If you’re looking for top dividend stocks for long-term income, how does one offering yields in excess of 5% sound?
And what if I tell you those dividends are around twice covered by earnings and are being raised annually ahead of inflation? Oh, and you can buy the shares on forward P/E multiples of only a little over 10, which is well below the long-term market average.
Unimpressive half
I’m talking about Rank Group (LSE: RNK), whose share price picked up 4% on the morning of its first-half results Thursday — and it comes despite a fall in interim profits.
CEO John O’Reilly said: “The first half of our financial year has been a tough trading period, I am however encouraged by the Group’s improved performance in Q2. The three-year transformation programme that we outlined at our Full-Year results in August 2018 is now well under way with nearly 300 initiatives identified and tasked.”
Mr O’Reilly expects to see benefits from the programme in the second half of the year, adding that he is “excited about the opportunities that exist.“
Profits down
Revenue for the half fell by 1.7% to £348.2m, leading to a 27.6% drop in adjusted pre-tax profit to £29.1m. Adjusted EPS was down 23.8% to 6.1p, and the interim dividend was maintained at 2.15p per share.
The one positive light at this point is a 15.8% rise in digital revenue to £70.4m, and I’d be looking there for further future growth.
The company reckons it’s still on course to meet the current consensus, which suggests a 6% drop in EPS for the full year — but analysts expect that to turn back upwards in the year to June 2020.
Top income
But if I had to pick my favourite FTSE 250 dividend stock of all, right now I’d go for Bovis Homes Group (LSE: BVS).
This week’s revelation by Nationwide that the housing market has dipped to its slowest growth in nearly six years will be depressing sentiment, but I also think it’s helping canny investors pick up some bargain shares.
The mortgage lender said that the average selling price of £211,966 in January was just 0.1% ahead of the same month last year, and put it down to our uncertain economic outlook.
But that’s really looking at the market over the short term, and I reckon investors who want to lock in some tasty long-term dividend income have rarely had it so good. The thing is, in the UK we’re in the midst of a long-term housing shortage, and the only way that’d going to be improved is by building more new homes.
Dividend growth
Though Bovis Homes shares have started picking up since the start of 2019, they’re still down 23% from their recent peak in May 2018. That puts them on low P/E multiples of under 10 based on 2019 and 2020 forecasts, and pushes dividend yields up to 10% (including specials, with ordinary dividends at an attractive 5.6%).
In this month’s year-end update, the company spoke of a “record year of profits slightly ahead of market consensus,” with a “substantial step-up in operating margin” and “strong land acquisition and strategic conversion in the second half.”
Completions in 2017 rose 3% to 3,759 homes, with an average selling price of approximately £273k. Early signs for 2019 are said to be encouraging.
