Stocks to watch in May
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There is still a rich harvest of shares that sport high dividend yields among the companies that used to be state-owned: National Grid (6.4%), Scottish and Southern Energy (6%) and Severn Trent (4.4%), for example.
But the pick of the bunch looks like First Group, the transport operator that emerged from bus and rail privatisation.
The group's diversity and geographical spread - it has a strong position in the US transport market - means it can offer investors that ultimate blend of growth plus income. The track record on both earnings and dividend growth is a good one.
Annual results in May are expected to show profits up from £180 million to £285 million and analysts are pencilling in £315 million for the current year. The shares yield a prospective 6.1% and a modest forward/earnings multiple of under eight.
One glance at supermarket meat counters makes you realise pork is a lot cheaper than lamb or beef. This helps explain the remarkable growth powering food producer Cranswick - pig meat specialist and key supplier to both Tesco and Sainsbury's, as well as to upmarket promoters such as Jamie Oliver and WeightWatchers.
Profits are expected to show a rise from £43.7 million to £47.6 million for the year to March. Broker Peel Hunt says profits could hit £51.5 million this year.
The shares are up from 600p to 835p in the past couple of years, reflecting a steady rise in profits and the management's growth strategy. The shares yield a useful 3.25%.
Cluff Gold, founded in 2004 by the veteran oil and gold entrepreneur Algy Cluff, has quickly established itself on solid foundations. Focusing on western Africa, it already has two producing gold mines in Ivory Coast and Burkina Faso. Now it is planning development of a potentially much larger gold mine in Sierra Leone.
The shares have certainly been helped by the great bullion boom, but also by the rapid rise in gold production at existing mines, now running at over 100,000 ounces a year. Sierra Leone seems capable of producing 157,000 ounces a year on its own.
Cluff himself has now handed over day-to-day management to a new team but will remain chairman.
The shares have nearly doubled in the past year but still look good value, particularly as the group now makes a profit - expected to reach £15.5 million for the year, compared with a £22 million loss last time.
Of course, West Africa is not one of the most politically stable regions on Earth, so the rating is perhaps a touch more cautious than it would otherwise be.
Shares in movie and TV show maker Entertainment One have risen from 39p in November 2009 to 148p on the back of the success of childrens' favourites such as Peppa Pig.
Britain's top pre-school cartoon character is now poised to conquer the American kiddies market, while a Peppa Pig World theme park is planned for Hampshire this month.
The group swung into profit in 2009/10 and the upcoming results in May are expected to show positive pre-tax returns of £31 million, compared with £6.9 million last time.
In a gung-ho mood to expand, the group is raising £11.6 million via a share placing to finance a series of small acquisitions. The shares sell on 11.7 times prospective earnings.
BRAEMAR SHIPPING SERVICES
Braemar Shipping Services matches cargoes with ships around the world and it has been doing so successfully for 160 years. There is still potential for long-term growth on the back of booming trade in commodities.
But of particular interest to investors is the yield of 5.6% on the shares - a yield that looks secure, as the company has an exemplary record of dividend increases every year for the past seven years.
Volatility in shipping freight rates is the main bugbear and earlier this year Braemar had to warn shareholders of recent weakness in these rates. So profits for 2010/11 are not expected to recover quite so rapidly as previously hoped, but should still rise from £13.5 million to £14.5 million. Analysts predict £15 million-plus this year.
Bloomsbury Publishing's results statement at the end of February showed signs the group might at last be coming out of its long period in the stockmarket doldrums.
The shares - down from a peak of 396p in 2005 to a lowly 121p - have simply bypassed the general market recovery.
The paradox is that Bloomsbury has been behind one of the most successful publishing ventures: the Harry Potter phenomenon. It helped take Bloomsbury's profits to a peak of £20 million in 2005 but by 2009 they were down to only £7.13 million. Last year saw a recovery to £8.4 million.
Meanwhile, the group is being reorganised and management strengthened. A strong cash flow and a progressive dividend record add to the recovery appeal. The shares yield 4%.
A chunkier yield of 5.6% is on offer at Dairy Crest. At 349p, the shares are cautiously rated on a price/earnings multiple of 7.6. The market is expecting profits to rise from £77 million to £85 million in the year to March and a further rise is expected. But will they reach the £100 million peak of 2009?
Meanwhile, a partial restoration of the dividend - it was cut in two stages from 24.4p to 18.9p - should help the shares.
The shares of KCOM, the troubled telecoms concern, were trading as low as 10p in the autumn of 2008. Now they have recovered to 65p, following the management's decision to almost double the dividend this year to 3.3p and raise the payment 10% annually until 2013.
This is all possible thanks to a return to profit growth after horrendous losses of £100 million in 2009. Profits for the year to March are expected to rise from £19.17 million to £42.2 million with further growth expected.
The shares, meanwhile, still yield a prospective 5.5% and sell on only 11.6 times earnings.
This article was taken from the April 2011 issue of Money Observer
The general term for the rate of income from an investment expressed as an annual percentage and based on its current market value. For example, if a corporate bond or gilt originally sold at £100 par value with a coupon of 10% is bought for £100 then the coupon and the yield are the same at 10%, or £10. But if an investor buys the bond for £125, its coupon is still 10% (or £10) and the investor receives £10 but as the investor bought the bond for £125 (not £100) the yield on the investment is 8%.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.
A term applied to raw materials (gold, oil) and foodstuffs (wheat, pork bellies) traded on exchanges throughout the world. Since no one really wants to transport all those heavy materials, what is actually traded are commodities futures contracts or options. These are agreements to buy or sell at an agreed price on a specific date. Because commodity prices are volatile, investing in futures is certainly not for the casual investor.