Today I’m looking at three companies with updates in September, all of which I think offer attractive progressive income.

Specialist recruitment

My first pick is SThree (LSE: STEM), due to bring us a third-quarter trading update on 20 September. The recruitment company, which specialises in the IT sector, saw its share price collapse again after a sharp spike in 2021.

Figures for the first half looked impressive, with net fees up 25% and operating profit up 62%.

There was net cash on the books, and SThree lifted its interim dividend by 67% to 5p per share. Forecasts suggest a 4% yield for the full year, and a price-to-earnings ratio of below 10.

That dividend payment appears cautious to me, with cover likely to be strong.

There is cyclical risk here, though. In the two pandemic years, the dividend was drastically cut. And there’s a recession on the horizon. But on balance, I see desirable long-term income.

Dividend recovery

My next choice is one that’s on something of a tentative recovery. I’m looking at construction firm Galliford Try (LSE: GFRD).

The company suffered two years of tough losses during the pandemic, and suspended its dividend in 2020. In 2021, it came back at a much lower level. The 4.7p dividend that year was but a shadow of the 77p paid in 2018. It yielded 3.3% on the share price at the time.

Forecasts show the dividends growing slowly but steadily. They predict a yield of 4.5% this year, growing to nearly 6% by 2024. Again, they should be well covered.

Like all broker forecasts, these are to be treated with caution. And at this stage in its recovery, Galliford Try is still a risk.

But the company’s July trading update spoke of “strong performance across operations resulting in increased revenue, pre-exceptional profit and operating margin.” Full-year results are due on 21 September.

Soft drinks

My final selection is AG Barr (LSE: BAG), which I think might hold up well in a recession. The soft drinks producer will deliver first-half figures on 27 September.

Barr did suspend its dividend during the pandemic, even though it still recorded healthy profits. But it’s a company that likes to trade with net cash, and I find that refreshing these days.

August’s trading update revealed a 19% increase in like-for-like revenue.

Inflation could hit trading, though. And the company pointed out that it’s suffering rising costs just like everyone else. It’s in a very competitive business too, so that’s something to watch out for. Part of Barr’s business comes from the hospitality sector. So there may be pressure there through the looming recession.

The dividend is modest, with forecast yields of around 3%. But I think we could be looking at a long-term defensive income investment here.

Growing digital sales

Shoe Zone (LSE: SHOE) is a UK-based footwear retailer. The company sells via an estate of some 410 stores nationwide and its website, shoezone.com.

In January, with its full-year results report, the company posted a healthy profit after recording a loss in 2020. And a big growth area has been the 58% increase in digital trading during the period. Online sales generated revenue of £30.5m in the 12 months to 2 October 2021 — just under 26% of total revenue.

The company reckons its decision to invest in infrastructure and people before the pandemic enabled it to capture digital sales when customers buying habits changed. And I see the growth of e-sales as a positive for this business.

However, although revenue and cash flow both have a positive trajectory, earnings have been patchy. And the company isn’t paying shareholder dividends at the moment.

Nevertheless, I’m keen on the stock for its growth potential. And with the share price near 150p, the forward-looking earnings multiple is just below 14 for the trading year to October 2023. I’d describe that valuation as fair and I would aim to buy a few shares on dips and down-days to hold for the long term.

Diversified and growing sales

Harry Potter publisher Bloomsbury Publishing (LSE: BMY) produces academic, educational, fiction and non-fiction publishing for consumers, children, students, teachers, researchers and professionals.

In January’s trading update, the company said it expected revenue for the year ending 28 February to be “comfortably ahead” of the market expectations. And the news on profits was even better with the directors expecting them to be “materially ahead”.

City analysts expect earnings to grow by about 8% in the trading year to February 2023. But estimates are not guaranteed and it’s possible for Bloomsbury to miss its forecasts. However, with the share price near 372p, the forward-looking earnings multiple is just under 17 when set against analysts’ expectations. And the anticipated dividend yield is about 2.6%.

The valuation looks quite full to me. But I like the firm’s quality indicators and its strong balance sheet. For me, Bloomsbury makes an attractive candidate as a long-term hold.

Well-placed to benefit from infrastructure spending

Construction company Galliford Try (LSE: GFRD) operates a cyclical business. And that kind of set-up comes with risks for investors. But I think the firm is well-placed to benefit from infrastructure spending and could see a boom in its business in the coming years.

In January, the company issued an “in-line” trading update and a bullish outlook. The directors reckon Galliford Try is “well-placed to benefit from increasing Government investment in economic and social infrastructure”. And the firm’s pipeline of work with high-quality private sector clients is also “robust”.

City analysts expect earnings to increase by about 18% in the trading year to June 2023. And with the share price near 180p, the forward-looking earnings multiple is just under 11 when set against that forecast. And the anticipated dividend yield is around 3.9%.

I think that valuation looks fair. And I’m also encouraged by the company’s strong balance sheet with its robust net cash position. In conclusion, I’d be happy to make this stock a core holding in my portfolio with a five-year-plus investment horizon in mind.

Construction specialist

The firm Galliford Try (LSE: GFRD) has slimmed down in recent years so its name seems less noticeable on building sites than it once was. I think the new focus has made the company more attractive. For example, by applying rigorous bidding criteria when tendering for contracts, it will hopefully avoid the trap of winning work that ends up being unprofitable.

In the first half of this year, the company turned in operating profits before amortisation of £3.9m. It also resumed its dividend. In a trading statement yesterday, Galliford Try said it has been making further good progress and expects to report final results at the top end of analysts’ forecasts. The strong business performance earns Galliford Try a place on my list of UK shares to buy today for my portfolio.

UK shares to buy today with net cash

The business performance isn’t the only thing that attracts me. At the half year point, Galliford Try reported a net cash position of £211m. But the current market capitalisation is only £163m, even after the shares responded positively to this week’s trading update.

So Galliford Try offers a business performing well, with a resumed dividend – and more net cash per share than the share price.

I see Galliford Try as among UK shares to buy today. There are risks, though. Construction is notoriously cyclical, and if the current strong demand for public works projects declines, that could hurt revenues at Galliford Try.

Back on the road

Galliford Try isn’t the only name on my list of UK shares to buy now for my portfolio.

When it comes to the car dealership Lookers (LSE: LOOK), the only discount a lot of people might hope for would be on a vehicle they’re buying. But Lookers shares also trade at a discount, in this case to the value of its property portfolio.

The current market capitalisation of Lookers stands at £250m. By contrast, its property portfolio was valued at around £300m according to the company’s annual results published this month. On top of that, the company is also sitting on net cash of £18m.

UK shares to buy today: Lookers

Like Galliford Try, Lookers trades at a discount to key parts of its balance sheet – but it is also attractive as a business to me. As one of the UK’s largest car dealerships, it is benefitting from a release of pent-up demand for car purchase. The board said this month that it remains confident about the outlook for 2021, in the absence of negative impact from pandemic restrictions or car supply issues.

Those are risks, admittedly. Also, some customers may still be wary of Lookers after a previous accounting scandal damaged its reputation.

But I am happy to hold it in my portfolio and would consider adding more of these shares while they trade at a discount to the company’s property portfolio.

Here is how I would invest £500 in UK shares for my portfolio today.

Capital preservation

Trading costs mount up and even historically successful companies can run into stormy weather.

So if I was putting £500 into the stock market today, I would apply two principles when selecting shares. First, I would try to diversify by buying at least two quite different types of company. Secondly, I would focus on well-known companies with strong balance sheets. There would still be a risk that they could turn out badly. But I would sleep easier using these basic risk management principles.

Income focus

I’d start by putting £250 into Galliford Try (LSE: GFRD).

The building company looks well-positioned to benefit from future strong demand for construction projects. With its focus on infrastructure business, I expect it to profit from economic recovery plans, which include large public works. Galliford Try also retains some exposure to the housing market. At a time of buoyant demand I see that as positive.

