2 dividend growth stocks I’m waiting to pounce on

With dividend payouts surging, I’m waiting to pounce on these income champions.

| 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.

Office service provider Restore (LSE: RST) may not be the cheapest stock around, but in my view, it looks to be one of the best dividend growth stocks on the market.

Over the past five years, it has gone from strength to strength as the demand for office services has risen. Today it reported revenue for 2017 up by 36% and profit before tax up by a similar amount thanks to increasing demand for its services overall, but also the significant office move by Bloomberg in London. This move helped grow revenue from relocation services by 25%. A large part of the growth also came from acquisitions. Organic revenue growth across the group was just 7%. Earnings per share increased 25% to 22.4p.

Boost from regulation 

As well as providing office services, Restore offers document management, a tedious but essential business for companies concerned about document security. 

Should you invest £1,000 in Marston's Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Marston's Plc made the list?

See the 6 stocks

This division is exposed to see a substantial benefit in 2018 from the introduction of the European Union’s GDPR data protection laws that give consumers more control over their data, giving them the right to ask firms to erase any records stored about them. Restore’s management believes that when this regulation comes into force in May, the company will “see more major projects for our records management operations…as more enterprises understand the need to ensure secure shredding of relevant documents, and also in scanning, driven by the need for enterprises to access their customer data more quickly.” 

And as the demand for Restore’s services grows, shareholders should be well rewarded. Today the company announced a 25% increase in its full-year dividend to 5p per share. 

This means a dividend yield of 1%, although it is not the current level of the yield that I’m interested in, it is the potential for further growth. Indeed, the 5p payout is covered five times by earnings per share, leaving plenty of room for growth. Over the past five years, the distribution has grown at a rate of 32% per annum, and if this continues, by 2023, the payout will have increased to 20p per share, for a yield of 4% based on the current stock price.

Cash-backed dividend 

Another company I like the look of is data business YouGov (LSE: YOU).  Demand for its surveying and data analytics offering has seen net profit increase at a rate of nearly 70% per annum on average over the past five years. City analysts are expecting a similar rate of growth in 2018 with earnings per share growth of 135% expected and an increase of 15% for 2019.

Unfortunately, the market has already priced the shares for perfection based on these projections. Right now the stock is trading at a forward P/E 32. However, once again it’s the dividend potential I’m interested in here. At the end of fiscal 2017, the company reported a net cash balance of £23m, enough to fund the current per share distribution of 2p for more than 10 years. The distribution itself is covered 4.6 times by earnings per share, leaving plenty of room for growth as revenues continue to expand. If the dividend continues to grow at its historical rate of 32% per annum, in five years, the shares will support a dividend yield of 2.3% based on the current stock price.

But this isn’t the only opportunity that’s caught my attention this week. Here are:

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation 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.

Rupert Hargreaves owns no share 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

Older couple walking in park
Investing Articles

Could £300 a month invested in US and UK shares reach a million by retirement?

Could an investor retire with a million pounds just by dedicating £300 a month to US and UK shares? Mark…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

Is £800 enough to start an ISA?

Is it worth bothering with an ISA with less than £1,000 to spare? This writer believes it may be --…

Read more »

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »