For investors seeking capital gains, that near-term future looks tough as the uncertainty of the Brexit vote continues to weigh on the sector. And a leave vote would likely threaten the growth of the UK economy and cause all sorts of uncertainties, some of which haven’t been quantified. For housebuilders generally this is a massive worry as a strong UK economy has been one of the integral components driving demand for new homes.

But the longer-term picture seems less bleak. Even if we do vote to leave the EU, these businesses have fundamental strengths that should carry them through. But which do I feel is the strongest of the trio?

Persimmon’s pretty dividend

Although Persimmon’s share price is down close to 3% year-to-date, the housebuilder has been operating in a favourable environment as demand for new homes continue to outstrip supply. Even more pleasing to investors is that Persimmon appears to have carried last year’s momentum into 2016 as a strengthening order book helped increase total forward sales by 8% for the first quarter of 2016, when compared to the previous year.

What’s impressive is that its shareholders are the main beneficiaries of this purple patch of performance as the dividend payout for 2016 has been increased to 110p per share, representing a yield of over 6%.

And if Brexit happens? Investors’ portfolios should fare well with exposure to Persimmon as the underlying fundamentals support continued growth and its current 11 times price-to-earnings multiple is cheap when you consider the strong yield on offer over the next five years.  

Two Housebuilding stalwarts

Taylor Wimpey and Barratt Developments have long had a place in many investors’ portfolios and it isn’t difficult to understand why. Similar to Persimmon, both have been able capitalise on strong demand as buyers continue to benefit from historically low mortgage rates. Importantly, both have made huge strides to meet this increasing demand by expanding their land banks. Taylor Wimpey, in particular, boasts the highest level of plots in its land bank, almost double that of Persimmon.

In terms of yield, Taylor Wimpey comes out on top with a current yield close to 5.8% compared to Barratt Developments’ still-good 5.1% yield. Importantly, for yield investors, Taylor Wimpey will begin to distribute 5% of net assets via an ordinary dividend next year, resulting in a stonking dividend yield of 7.7%.

On current form, all three would make my buy list but Persimmon would be the one to watch as its strong cash flow should support its ability to snap up high quality land, even if the growth path may slow should the leave vote prevail.

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Yasin Ebrahim has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

On track

Kingfisher, Europe’s largest home improvement retailer and owner of both B&Q and Screwfix, has been hard at work since implementing the ‘One Kingfisher’ strategy announced in January. The five-year plan targets increasing profits by an extra £500m a year by the end of year five (taking profits to over a billion), and returning £600m to shareholders over the next three years.

This will be achieved mainly through providing a unified offer – the same products presented in the same way across all its brands. That’s B&Q and Screwfix in the UK and Castorama and Brico Dépôt in Europe. The thought process behind this plan is that with a unified offer, Kingfisher can leverage its buying power, approximately £7bn, and negotiate a larger discount from suppliers.

Is this plan on track? It would certainty seem so, at least according to its most recent quarterly report, released on 24 May, revealing a 5.1% increase in total sales compared to a year earlier. The trade-focused businesses – Scewfix & Brico Dépôt – have continued to do well but the consumer-facing B&Q and Castorama chains are suffering. This somewhat justifies Kingfisher’s decision to close some B&Q stores and the good news is that Kingfisher has now closed 40 out of the target of 65 locations.

Kingfisher currently trades on a price-to-earnings (P/E) multiple of around 15, which is just above its historical average of 14. Although the current dividend yield of 2.7% isn’t the most attractive, the turnaround plan is compelling and this should be a long-term buy with rewards ahead as the company has only returned £78m of the £600m target to shareholders to date.

If Steve can’t do it, who can?

I’d marked Marks & Spencer as a hold at best in the short term and fully expected its share price to soften as its earnings report drew closer, yet in the days before results days (25 May) the performance wasn’t too bad. But its share price suffered its worst trading day in seven years on 25 May as it slumped 10%. And it was the usual suspect, its clothing division, which accounts for about 60% of M&S’s profit, that proved a drag on top-line growth as it declined 2.9% on the year.

In keeping with recent trends, food sales were once again the highlight for M&S as it posted a 0.2% increase in like-for-like sales. The M&S turnaround need is clear cut: it needs to keep up the good work in its food division and reignite the affinity its most loyal customer – the 50-year-old woman – used to have for its clothing. To do this, the plan is to lower prices, rein-in markdowns, boost quality, and rationalise a sprawling offer.

Rome wasn’t built in a day and M&S’s fortunes won’t turn overnight, chief executive Steve Rowe needs time to leverage his 26 years of M&S experience to drastically improve the retailer. Yet this is a long-term opportunity and the overreaction seen in the share price offers a favourable entry point for the stock that’s currently yielding 4.5%.

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Yasin Ebrahim has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Johnson Matthey plc (LSE: JMAT), has become the ‘one to watch’ for both yield and capital gain seekers. Investors have not only benefited from a special dividend of 150p, but also from a 7% increase in its share price year-to-date.  

And the signs are good that it will continue the rally, as the most recent update, released in February, revealed that the company is on track to deliver full year results. However, the fly in the ointment has been falling sales in its Precious Metal Products division, as softer platinum prices continue to weigh on top line growth.

Fortunately, the company is delivering solid performance where it matters most, its Emissions Control Technologies division — by far Johnson Matthey’s largest source of revenue — which reported a 5.5% increase in sales. Can we expect more of same, or even stronger performance, in the near future?

It pays to be a leader

Yes, I think so — at least over the longer term. Johnson Matthey benefits from being a global leader in emission control and as emission legislations tightens so too does the demand for its catalytic converters.

There are, however a few spots of bother likely in the short term, as the increasing trend to electric vehicles hurts sales, since there is no need for its catalyst products. But the company seems ahead of this potential hiccup, being well placed to capture value as  a strong player in the battery technology business. 

On the June 2, Johnson Matthey reports annual results for the year ending 31 March 2016, so expect some volatility in the share price over the next few week,s as investors initiate positions ahead of the earnings report. This could help soften the share price and make for a better entry. Nevertheless, this is a compelling story to get involved in and should the company continue to perform, we could see the current yield of 2.4% improved on.

A portfolio refresher

Fevertree drinks plc (LSE: FEVR) , the world’s leading supplier of premium carbonated mixers, has shot up 18% in trade today as it provided a solid trading update for first four months of the year, and announced that the results for the full year of 2016 are likely to be ahead of market expectations. 

It has picked up from where it left off in 2015, outperforming expectations in the first four months of the year. And the signs are good that it can continue to do so, as it enjoys margins of more than 50% and recently extended its off-trade footprint by sealing a deal with Marks & Spencer, which offers the Fevertree product line in its stores.

For the uninitiated, the company sells its carbonated mixers to hotels, restaurants, bars, cafes (“on-trade”), as well as selected retail outlets (“off-trade”). Despite being based in the UK, the company generates the majority of sales — around 70% — from outside the UK, with the US and Europe its key markets.

On a valuation basis, the company trades on a price-to-earnings multiple of around 60. That may well appear expensive, but there’s little reason — apart from the low yield of 0.5% —  to ignore the company that owns more than half of a market estimated to be worth between £300-400m. This is a growth play and it’s encouraging to see the solid progress it’s made from its float at 134p in November 2014.

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Yasin Ebrahim has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Usually an increase in RevPAR is met with positivity but the most recent figure failed to tell the whole story about InterContinental. Growth in America and continental Europe was offset by falling sales in the Middle East as lower oil prices began to take a toll on the region. Why does that matter so much? The Middle East is key for the hotelier as it has a high concentration of rooms in the region.

However, income investors have been rewarded handsomely over last decade as the company increased its dividend by more than 300% from around 15p in 2005 to 58p in 2015. 

This hasn’t stopped the City from taking a somewhat gloomy near-term outlook as a cocktail of uncertainty looms, largely fuelled by a combination of terrorism concerns, the forthcoming Brexit vote, China’s economic situation and the US elections.

A summer of growth beckons

While these concerns do warrant consideration, we’re entering what is typically a strong period for hotel operators. Additionally, major sporting events such as the Olympics in Rio and the European championships, should drive occupancy rates.

The numbers seem to support this view as the shares currently trade on an earnings multiple of around 5 times and with 20% earnings growth forecast for 2017, investors have reason to consider this opportunity over the short-to-medium term.