I like the company’s disciplined approach to bidding for work. Builders often run into trouble by tendering low prices for projects to win the work and then struggling to turn a profit. Galliford Try’s approach specifically aims to avoid this trap.

UK shares with dividend

With an interim dividend of 1.2p, the shares offer a modest yield, though hopefully a final dividend will also be announced in due course. Galliford Try plans to grow dividends in line with earnings, covering them at least. That makes it an attractive income pick for my portfolio.

Also attractive to me is the strong balance sheet. The company ended last year with a net cash position of £211m. Yet its current market cap is only £136m. That gives the company a substantial financial cushion.

However, there are risks. Even carefully costed building projects can overrun, running up losses. Future revenue potential may not be as high as expected if public spending priorities shift.

Growth pick

I would allocate my remaining £250 in a company whose growth prospects I like: JD Sports (LSE: JD).

JD’s half-year results reported £764m of net cash, albeit £200m was due to temporary factors. That is a strong balance sheet at a time when many companies are scrambling for cash.

Back of the net?

Partly that reflects the decision to suspend dividends. While JD might not be attractive right now from an income perspective, as a growth pick I continue to see potential here for my portfolio. While first-half revenue slipped 6% versus the prior year, it was still up 38% on the pre-pandemic 2019 figure.

The company’s winning formula of keen pricing on strong brands is set to keep it growing in my view. But there are risks, as the recent revenue fall showed. For example, a move away from working from home could lead to a decline in demand for leisurewear, which might hurt sales.

My next move

With £500 to invest, I would assess the fit of these two UK shares with my portfolio and investment objectives.

I would then consider splitting the money across two names and move to action by adding the choices to my holdings.

Other shares have gone down with the wider market, but are promising recovery plays. I’ve used that approach to choose two UK shares I would buy as recovery plays.

Builder Galliford Try has a cash pile worth more than its shares

Shares in construction company Galliford Try (LSE: GFRD) have plummeted in 2020. That was largely due to a demerger at the start of the year. Even after that, though, the share price continued to fall significantly.

It reported a big cash pile of £197m at the end of June. The company’s total market capitalisation is little more than half of that, at £112m. That means that if the company was dissolved, it could pay out a lot more than today’s price for each share – in cash!

The company is set to put that money to good use instead. It is currently focused on infrastructure projects and residential building schemes. With the government keen to spend recovery funds on infrastructure projects and an ongoing boom in housing demand, Galliford Try looks like the sort of prime recovery play I’d choose among cheap UK shares. A positive indicator is its recent announcement that it expects to resume dividends early next year. Shares have already started to climb – but I think they have further gains to make as the business returns to normal.

Babcock – a defence share in the sick bay

Defence contractor Babcock (LSE: BAB) specialises in dull but important work, from building battleships to maintaining helicopters. Normally this would provide stable cash flow. But the company has had a challenging couple of years, writing down values in its oil and gas business. The shares have been battered down as a result. Suspending the juicy dividend further damaged City sentiment. Babcock remains a familiar name among cheap UK shares, but I don’t expect it to stay this cheap for long.

Despite its stumbles, I think Babcock’s underlying business is as unlikely to sink as the ships it builds. With deep relationships, heavy spending customers like the Ministry of Defence, and limited competition, the company has a stable, profitable business model. A new chief executive began in September and looks set to right the ship.

The recovery is not here yet but investor sentiment is improving – the shares are already up over 30% from their lows. I think they have a lot further left to rise. To me, the Babcock share price looks a bargain.

The recovery for these cheap UK shares is already beginning

Both Galliford Try and Babcock have had double-digit share price rises already this month. I think that reflects their attraction as recovery plays. I think the recovery is just starting for them, so I’d buy them both.

Whether we are past the worst or there are further dips to come, is as yet unknown. But one thing does seem to be apparent – a lot of investors are seeing recovery buys out there. Here are two I like the look of.

FTSE crash victim

Shares in Galliford Try (LSE: GFRD) have pretty much followed the Footsie since the Corvid-19 pandemic arrived. They’re now down 22%, almost exactly in line with the fall in the index. But they were among the top risers Friday, with a gain of 10% by early afternoon.

It’s a sector that I’m quite certain still has tremendous long-term growth ahead of it. The big question is whether Galliford Try has the financial strength to see out the lockdown, while many of its work projects are shelved.

The firm released a Covid-19 update at the end of March, when the FTSE crash was just past its worst point so far. In it, Galliford Try told us it “remains a well-capitalised business with no debt or bank covenants.” The government is continuing to support the industry, and having 83% of its order book in the public and regulated sectors must be a strength for the company.

The dividend has been suspended, along with so many others, and I definitely think that’s wise.

Sentiment has been against construction firms since the collapse of Carillion. So Galliford Try might be a bit of a risky pick, at least in the medium term. But I reckon it could provide long-term rewards for bold investors.

Cornerstone

Brick and concrete product maker Ibstock (LSE: IBST) was also one of the top Friday risers, up 8%.

Ibstock shares have been hit harder than most, losing 40% since the start of the FTSE crash. But they have been ticking up again since the middle of March.

Ibstock closed all its manufacturing sites across the UK, retaining just a skeleton staff during the shutdown. The board and executive leadership team took a 20% salary cut (in line with the fall in income for furloughed workers), and the 2019 final dividend has been suspended.

The company did report net debt at 31 December, of £85m. That represents a net debt/EBITDA ratio of 0.7 times (in pre-IFRS 16 terms), which I rate as pretty healthy.

I’ve always liked Ibstock as a long-term investment, being particularly attracted to its dividends. The 2018 yield (before the 2019 halt) came in at 4.8%, and analysts had been predicting rises to 5.5% by 2021. That optimism has taken a bit of a beating since the FTSE crash. But I reckon Ibstock should get back to paying healthy dividends before too long.

There’s some short-term risk, certainly. But I now rate one of my favourite income stocks as a recovery candidate too.

That is why I prefer to put my money in a Stocks and Shares ISA. Yes, stock markets have also crashed. But I think this has thrown up a host of bargains, if you are brave enough to buy anything right now (apart from toilet roll). I am tempted by the Galliford Try Holdings (LSE: GFRD) share price, which has fallen 21% today, and Just Group (LSE: JUST), down around 13%.

Galliford Try’s half-year report this morning showed the group posting a £16.6m statutory profit before tax, reversing a loss of £24.7m in the year before. That’s despite a drop of 8.2% in revenues, which fell from £728m to £668m.

Galliford tries

Markets were no doubt disappointed by news that attempts to hit a divisional margin target of 2% in 2021 have now been pushed back to 2022. But at least the order book has held steady at £3.2bn, following a series of project wins.

Galliford Try was hit hard by both Brexit and the collapse of fellow construction group Carillion. This forced it to scrap its dividend and launch a £150m rights issue, amid concerns about its balance sheet. However, with the turnaround under way, the share price was picking up steadily, until the coronavirus trauma. Now it has a market cap of just £123m, and trades at a measly valuation of just 1.2 times earnings.

Today’s mixed results have been harshly punished, but that’s how it is when sentiment crashes. This could prove an exciting buy at today’s low, but we live in strange times and you would have to be brave to buy it.

Just the job

Financial services group Just Group looked like a bargain a year ago, when it traded at just 3.5 times earnings. It looks even cheaper given today’s share price mauling, as it now trades at just 3.1 times earnings.

Today’s preliminary results showed IFRS profit before tax of £369m, turning round 2018’s loss of £86m. The turnaround was pinned on an “improved operating result and positive economic variances”. Total revenue climbed from £2.86bn to £3.83bn, despite a 12% fall in gross written premiums to £1.92bn.

Just has also been through a tough time, like Galliford, but for different reasons. It was hit hard by a regulatory clampdown on sales of equity release lifetime mortgages. This was a key product and sparked a £219m regulatory capital cost in the second half of 2019. New business margins have also fallen, as it puts capital discipline above sales, but capital coverage now stands at 141%, and is set to rise further.

