I have previously spoken at length about the ambitious strategy, achieved through both organic investment and acquisition activity, that Vodafone Group has undertaken to create mammoth revenues growth in the years ahead.
As I mentioned last time out, it is true that latest City forecasters suggest some profits pain in the near term, however, a 6% earnings duck in the year to February 2019 currently being anticipated. And this leads to the number crunchers also expecting Vodafone to can its progressive dividend policy. Not even Vodafone’s gigantic cash flows are viewed as enough to keep shareholder rewards growing.
Still, looking on the bright side, the projected payout of 15.07 euro cents per share through to the close of fiscal 2020 still yields a formidable 7.3%. And with profits expected to resume a northwards path from next year — a 15% improvement is currently estimated for the next fiscal period — I am confident that dividends should start moving higher again shortly afterwards, too.
Right now Vodafone carries a forward P/E ratio of 18.8 times. Slightly expensive on paper, sure. But in my opinion this still represents pretty attractive value given the exceptional sales opportunities the communications giant has across all of its main markets, and particularly those emerging regions of Asia.
The marketing giant
But as I said, Vodafone isn’t the only exceptional dividend share I would buy today. Marketing services specialist Communisis is another hot income pick thanks to the impressive rate at which it is adding blue-chip clients to its already-excellent portfolio.
The business provides a broad range of services to multinationals the world over and major clients include Samsung, Lloyds Bank, Coca-Cola and American Express. And the business has recently set up new offices in New York and Hong Kong to help it continue building its geographic footprint.
In the medium term City analysts are expecting Communisis to deliver annual earnings growth of 7% in both 2018 and 2019, projections that fuel expectations of further dividend expansion too. Payouts of 2.8p and 2.9p per share are forecast for this year and next respectively, creating chunky yields of 5% and 5.1%.
Add in an ultra-low forward P/E ratio of 8.3 times and Communisis becomes too good to miss, in my opinion.
Recent trading details from Stobart affirming its ambitious growth strategy have solidified my admiration for the FTSE 250 stock.
First off, the business said last week that it remains on track to meet the five-million-passenger-per-year milestone at London Southend Airport which it operates. News that that low-cost airline Ryanair intends to set up a base there for at least five years affirms the airport’s growing importance as the south east of England’s existing bases become jammed with overcapacity, and Stobart is in the box seat to capitalise on this.
Secondly, Stobart confirmed in recent days that its goal of supplying more than three million tonnes of renewable energy fuel each year by 2022 also remains in play. Its Energy division has shifted 54% more tonnes of biomass in the year to date versus the same period in 2017 as supply contracts have come online.
Earnings at the firm are expected to fall 84% in the year to February 2019 before bouncing 97% higher next year. Regardless of this turbulence, the City expects Stobart’s balance sheet to still support heavy annual dividends of 18.5p per share this year, up from 18p last year, and 19.1p in fiscal 2020. Thus yields for these years stand at 7.9% and 8.1% respectively.
Stobart is expensive, the firm sporting a forward P/E multiple of 44.3 times. This is an appropriate reading for its bright growth strategy, though. And those massive yields go a long way to taking the edge off as well.