Making the ‘right’ moves

Rightmove (LSE: RMV), the online property portal, has been steadily cashing in on the nation’s love affair with home ownership by connecting people to properties. This trend doesn’t show any sign of abating as the company recently enjoyed its busiest-ever first quarter for enquiries to estate agents. Apparently, the rush to beat the stamp duty surcharged introduced on 1 April helped to boost activity in the sector.

Rightmove is the current UK property portal market leader and it’s not difficult to see why – it not only has the UK’s largest and most engaged property audience but also has the largest inventory of properties. This creates that all-important network effects as the increasing demand from homebuyers creates the need for an ever-increasing inventory of properties.

A big fish in a big pond

It helps too that Rightmove operates in what’s arguably a duopoly as Zoopla is the only other strong competitor in the UK property portal market. However, there are concerns that new entrants such as OnTheMarket, launched in 2015, could steal share away from Rightmove. Yet there appears to be very little incentive for estate agents to leave the clear market leader as Rightmove attracts more than 85m visits per month, which dwarfs the 3m monthly visitors for OnTheMarket. The yield of 1.2% isn’t the most attractive but the City is bullish on Rightmove and has set a target of around 4,400p, representing an expected gain of 10%.

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Yasin Ebrahim has no position in any shares mentioned. The Motley Fool UK has recommended Rightmove. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Domino’s is essentially a franchise business. Franchisees not only buy the ingredients from Domino’s but also pay a royalty on the sales they make. It would appear that increasing the amount of franchisees is the name of the game for Domino’s as that bolsters top-line growth.  

However, having a store in every nook and cranny doesn’t guarantee success, both the demand and customer awareness has to be there too. Fortunately for Domino’s, Britain’s annual spend on fast food exceeds £29bn and expenditure on pizza is predicted to grow by 28% to £7.6bn by 2020.

The majority of that growth will be driven by online and mobile ordering. This is where Domino’s really has the upper hand as its digital business now accounts for 77.7% of all UK delivered sales, a 30% increase from a year earlier.

There are a few bumps on the road ahead for Domino’s such as the living wage, introduced in April, which will surely prove a drag on top-line growth as it increases costs for its franchisees. But this could be offset by lower input costs should the price of cheese and wheat continue to fall. 

Income and capital gain investors have reason for optimism as the company has increased its annual dividend by 19% to 20.57p and said it will resume share buybacks over the medium term.

Return to growth

Tomorrow (17 May), Vodafone Group (LSE: VOD) will report its full year results for the year ending 31 March 2016. Apart from the all-important service revenue figures – a core metric for Vodafone’s mobile operations – investors will be keen to get an update on potential deals/takeovers. This stems from the worry that  Vodafone may be falling behind competitors such as BT as competition to become the ultimate quad-play service provider, offering broadband, mobile, phone and pay-TV, intensifies.

Fortunately, Vodafone has some good news to wax lyrical about as the number of people using its new money transfer system – a service that connects to a bank account and allows users to send and receive money, or pay bills across Africa, Asia and Europe – has increased 27% from a year ago.

The City is expecting a return to service revenue growth in two of its largest markets, Germany and Italy. Service revenues are expected to have risen by 1.6% to £9.5bn in the final quarter with the largest growth expected to come from its emerging market businesses. Turkey is of particular importance as services revenues are forecast to rise by more than 20%, which should help offset the decline in the UK and Spain.

Importantly, for income investors, Vodafone’s current yield of 5.03% may look more secure come this time tomorrow as the company is expected to end its capital-intensive improvements to its network infrastructure. Analysts expect capital expenditure to decrease from 22% to around 15% of sales by 2017. This should help strengthen the current dividend cover, which is currently around 0.5 times.

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Yasin Ebrahim has no position in any shares mentioned. The Motley Fool UK has recommended Domino's Pizza. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

A key reason for the strong set of figures boils to down to sound strategic planning and exploitation of opportunities online. The company had earlier planned major online expansion with more international e-stores, including a strategic move to open dedicated web stores in Taiwan and Australia. Additionally, the company’s offline expansion plan to dedicate 80% of planned future retail space (90,000 sq ft) overseas is coming to fruition, the firm having recently expanded into China via a deal with Trendy International Group, a casual fashion company backed by LVMH.

In e-commerce, the retailer now has 26 international websites across 18 countries in 12 different languages, which deliver to 169 countries. Wise investors – Warren Buffett among the wisest – always advocate that good management makes for good execution. The company’s CEO, Euan Sutherland, clearly deservers huge praise for not only delivering on the strategic plan but also having the nous to take advantage of the momentum towards online shopping.