Just Group’s stock is another bargain for the brave, with a price-to-book value of just 0.4. These are wild times for investors, but I reckon both firms merit further due diligence, and a place on your watchlist.

Over the past 24 months, Superdry has lurched from disaster to disaster and investors have rushed to sell their holdings. Shares in the retailer are currently dealing 75% below their all-time high of 2,000p reached at the end of 2017. The company reported a 68% decline in earnings per share for its 2019 financial year.

Still, City analysts are expecting the group to return to growth in its current financial year now its founder has returned to manage the business. Julian Dunkerton took control in April and has since focused on cutting costs and ensuring new products are available for the final quarter of 2019. 

Founder control 

Dunkerton believes he’s done enough to save the brand and position it for a busy Christmas period, but only time will tell. After three profit warnings in one year, Superdry is facing an uphill struggle to restore investor confidence. That’s without taking into account the harsh retail environment on the high street. 

To put it another way, Superdry’s founder needs a Christmas miracle to help the brand return to its former glory and, as a result, I think it is worth avoiding the company for the time being.

Instead, I would buy construction group and FTSE 250 dividend champion Galliford Try (LSE: GFRD) for 2020.

Re-building the business 

Just like Superdry, 2019 has been a tough year for Galliford. It started by issuing a profit warning in April due to exceptional costs on the Queensferry Crossing in Scotland, and the firm has struggled to rebuild investor confidence ever since. 

Management is undertaking a strategic review of this construction division, with the view to a sale in the medium term. Galliford has also recently agreed on the sale of its homebuilding business.

After peer Bovis approached the company about a deal at the beginning of 2019 (rejected), it returned in the third quarter with a higher offer. Bovis is paying £1.1bn in cash and shares to acquire Galliford’s Linden Homes and Partnerships divisions. This deal raises the prospect of a special dividend for Galliford’s investors, and also strengthens the group balance sheet. 

Additional security 

The City has been worried about the company’s balance sheet for some time, and the stock, which currently supports a dividend yield of around 9%, should receive a boost from this additional security.

And if management can agree on a long-term plan for the rest of the group’s businesses, including the construction and regeneration arms, I reckon the stock could produce a total return of more than 100% in 2020. 

At the time of writing, shares in Galliford are dealing at a forward P/E of just 5.4, around half of the sector average. In my opinion, this reflects the level of uncertainty surrounding the business.

If management can lay out a long-term plan, I reckon investor confidence will return, and the stock could rise to a sector average multiple, implying an upside of nearly 90% from current levels. On top of this, there’s that juicy 9% dividend yield to look forward to. 

Today, I’m going to take a look at three of these high-yield champions and explain why I think they’re great at current prices.

High risk 

My first high-yield FTSE 250 pick is Ukrainian iron ore miner Ferrexpo (LSE: FXPO). This isn’t one for the faint-hearted. It’s currently without a CEO after Kostyantin Zhevago stepped aside to resolve issues at one of his other firms earlier this week. The company has also been hit by corruption allegations and corporate governance concerns. 

Still, despite these issues, Ferrexpo’s underlying business is throwing off cash. Between 2016 and 2018, the group reported free cash flow from operations of $690m. Of this, $150m was paid out to investors via dividends, and $335m was used to pay down debt.

City analysts are expecting this trend to continue. They’re forecasting a net profit of $468m, implying the stock is currently dealing at a forward P/E of 2.1. Analysts also believe Ferrexpo will distribute around 30% of its earnings to investors with dividends, giving a yield of 13.6% on the current share price.

All in all, I think Ferrexpo’s low valuation and high dividend yield more than make up for the risks surrounding the business.

Property bargain 

Newriver REIT (LSE: NRR) is also a dirt-cheap FTSE 250 dividend bargain. With its extensive exposure to commercial property, investors have been giving Newriver a wide berth recently. However, despite these investor concerns, the business has managed to outperform expectations.

