You can find many decent, fast-growing firms with excellent dividend and earnings-growth prospects in the lower reaches of the London stock market. Firms with smaller market capitalisations truly can grow in a short number of years to produce spectacular returns for investors. However, you have to be careful and selective. But I think the two companies featured in this article have a lot of potential and are both well worth your further research.
Growing fast
Today’s sparkling full-year results from Avingtrans (LSE: AVG) are dominated by the first nine-month contribution from the firm’s gargantuan September 2017 acquisition of Hayward Tyler Group. The enlarged company designs, manufactures and supplies critical components, modules, systems and associated services to the energy, medical and industrial sectors, and sees the expansion as transforming forward prospects.
The directors said last year that the enhanced scale of the business will enable it to “achieve critical mass and make inroads into the Chinese nuclear energy market,” which sounds exciting. It’s all part of the firm’s strategy to “buy and build” in regulated engineering niche markets. The integration of the new business has gone well and “ahead of schedule,” and we can’t really argue with the figures the firm posted today. Revenue blasted up 247% compared to the equivalent period the year before, which delivered a blistering rise in adjusted diluted earnings per share of more than 660%. I reckon Avingtrans will be pleased with its purchase.
However, there’s more to the story than paid-for acquisitive growth. Underlying revenue excluding gains from acquisitions went up nearly 11% too, proving that the firm is also making organic progress. The directors expressed their confidence in the outlook by pushing up the full-year dividend by almost 6%. The shares are perky today, up around 6% as I write, but I think there’s much more to come for investors as the company’s growth strategy unfolds in the years ahead.
Big increase in the dividend
I also like the look of intellectual property (IP) advisory services provider Murgitroyd Group (LSE: MUR). Although last month’s full-year results report showed revenue for the period essentially flat, underlying basic earnings per share shot up 21%. The directors were not shy about matching investor returns with the firm’s performance and they pushed up the total dividend for the year by 24%.
The firm is another that mentioned macroeconomic and political uncertainties as a factor to worry about in the outlook statement, but insisted that it operates in a market “with good long-term prospects.” The directors believe that the firm’s growth in earnings and the dividend will continue. The dividend is up around 70% over the past five years and if such progress carries on, I reckon it will drive the share price higher too. At today’s share price around 682p, the forward dividend yield for the trading year to May 2020 sits just under 3.5% and I think the payment is worth collecting while we wait for further rises in the shares.