I believe that improving sales momentum at Telecom Plus (LSE: TEP) is a promising sign for those seeking great growth and income stocks.
It announced last week that it has seen an upsurge in the number of customers switching to it for their services in recent months, with client additions speeding up during the final quarter of last year.
The London company is benefitting from a steady improvement in the quality of its customer base too. Telecom Plus currently provides 55% of the households on its books with five or more services versus 30% just two years ago. And the multi-utility mammoth expects the number of services it supplies to advance between 5% and 10% during the current year alone.
Telecom Plus is facing higher customer acquisition and IT-related expenditure in the near-term as the number of multi-service clients rises. However, the move over is providing the supplier with terrific revenues visibility in the long term — as Peel Hunt notes, the average five-services customer tends to stick around for more than 15 years.
On top of this, Telecom Plus’s entry into new markets also provides plenty of additional sales opportunities. The firm is about to enter the home insurance segment following successful trials during the winter.
Hot forecasts
The Square Mile reckons these factors should keep driving earnings and dividends in the years ahead. For the year to March 2018 the business is anticipated to see earnings rise 5%, supporting a 52.2p per share dividend. And an extra 11% earnings rise in fiscal 2019 should propel the dividend to 55.9p, City brokers suggest.
These proposed payments yield a stunning 4.2% and 4.5% respectively, smashing the British blue-chip forward average of 3.5%.
Money master
Sub-prime lender Provident Financial (LSE: PFG) is another hot dividend stock with exceptional long-term earnings potential.
Looking to the more immediate future however, the financial firecracker is expected to enjoy a 3% earnings bounce in 2017, keeping its rich record of earning expansion rolling and underpinning predictions of a 143.4p per share dividend. This figure yields an exceptional 4.5%.
And forecasts of a further 14% profits advance in 2018 lead to an estimated 160p dividend, nudging the yield to 5%.
Provident Financial’s decision to upgrade its customer targets this month certainly bodes well for future returns, particularly given the financier’s track record of either meeting or exceeding previous targets.
At its Vanquis Bank division — an area responsible for almost two-thirds of group profits — Provident Financial sees the potential to attract between 2m and 2.3m credit card customers in the medium term, with an average balance of £1,000 to £1,100. This is up from 1.5m customers as of the close of 2016, whose average stood at £922.
Meanwhile, Provident Financial’s operational shake-up at its CCD arm should also significantly improve profits over the longer-term, while growth at Moneybarn is also exceeding previous expectations thanks in no small part to new product rollouts.
I reckon both Provident Financial and Telecom Plus are in great shape to deliver monster long-term returns.