company and management expects “further substantial improvement in performance” in FY23.

An increase in capital expenditure was never likely to be celebrated but, on a more positive note, the shares now trade at just eight times forecast earnings. 

The dividends look pretty solid, too. DS Smith is forecast to yield 5.7% in the current financial year. This payout should be covered by expected profit if analyst predictions are hit.

As a source of passive income as part of a diversified portfolio, I think the shares are worth a closer look. 

Paul Summers has no position in DS Smith

Clarkson 

What it does: Clarkson provides an array of shipping services such as shipbroking. 

By Royston Wild. Resilient trading at shipbroking giant Clarkson (LSE: CKN) suggests (to me at least) that this remains a top dividend growth stock to buy. 

Cyclical businesses like this face the risk of cooling profits as global growth stalls. But trading conditions at Clarkson remain white hot (it said last month that it expects profits in 2022 to come in “materially ahead of its previous expectations.”). 

Shipping rates remain solid as vessel shortages of all classes roll on. Meanwhile, the war in Eastern Europe has pushed up rates, too, as ships bound for Russian and Ukrainian ports are diverted to already-packed ports elsewhere. This is removing even more capacity as vessels sit waiting to unload their cargoes. 

City analysts think Clarkson’s earnings will soar 22% year-on-year in 2022. And so they are tipping exceptional dividend growth as well, to 92.2p per share. That would represent a 10% year-on-year increase.

This projection creates a healthy 2.7% dividend yield. And the predicted dividend payment is covered 2.3 times by anticipated earnings, too.

Royston Wild does not own shares in Clarkson. 

Hargreaves Lansdown

What it does: Hargreaves Lansdown is the largest provider of retail-focused investment services in the UK.

By Edward Sheldon, CFA. Hargreaves Lansdown (LSE: HL) shares have experienced weakness in 2022 and this has pushed the dividend yield up to a very attractive level. With analysts expecting the group to pay out about 40p in dividends for the year ended 30 June 2022, the prospective yield on offer here is currently around 4.6% – considerably higher than the average FTSE 100 yield.

But this stock isn’t just about dividends. In my view, it has the potential to reward investors with healthy long-term capital gains as well. The reason I’m bullish here is that Hargreaves Lansdown is essentially a play on the world’s stock markets. And markets tend to rise over time.

One risk to consider here is that new competitors are emerging. These companies could potentially steal market share from Hargreaves. However, with the stock currently trading on a P/E ratio of less than 20, I think a lot of this risk is already priced into the stock.

Edward Sheldon owns shares in Hargreaves Lansdown

DS Smith

What it does: DS Smith is the UK’s leading manufacturer of recycled paperboard and corrugated packaging.

By Zaven Boyrazian. With consumer spending declining, e-commerce businesses haven’t had the best time in 2022. Yet, looking at the bigger picture, our current economic environment is ultimately a short-term problem. And online spending continues to grow as a proportion of total retail spending.

That’s why DS Smith (LSE:SMDS) has caught my attention. The cardboard manufacturer doesn’t have an exciting business model. But it does provide a critical product for the e-commerce sector.

With investor confidence at record lows, the stock has dropped by over 37% in the last 12 months. Yet looking at the latest results, sales and profits are up by double digits. But more excitingly, its return on capital employed has jumped from 8.2% to 10.8%, on track to hitting management’s long-term target of 20%.

In other words, despite headwinds, DS Smith is generating impressive growth and value for shareholders. Paring that with a discounted share price spells a buying opportunity for my portfolio, in my opinion.

Zaven Boyrazian does not own shares in DS Smith.

M&G

What it does: M&G is an investment manager that offers savings and investment products across a number of countries.

By Christopher Ruane. For M&G (LSE: MNG), could August be a big month?

I think the answer may be yes. Interim results are due to be released on 11 August. The company’s policy of maintaining or increasing its dividend annually seems to make the shares attractive – if the firm can keep delivering on it.

Last year, the interim dividend rose by 1.7%. But the full year dividend increase was a meagre 0.4%. With a strong brand, long experience and a substantial customer base, the firm has a recipe for profitability. I see the risk of clients withdrawing funds as a threat to profits in coming years. The company reported net inflows of client funds last year. Hopefully that positive trend has continued.

Meanwhile, the dividend yield is 8.4%. So I do not mind if M&G delivers another modest rise or none at all. As long as the firm does not cut its dividend, I think the income opportunity here is attractive.

Christopher Ruane owns shares in M&G.

Ashmore

What it does: Ashmore is an asset management firm that has a presence across the globe and specialises in emerging market investing.

By Andrew Woods. Ashmore (LSE:ASHM) has been consistent with its dividend policy over the past five years. During this time, it has paid well above 16p per share every year. For the year ended June 2021, the firm paid a total dividend of 16.9p per share. At current levels, this equates to a dividend yield of 7.99%. For me, this is appealing.

In the current economic climate, however, customers have generally been more risk-averse, meaning that emerging market investments have suffered. This has been caused by a multitude of factors, including inflation and interest rate hikes. To that end, in June the company’s assets under management declined by 18.3%, quarter on quarter.

However, for the six months to 31 December, the business beat earnings expectations of £89m, instead posting £92m. Furthermore, over the long term the company continues to report consistent growth. Between 2017 and 2021, for instance, pre-tax profit and revenue continue to increase markedly.

Andrew Woods owns shares in Ashmore.

Vesuvius

What it does: Vesuvius makes equipment used in foundries to handle molten metal and control its flow.

By Roland Head. Vesuvius (LSE: VSVS) can trace its history back over 100 years, to the fast-growing US steel industry of the early 20th century.

Today, the company’s product range is broader and more sophisticated. But its core specialism of handling molten metal is unchanged. I think that’s attractive — this business is a market leader in a very specialised market.

Another big attraction for me is that more than 95% of the parts Vesuvius sells are consumables. These need regular replacement.

The only real risk I can see is that customer demand could slow during a severe recession.

I see that as an acceptable risk, especially as Vesuvius is tapping into new growth markets like wind energy.

Management recently reported strong trading and a positive outlook for the rest of the year. Vesuvius shares currently offer a well-supported 6.5% dividend yield. I see this dividend stock as a good buy in August.

Roland Head does not own shares in Vesuvius.

The post Best British dividend shares for August appeared first on The Motley Fool UK.

The broader market has sought to disagree, however, and the FTSE 250 firm’s share price has plummeted in the wake of the third-quarter update. It’s now trading at its cheapest for four months.

Much of this summer’s gains may have been wiped out, but I’m not worried. Indeed, I believe Aggreko’s subsequent forward P/E ratio of 15.1 times, in line with the widely-accepted value benchmark of 15 times (or below), makes it a hot buy right now.

Sales surging

In that aforementioned market update, the business — which rents out power generation equipment for a broad range of sectors, from agriculture and energy to shipping and telecoms — declared that underlying revenues galloped 11% higher in the nine months to September.

Growth may have slowed in recent months (comparable sales were up 14% in the first half of 2018), but this result is still not to be sniffed at. That broad operational base protects it from weakness in one or two areas, as does its broad geographic footprint.

Indeed, at its Rental Solutions arm, a division worth more than half of group revenues, underlying turnover soared 26% year-on-year from January to September thanks to soaring sales in North America (up 32%), as well as solid growth in Europe.

Those hoping that Aggreko can break out of its long-running cycle of earnings dips in 2018 are set to be disappointed, or so say City analysts who are forecasting an 8% drop. They are, though, predicting that it will bounce in 2019 with a 6% profits improvement.

And with the profits picture brightening, the number crunchers feel that Aggreko will have the confidence to start lifting dividends again. Last year’s 27.12p per share dividend is expected to rise to 27.5p in 2018 and again to 28p in 2019, figures that yield a chubby 3.7% and 3.8% respectively.

Even bigger yields!

Vesuvius (LSE: VSVS) is another FTSE 250 share offering inflation-busting dividend yields that I’d be happy to buy for 2019 and beyond.

Unlike Aggreko, though, Vesuvius, which manufactures equipment used in the steel and foundry industries, has had no problems lifting dividends in recent times. And thanks to City predictions of further bottom-line growth — earnings rises of 18% for 2018 and 8% for 2019 are currently predicted — shareholder payouts are tipped to keep swelling too.

A 19.5p per share reward is predicted for this year, up from 18p in 2017 and yielding 3.8%. Next year a 20.5p dividend is anticipated, nudging the yield to a tremendous 4%. And I’m tipping payouts to keep striding on along with profits as global steel demand goes from strength to strength.

Right now, Vesuvius trades on a prospective P/E ratio of 10.8 times. This provides a brilliant base for its share price to spring higher in the near-term and beyond, whilst those bulky dividend yields provide a great little bonus. I reckon the engineer is a hot buy today.

The post 2 FTSE 250 dividend stocks I’d buy for 2019 and beyond appeared first on The Motley Fool UK.

Today I’m looking at two FTSE 250 stocks that I believe could power ahead of the FTSE 100 over the coming years.

A turnaround in progress

Back in January, I tipped defence firm Chemring Group (LSE: CHG) as a potential buy. The shares rose by about 30% after that, until a serious fire at its Countermeasures factory in Salisbury caused the shares to crash in mid-August.

The group’s shares fell from 236p to under 195p following this incident, in which one person was killed and one seriously injured. However, Chemring shares have risen by more than 10% already this week, after the firm announced a major new contract win and issued an update on trading.

Work is going to gradually restart at the Salisbury factory, starting with shipments of finished orders. As the factory is rebuilt, it’s likely to be more heavily automated than it was previously. I’d expect this to result in higher profit margins over the long term.

In the meantime, Chemring has won a long-term contract to supply chemical agent detectors to the US Department of Defense. The company says this is the result of several years’ research and development. No information was provided about the value of the deal, but it was enough to send the shares up by 5%. This suggests to me that it’s expected to make a meaningful contribution to future profits.

A buying opportunity?

The fire is expected to cut Chemring’s underlying operating profit by about £15m this year. Aside from this, management says that trading is in line with expectations.

Analysts’ forecasts are for earnings per share to drop by around 18% in 2018, before bouncing back next year. This puts the stock on a 2018 forecast P/E of 20, falling to a P/E of 16 in 2019.  The group’s dividend yield is expected to rise from 1.6% in 2018 to 2% in 2019, as profits and cash flow improve.

I believe Chemring could be a good buy at this level, for long-term investors.

A safer option?

If you’re concerned about investing in a firm that’s facing significant operational disruption, you might want to consider my second choice. FTSE 250 engineer Vesuvius (LSE: VSVS) specialises in “molten metal flow engineering”.

This company makes equipment used in foundries and in the steel industry. The group’s shares have risen by 11% over the last year, compared to a gain of just 2% for the FTSE 100. Although profits dipped in 2015 and 2016, last year saw Vesuvius return to profit growth.

Further progress is expected this year. Analysts expect adjusted earnings to rise by about 15% to 47p per share in 2018. A dividend of 19.3p per share is expected, an increase of 7.2% versus last year’s distribution.

These forecasts put Vesuvius on an undemanding forecast P/E of 13.4, with a prospective dividend yield of 3.1%. In my view this could be a good example of a boring business that makes a good long-term investment. I’d consider buying this stock at current levels.

The post Forget the FTSE 100! These FTSE 250 dividend growth stocks could help you retire rich appeared first on The Motley Fool UK.