Two dividend stocks I like the look of are Softcat (LSE: SCT) and Tritax EuroBox (LSE: EBOX). I would buy some shares now if I had the spare cash to do so.
IT solutions
Softcat is an international IT solutions provider to businesses of all shapes and sizes in the private and public sector. Shares are currently trading for 1,491p, up by 12% on a 12-month basis from 1,328p at this time last year. They’re up by 39% from March levels of 1,071p.
A rookie error when looking for dividend stocks is thinking a just high dividend yield is important. I’m more interested in the record of payout, as well as future prospects for continuous growth and returns for the future too.
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At present, Softcat’s yield is 2.5%. It has increased its payout steadily in recent years due to excellent performance growth. Furthermore, it also has a history of paying special dividends too. I am aware that past performance is not a guarantee of the future. It is also worth noting that dividends are never guaranteed.
As well as the recent history of performance and returns, I’m buoyed by Softcat’s growth prospects. It is in an excellent position to benefit from the massive digital transformation occurring at present throughout the world. Softcat possesses the profile and expertise to translate this surging demand into increased performance and investor returns.
My only issue with Softcat is that, at present levels, the shares look a tad expensive with a price-to-earnings ratio of 27. Any issues or pullback could impact any returns I hope to make.
Warehousing and distribution
The demand for warehousing and distribution services has increased exponentially in recent years as the e-commerce boom has continued. This will benefit firms like Tritax EuroBox and this is why it is one of the best dividend stocks on my personal ‘stocks to buy’ list at present.
Tritax has kept in line with current market trends and seen its shares struggle in recent months. At present, they’re trading for 54p. At this time last year, the shares were trading for 93p, which equates to a 41% drop over a 12-month period. I view the recent share price drop as an opportunity to buy cheap shares to boost my holdings.
I like Tritax for its growth prospects too. The demand for warehousing and distribution centres is at an all-time high and industry experts reckon the supply of such facilities is waning. This has resulted in rental prices increasing. This is good news for Tritax as it can expect increased performance in the future. This performance growth could underpin investor returns. Tritax’s current dividend yield stands at 7.7%.
At present, Tritax trades on a forward-looking price-to-earnings growth (PEG) ratio of close to 0.7. When a PEG ratio is below one, this can indicate that a stock is undervalued.
One potential risk that could impact Tritax’s performance and returns is the current tough economic conditions in mainland Europe, its primary market. Many countries are now in a recession and this could impact shorter term spending and demand for its properties.
Overall I believe Softcat and Tritax EuroBox are excellent dividend stocks with great growth prospects.