A new era

Income investors can add one additional stock to their buy list as Supergroup has paid its first dividend this quarter. Supergroup’s annual yield is currently 0.49% as the company takes a prudent approach to dividend payouts – in the range of three to three-and-half-times earnings.

And rightly so, as Supergroup needs to adjust to balancing its cashflow between dividend payouts and capital expenditure. Capex will be paramount to Supergroup’s continued success as it’s hoped that investment and expansion will lead to a higher rate of customer acquisitions and thus help bolster top-line growth. Both Investment and expansion remain key factors for the CEO. He took the opportunity to reiterate his vision by saying that “our focus remains on the extension of the Superdry brand and execution of clear growth opportunities, underpinned by continued investment in infrastructure to strengthen our business.”

What should encourage income investors is that should the UK retailer continue to churn out sound numbers as it did today, there’s every possibility of a future yield increase. The City certainly seems to share this view as a 25% yield increase is predicted by 2017.

Yet it’s those investors seeking capital gains that may be eager to add this stock to their portfolios with hopes that this latest set of impressive results could be just the boost the stock requires to recover. Despite the current 12% gain in today’s session the share price is still down 3.2% year-to-date.

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Yasin Ebrahim, CAIA, FRM has no position in any shares mentioned. The Motley Fool UK has recommended Supergroup. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Over past few months Sports Direct International (LSE: SPD) has been making the headlines, from its unpopular ‘zero hours’ employment practices to its relegation from the FTSE 100.

Thankfully, the most recent headline concerning the company is encouraging — at least for investors — as Sports Direct owner, Michael (Mike) Ashley, announced his intention to make a swoop for troubled retailer, BHS.  

Few would bet against the man, who seems to have an uncanny knack of buying brands, such as Donnay, from distressed sellers, and increasing sales by selling them at a discount, alongside high-profile brands such as Nike and Adidas.

Should Mike Ashley succeed in his bid for BHS, this could indeed present a strategic advantage to Sports Direct. One possible scenario could be to implement Sports Direct concessions in BHS stores, something he did when he bought a stake in Debenhams via a serious of options.

Down but not out

Potential acquisitions aside, Sports Direct’s recent performance has been in the spotlight. And rightly so, as its share price has slumped almost 50% over the last six months, wiping more than £1n from its valuation.

Sports Direct’s half yearly results, released last December, amassed huge panic among investors, as it was revealed that the company would fail to meet its forecast annual earnings target of £420m. A fall in high-street footfall and the warmer weather over the Christmas period — a critical period for retailers — were mentioned as key reasons for the profit warning.

Income investors would do well to look away now — Sports Direct doesn’t yield a penny. However, a summer of sport is near, which includes both the 2016 Rio Olympics and European Championships and I expect a pick-up in sales of sporting gear to boost top line growth, which could be the first step towards a recovery in the battered share price.

I think Sports Direct is a buy for the short-medium term, and may even be a good long term bet should Mike Ashley’s bid for BHS succeed.   

Food is the best way to a customer’s wallet

Struggling to shake off its fashion image as the brand for the ‘oldies’, Marks and Spencer (LSE: MKS) continues to make strides in other areas of the business such as  food items. This was evident during the most recent trading update, released on 7 April. Compared to the same period a year ago, food sales were up 4%, helping the the retailer grow its market share by 4.3% in this category. But clothing and home goods continued to struggle, with sales down 2.7%.

The company’s CEO, Steve Rowe, has highlighted that the growth in food sales is clearly the result of a sound strategic plan, after opening 80 stores and launching 400 new products.  Marks and Spencer’s next trading update is expected on 25 May and a key item on the agenda for investors is whether short-term profit expectations will be lowered.

Marks and Spencer’s current yield of 4.45% offers solace for investors unhappy with feeble capital gains of 2.6% YTD. Marks and Spencer is a “hold” for the short-term at best. Yet, as investors take positions with a view to the next set of numbers on 25 May, I expect that the added volatility could present an opportunity for a favourable entry.     

