Have £5k to spend? Dividend growth stocks I’d buy for my ISA before December

Looking to supercharge income flows from your Stocks & Shares ISA? This FTSE 250 dividend stock could be just what you’re looking for.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Share pickers haven’t got long to act, but I consider Big Yellow Group (LSE: BYG) to be a brilliant mid-cap to buy before December. The self-storage giant is set to release half-year results tomorrow (Tuesday, 19 November), and I’m expecting nothing but another splendid set of trading numbers.

The self-storage market continues to defy the broader slowdown in Briton’s spending habits. Rival operator SafeStore reported last week that like-for-like revenues on these shores were up a solid 3.8% in the three months to October.

Big Yellow advised on its own financials back in mid-July that like-for-like sales were up an even better 4.4% in the quarter ended June.

Share price boom

Multiple social and demographic factors – from the growth in tenants moving homes to a steady rise in the ‘hoarding’ culture across the western world – mean that demand for these spaces keeps on rising, and the likes of Big Yellow are riding this trend through aggressive expansion.

Over the past month or so the FTSE 250 business has had planning permission approved for new sites in Hove and Queensbury to boost its pipeline and help it build its current estate of around 100 stores.

The company’s share price has risen a whopping 111% over the past half decade and the stage appears set for more significant gains over the next decade at least, in my opinion, with another hefty rise possibly in the offing following tomorrow’s update.

Big Yellow might be expensive on paper (it currently trades on a forward price-to-earnings ratio of 27.2 times), but I consider the firm worthy of such a rating given its stable profits outlook, particularly in politically and economically uncertain times like these.

City analysts forecast annual earnings improvements of 6% and 7% in the fiscal years to March 2019 and 2020 respectively.

Hot dividend growth

Big Yellow’s appeal as a hot dividend grower helps to take the edge off the elevated P/E multiple. The company raised the total payout 8% in the last financial year to 33.2p per share, taking the total rise over the past five years to 53%.

And thanks to the company’s bright bottom-line picture and ability to throw out lots of cash, the number crunchers expect more hefty dividend rises in the medium term at least. Incidentally, operating cash flow boomed 14% year on year in fiscal 2019, to £71.8m.

A total reward of 35.2p per share is forecasted for this year and a 37.8p one predicted for the following period, figures which yield a decent 3% and 3.2% respectively.

Okay, these figures might trail the forward average of 3.3% by a hair but they still smash the current rate of inflation in the UK of around 1.5%, not to mention some of the returns on offer from other investment products like Cash ISAs.

Besides, the prospect of some increasingly meaty dividend cheques over the long term make Big Yellow a tempting income share to buy right now.

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 of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

How much would I need to invest in income shares to earn £300 a month?

What kind of lump sum would be required to earn £300 a month by taking advantage of some of the…

Read more »

Investing For Beginners

Up 31% in a month, could this FTSE 250 stock be getting bought out?

Jon Smith takes a look at speculation that's pushing the share price of a FTSE 250 share higher and considers…

Read more »

Investing Articles

Here’s how I’d follow Warren Buffett to start building passive income in 2025

Ben McPoland highlights one FTSE 250 firm with a strong competitive edge that he thinks can continue rewarding investors with…

Read more »

Investing Articles

Burberry shares: undervalued FTSE gems that are ready to rocket?

Burberry shares soared at the beginning of the week as the takeover rumour mill went into overdrive. Is Paul Summers…

Read more »

US Stock

Here are the latest share price forecasts for S&P 500 giant Amazon

Amazon has generated monster gains for investors over the last decade. And Wall Street analysts believe the S&P 500 stock…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »