Ongoing work to turbocharge its position in the online publishing segment should deliver exceptional profits growth over at Reach (LSE: RCH).
As I mentioned previously, the acquisition of Northern & Shell’s Express and Star titles should prove a game-changer for the Docklands-based company. Just last month the firm — which was known as Trinity Mirror until the aforementioned acquisition — said that the purchase should support an 11% improvement in like-for-like revenues in the 26 weeks to July 1. Digital revenues at the Express and Star exploded 25% in the first fiscal half, it added.
Without the contribution of its newly-acquired titles sales, at Reach would have ducked 8%, it was noted.
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The positive contribution of these digital operations is not the only cause for celebration, however. An improvement in national print advertising budgets has helped drive turnover in the past couple of months. What’s more, the publisher can also look to the significant cost synergies delivered by the tie-up with Northern & Shell’s old titles.
Yields leap to almost 9%
The pressures in the ad market are expected to cause earnings at Reach to flatline in 2018. But the City’s broker army does not expect this to prove a barrier to further strong dividend growth, so strong are the company’s cash flows.
Thus current forecasts point to a 6.1p per share dividend this year, up from 5.8p in the prior period and yielding a brilliant 8.5%.
The good news doesn’t stop here either. With profits expected to pound 10% higher in 2019, the full-year reward is predicted to rise to 6.4p. This means that the dividend rings in at an even more impressive 8.9%.
Usually companies with big dividend yields and dirt-cheap earnings multiples (in the case of Reach, it has a forward P/E ratio of 2 times) are considered no-go areas for investors.
As my colleague Roland Head previously pointed out, the discrepancy in this case can be caused by fears over the size of the firm’s pension deficit. However, predicted dividends over at Reach are protected between 5.9 times and 6.2 times by anticipated earnings through to the close of next year, leaving plenty of room for current projections to be met.
Throw Reach’s undemanding valuations, massive dividend yields and recovering revenues into the mix, and I reckon the company is a pretty compelling selection for income chasers today.
The 6%+ yielder
I also reckon Go-Ahead Group (LSE: GOG) should be attracting the glances of dividend investors today.
The number crunchers are predicting that the FTSE 250 business will pay a 120.3p per share dividend in the year to July 2019, matching the anticipated reward for the prior year. This figure yields a huge 6.6%.
While the market is expecting the company to endure a 20% earnings slip in the current year, I reckon this could be due for upgrades when the firm releases full-year financials on September 6. In May it advised that profits should exceed prior expectations when it reports for fiscal 2019, driven by efficiency improvements.
While there is some uncertainty facing its UK rail operations in the medium term, this is baked into Go-Ahead’s low forward P/E ratio of 9.9 times. Besides, I reckon the prospect of surging international contracts in the years to come makes the transport titan a compelling selection today.
