2 ‘hidden’ income shares to turbocharge your wealth

Royston Wild discusses two dividend dynamos you’ve probably never heard of.

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Investment demand for Vitec Group (LSE: VTC) has taken off since the summer, a healthy upswing taking the camera specialist spiralling to 13-month tops just last week. And I reckon the company still offers plenty of value for money at current levels.

Vitec announced in a lively November trading update that “results since the half year end have been slightly ahead of expectations, with trading benefitting from movements in foreign exchange rates.” But the business also lauded improvements at its ‘higher technology’ broadcasting businesses, with the success of the Rio Olympics helping sales here to grow.

Vitec is in great shape to keep punching stunning sales growth as it leads the next wave of broadcasting innovation, helped by a steady stream of acquisitions. Indeed, rising broadcaster investment in areas like remotely-operated cameras and HD/4K-ready field cameras provides plenty of growth opportunities for the video ace.

The City expects Vitec to pay a dividend of 25.4p per share in 2016, up from 24.6p last year, and to hike the payout to an even-juicier 26.1p in 2017. These projections yield a meaty 4% and 4.1% respectively, beating the London blue-chip average of 3.5% by no little distance.

And Vitec’s rejuvenated growth outlook should bolster investor confidence in the possibility of chunky rewards. After enduring two successive earnings dips, the camera colossus is anticipated to see growth of 16% this year and 3% in 2017.

These estimates mean that Vitec’s dividends for this year and next are covered 2.3 times, more than meeting the widely-regarded safety threshold of two times.

Staffing star

But Vitec isn’t the only under-the-radar London stock offering dynamite dividend potential. Indeed, SThree (LSE: STHR) also has plenty of scope to keep throwing out bumper shareholder payouts.

The recruitment play has kept the dividend locked at 14p per share for what now seems an age. And expected near-term earnings pressure — drops of 1% and 8% to November 2016 and 2017 respectively are pencilled-in by City brokers — is anticipated to keep dividends locked around these levels for this period.

Still, investors shouldn’t ignore the 5% dividend yield that these forecasts throw up.

It’s possible that SThree’s next financial results (scheduled for 9 December) could indicate fresh turbulence created by the EU referendum, a phenomenon that — combined with a slowdown in the banking and financial segments — pushed gross profits from the UK and Ireland 9% lower during June-August.

However, Britain isn’t the be-all-and-end-all for SThree, the region being responsible for less than a quarter of total profits. Rather, I reckon the recruiter’s strong presence across North America, Europe and Asia should help it to offset the worst of any Brexit impact and deliver solid long-term returns, particularly as operational improvements in North America continue.

On top of this, SThree’s bias towards the contract rather than permanent segment should enable it to more effectively ride out the fall in business confidence brought about by June’s referendum.

With the business also creating shedloads of cash, I reckon SThree is in decent shape to keep churning out generous dividends in the near term and beyond.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Royston Wild has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

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