I spend much of my time running the rule over some of the cracking dividend stocks that investors can find on the FTSE 100 index as well as London’s FTSE 250 share bourse.
Investors would be foolish to channel all of their efforts into hunting for large-to-mid-cap businesses on these indices, however, as there are plenty of great income shares on the capital’s lower listings that could also make you a fortune now and in the years ahead.
M&A mammoth
One of these little-known lovelies is Randall & Quilter Investment Holdings (LSE: RQIH), a business whose restructuring drive promises to light a fire under already-impressive earnings growth. Pre-tax profit from continuing operations soared 40% during January-June to £7.8m.
The insurance leviathan has undergone a strategic overhaul to focus solely upon the fast-growing legacy and program underwriting management segments, resulting in the disposal of its Lloyd’s Managing Agency and Insurance Services late last year and in early 2018.
And Randall & Quilter has used these funds to help finance blockbuster M&A to boost its position in North America and Europe. Last month it made its biggest ever acquisition with the takeover of Global Re US, while it also dusted off the chequebook to buy UK-based MPS Risk Solutions (both purchases are subject to regulatory approval).
It’s no great surprise that City brokers are expecting earnings at the AIM-quoted firm to leap 31% in 2018 and 39% in 2019 given the rate at which it is winning business. It expects more contracts to be signed before the end of the year that will result in annualised gross written premiums around the $500m marker. Randall & Quilter has said that profits estimates could be even higher should the Global Re US takeover receive regulatory sign-off before the end of 2018.
With profits blowing higher it’s also no shock that the number crunchers are predicting impressive dividends. The anticipated 9.1p per share dividend for this year yields an exceptional 4.8% and the dial moves to 4.9% for 2019 thanks to the expected 9.3p payout.
Right now Randall & Quilter carries a forward P/E ratio of just 13.7 times. This is far too cheap in my opinion given the company’s rapidly-improving growth outlook.
Dividends training higher
The trading outlook for Begbies Traynor (LSE: BEG) is also steadily getting better as economic conditions become ever tougher.
The business recovery specialist announced this week that the number of insolvencies in the UK continues to increase, with government statistics showing the total of corporate insolvency appointments rising 6% in the six months to June to 7,915.
Right now City brokers are expecting earnings at Begbies Traynor to edge 4% higher in the year to April 2019, helped by recent acquisition activity, before profits expansion blasts to 21% in fiscal 2020. And the possibility of more M&A action could supercharge earnings growth further out.
This is a good omen for long-term dividend growth as well. In the meantime, though, payouts are expected to rise to 2.5p and 2.8p per share for this year and next respectively, figures that yield a chunky 3.5% and 4%.
Right now the firm boasts a slightly-toppy forward P/E multiple of 17 times, but in my opinion this slight multiple is justified given Begbies Traynor’s position as an increasingly exciting growth and income share.