At the beginning of September, the group announced it had agreed £58m of property sales in its portfolio on terms 1.2% above book value, on average. 

This seems to suggest the market has oversold shares in Newriver. Indeed, at the time of writing, shares in the real estate investment trust are changing hands at a price to book value of 0.8. Recently-agreed property deals suggest the multiple should be closer to 1. These figures indicate the stock could rise by more than 20% from current levels when confidence returns to the commercial property market. 

As well as the capital growth potential, investors can also look forward to a dividend yield of 10.6%, provided by income from Newriver’s diversified commercial property portfolio.

Construction giant

My final FTSE 250 income play is construction group Galliford Try (LSE: GFRD). After five years of growth, Galliford’s earnings slumped in its 2019 financial year, following the collapse of its joint venture partner Carillion. 

The costs of this collapse have forced the company to restructure itself and reconsider how much money is paid out to shareholders every year. The dividend was cut in 2018 and reduced further in 2019.

City analysts believe Galliford’s earnings will decline further in its current financial year, but growth is expected to return in fiscal 2021. Analysts are also forecasting a dividend increase, although I’m not so optimistic on this front. I would rather see management take a conservative line and prioritise balance sheet strength over shareholder payouts. 

Still, at current levels, the dividend yield is highly attractive. The stock supports a yield of 7.8%, and the distribution is covered twice by earnings per share. 

Here, I’m looking at two FTSE 250 dividend stocks with serious income potential. Both companies offer dividend yields of about 10%. Held in a Stocks and Shares ISA, these could offer an attractive tax-free income.

They are housebuilder Bovis Homes Group (LSE: BVS) and rival Galliford Try (LSE: GFRD), which also has a construction division. Earlier this week, the two firms announced plans to combine their housebuilding operations under the Bovis name, leaving Galliford as a dedicated construction business.

Should you buy these high-yield stocks after this week’s news? I’ve been taking a look at the latest numbers to find out more.

What’s the deal?

Bovis boss Greg Fitzgerald first approached Galliford about a possible deal back in May. Fitzgerald’s initial offer was turned down, but he’s now back with a more generous offer that seems to have won the backing of Galliford’s board.

In short, the £1.1bn deal would see Bovis take over Galliford’s housebuilding and regeneration businesses. Galliford shareholders would receive £675m of Bovis stock. Galliford itself would get £300m in cash. Bovis would also take over £100m of Galliford’s debt.

The Bovis CEO was previously the chief executive of Galliford, so he knows the business well. Both companies seem to be happy with the deal. Should shareholders vote in favour?

Is it a good deal?

The GFRD share price tumbled in April, when the group’s construction business was forced to book losses on various big contracts. This is a constant hazard for construction firms, and is one reason why I prefer to see this type of business run without debt.

Galliford’s latest accounts show an average net debt of £186m over the last year. Selling its housebuilding operations to Bovis would free up cash that’s tied up in housebuilding land and inventory. It would also cut debt and leave the construction business with a net cash balance, according to analysts’ estimates.

For Galliford, I reckon the deal looks good. What about Bovis? I don’t think Bovis needs a deal as badly as Galliford. But the firm only sells about 20% as many houses as FTSE 100 rival Barratt Developments. Increasing the scale of the business should deliver useful cost savings and provide new options for future growth. It’s not a bad idea.

Which is the best dividend stock?

Construction businesses like Galliford run with low profit margins and are always dependent on big contract wins. Costly problems are inevitable, from time to time. I wouldn’t buy a construction stock for income.

Meanwhile, housebuilders have problems with boom and bust cycles too, but Bovis is performing well at the moment and profit margins are high. This year’s forecast dividend yield of 10% looks affordable to me, regardless of whether the Galliford deal goes ahead.

However, I don’t expect the Bovis dividend to remain at this level forever. At some point, I expect housing market conditions to change, making life harder for housebuilders.

I don’t know how soon this will be. If you’re bullish about the UK economy, then I’d buy housebuilders. If you think we’re heading for a recession, I’d probably hold back. It’s your call…