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Yasin Ebrahim has no position in any shares mentioned. The Motley Fool UK has recommended Sports Direct International. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

In recent times bullishness in Apple has translated into bullishness in ARM Holdings (LSE:ARM). Traders and investors alike would get interested in ARM whenever Apple released strong earnings. It’s not difficult to understand why — Apple is one of ARM’s biggest customers. Thus, the larger sales of smartphones using ARM’s components, the larger amount of royalties for ARM.

However, the exponential growth of the smartphone and tablet market was not going to last forever, with both high and low end smartphones vying  for market share, resulting in many now believing that the smartphone and tablet market is close to saturation.

Companies with good management tend to adopt a proactive approach. Luckily for ARM, its revenues are more diversified than they were six or seven years ago. The growth of the ‘Internet of Things’  has seen rising demand for chips that are able to operate on low power, as devices get ever-smaller.  Producing chips that operate on low power is one of ARM’s key skills. ARM’s long-term prospects will be further enhanced if autonomous cars and mobile computing turn out to be key growth markets, as they will help firm up long-term licensing and royalty revenues.  

Strong licensing pipeline

In the short-to-medium term, any sign of a slowdown in consumer demand for high-end consumer electronics — especially in the US — will limit ARM’s growth. Fortunately, for investors,  during the most recent earnings release on 20 April, ARM’s CEO, Simon Segars, expressed his optimism concerning the short-term outlook. He reiterated that “the licensing pipeline for the rest of year is robust” and confirmed that the group is on track to meet market expectations for the full year.  

Although ARM’s current annual yield of 1.05% doesn’t make it a top choice among income investors, the UK chip designer certainly ticks the growth box, as analysts expect 16% earnings-per-share growth by 2017. Thus, investors have reason to expect capital gains over the next 12 months as the share price firms.

More than a just a blip for Burberry

In stark contrast to ARM’s growth path, Burberry‘s (LSE:BRBY) growth path is somewhat clouded, as was evident during the most recent trading update, released 14 April. It proved to be a catwalk straight down to the bottom, as total revenue was down 1% to £1.41bn, licensing revenue also down 1%, and retail revenues flat at £1.06bn, when compared to the same period a year ago. Importantly, this performance faux pas is far from over as CEO, Christopher Bailey warned that the “external environment remains challenging”.

A huge blow to Burberry is the decline in spending among Chinese consumers. The firm could always count on the fact that luxury customers tend to be resilient whatever the economic weather. But the spending drag from the potential Chinese slowdown and the crackdown on extravagant gift giving in China is a bigger problem for Burberry than for other luxury retailer, as Chinese consumers account for more than a third of its global sales.

So, is it time to stick, buy or twist?

At 2.99%, Burberry offers a significantly better annual yield than ARM, and trades on a P/E ratio of 15.4, which is below the industry average of 25. However, don’t be fooled by the low multiple. It reflects the lack of confidence the market has concerning the company’s growth prospects rather than any undervaluation.

Until we see a semblance of stability in Chinese consumption or, better yet, a solid plan for how Burberry will lessen its dependence on Chinese consumption, you would do well to steer clear.

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Yasin Ebrahim, CAIA, FRM has no position in any shares mentioned. The Motley Fool UK owns shares of Apple. The Motley Fool UK has recommended ARM Holdings and Burberry. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Randgold continues to shine

Randgold (LSE:RRS) has been riding on the coat-tails of a bullish gold story. Gold futures had their best quarterly performance since 1986, gaining more than 16% during the first quarter of 2016. 

Usually, a strong performance in gold filters through to gold miners like Randgold as it improves margins. 

The price of gold may be the most important factor as miners understandably generate larger revenues when commodity prices are higher. However, the efficiency of each mine plays an important role too. The lower the cash cost of operating each mine, the better the margins. This was evident during Rangold’s most recent quarterly earnings report, released 4 May, as total cash costs dropped 8% from the previous quarter to $648/oz.

The standout performer was Randgold’s flagship operation in Loulo-Gounkoto, Mali, which helped offset the technical and commission issues at its other operations, namely the Kibali mine, in the Democratic Republic of Congo and the Tongon Mine, in Côte d’Ivoire. Loulo’s outstanding quarter, which includes a 29% reduction in cash cost per ounce, compared to a year earlier, helped boost Randgold’s earnings to $0.58.

Whether Randgold can deliver another period of double-digit capital gains will depend not only on the continued rally in gold prices but also the ability of the company to continue improving its cash costs at key operations.

