As a investor myself in a myriad of UK-focussed stocks it comes as relief (at least for the time being) that British and European Union lawmakers have taken the prospect of a catastrophic no-deal Brexit on Thursday off the table.
Good news, sure, but as I’ve explained it’s not exactly reason to be shouting from the rooftops. In reality, all possible Brexit scenarios remain, from a hard Brexit to no Brexit at all, and so we as share investors need to be prepared for all possible situations in 2020 and beyond.
The retail rule-breaker
I believe that one great way for share pickers to prepare themselves for all eventualities is to buy stock in retailers specialising in the value end of the market. While much of the retail sector is struggling as consumers tighten the pursestrings these discounters, like B&M European Value Retail (LSE: BME), are cleaning up by offering their products at a fraction of the cost of many of their competitors.
It’s why City analysts, who are also encouraged by the cut-price operator’s expansion across the UK and in Germany, are predicting that earnings will keep rising irrespective of Brexit uncertainty (increases of 8% and 17% are forecasted for the fiscal years to March 2020 and 2021, respectively).
In its most recent financial update, B&M advised that like-for-like sales rose 3.9% in the three months to June, a period in which Easter sales hit their third consecutive record high. I’m expecting nothing less than another set of sterling numbers when interims are released on 12 Tuesday November, results which could help its share price to gain further traction (it’s already up 30% since the start of 2019).
The dividend dynamo
This is why I’d be happy to buy B&M despite its slightly toppy forward price-to-earnings ratio of 17 times, a value which sits above the widely accepted value region of 15 times and below. But it’s not the only reason – as I say the FTSE 250 retailer has ambitious growth plans of expanding its store network across the country.
Back in May it upped its target for gross new stores for the current financial year, to 50 from 45 previously, while its forward pipeline for fiscal 2021 is described as being “in very good shape.” The company wants to have 950 stores carrying its B&M fascias up and running eventually – a huge upgrade from the 632 it was operating as of June – a number which excludes its B&M Express and Heron Foods sites (it plans to open another 20 of the latter this year, too).
One final thing: this bright profits outlook means that dividends are expected to keep dancing higher as well. B&M lifted the full-year dividend almost 6% last time out, to 7.6p per share, and even bigger increases are expected for this year and next, to 8.5p and 9.9p respectively.
Subsequent yields of 2.3% and 2.7% clearly aren’t the biggest but forget about those near-term yields, I say, as over the long term B&M is likely to have doled out some handsome dividend cheques.