Fortunately, investors have reason for optimism as Randgold’s CEO, Mark Bristow, reiterated that the miner can continue delivering at current or even lower gold price levels. Randgold has declared a 10% increase in its annual dividend from $0.60 to $0.66 per share, this still represents a paltry yield of around 0.8%. Yet investor sentiment concerning gold remains somewhat bullish for the short-to-medium term, making this a buy opportunity at a current multiple of 42 times earnings.

The one that got away…

Investors, who took a risk on Fresnillo (LSE:FRES) at the start of the year are probably in full cheer as the world’s largest primary silver producer has added a stonking 52% to its valuation YTD. Fresnillo continues to bask in the glory of a rally in the price of silver as its soared almost 10% YTD.

It may come as surprise that the company’s CEO, Alberto Bailleres, struck a cautious tone during the company’s AGM on 3 May. Alberto mentioned that Fresnillo will trim its exploration budget in order to maintain a strong balance sheet as he’s concerned that the current volatility in precious metals looks set to continue.

While this isn’t the sort of news needed to support another 50% rally in Fresnillo’s share price, the miner remains on target for its gold and silver production for 2018. Alas, the Fresnillo rally YTD may be a missed opportunity and the somewhat low yield of 0.5% is far from attractive. Fresnillo currently trades on a 160 multiple of earnings and considering Alberto Bailleres’s cautious outlook, Fresnillo may not be a ‘buy it now’ but rather a ‘watch it now’ opportunity.

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Yasin Ebrahim has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

A handsome yielder

A dominant player in the closed life funds sector, Phoenix Group (LSE:PHNX) has once again made a splash on financial newswires. Thankfully, it’s not because of another scandal involving a near-retiree losing most of their pension or savings in a zombie fund. Rather, Phoenix Group appears to lead the race to buy its smaller UK rival, Sun life.

Acquisitions are the name of game for closed life funds like Phoenix Group as it depends on making acquisitions to grow cash generation rather than issuing new policies. And cash generation is ever more important with the introduction of Solvency 2, which imposes stricter capital requirements, ultimately posing a risk to a company’s ability to continue paying out lofty dividends.

Thus, should the Sun life deal go ahead, it would provide a much needed cash injunction to Phoenix Group’s balance sheet. Importantly for us yield hunters, it should help firm up that lofty 6.3% dividend yield.

Making good on old promises

Esure’s (LSE:ESUR) earnings report released, May 5, was positively received by the market as key metrics across the board were higher compared to the same period a year ago.  Gross written premiums were up nearly 16%, gross written motor premiums rose 17% and home premiums grew 8.3%.

However, what investors were really keen on scrutinising was the performance of Esure’s price comparison unit, GOcompare.com. Esure has recently invested heavily in new advertising campaigns focused on money products such as loans, credit cards and current accounts. Fortunately for investors, the price comparison unit didn’t disappoint as income soared 19% when compared to the first quarter of 2015.

It might seem somewhat strange that I’ve called this a ‘dividend musketeer’ given that the company reduced its current annual dividend to 11.5p from 16.8p a year earlier.

However, the bigger picture here is that management is making good on old promises. In March, management announced plans to cut the dividend in order to fund growth in an improving UK motor insurance market. Thus, the increase in gross written motor premiums fully justifies its decision.

Considering that Esure’s current payout ratio is around 70%, investors will be hoping that continued growth in UK motor insurance helps boost earnings and soften the payout ratio. The payout ratio refers to the proportion of earnings paid out as dividends. Usually, a lower payout ratio is preferred as it implies that dividend payments are more sustainable.

And investors have reason to be optimistic as analysts are expecting earnings to grow nearly 16% by 2017. Including the current yield of around 4%, making this dividend musketeer ever more attractive. 

Time to talk about TalkTalk

Despite the hacking scandal hanging over TalkTalk that makes customer acquisition and retention efforts harder, Talktalk has performed strongly in 2016, adding over 17% to its valuation year-to-date. This performance far outstrips the wider FTSE100.

Yet there are more reasons than the strong capital gains YTD to hold onto TalkTalk as many are predicting that, given its shaky reputation and customers pouring out of the exits, it may be ripe for takeover bid from one of its rivals, Vodafone. However, juicy rumours and impressive capital gains aside, the yield of 5.7% remains attractive.  

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Yasin Ebrahim has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.