Premier Miton

AIM-listed asset manager Premier Miton (LSE: PMI) is first up.

Thanks to some great performances from its funds, the firm has been attracting more investors. By the end of March, Premier had £12.6bn in assets under management. This compares favourably to the £9.1bn by this point in 2020. At £6.2m, pre-tax profit over the last interim period came in 17% higher. 

On dividends, Premier didn’t disappoint either. It recently hiked the interim payout by 48% to 3.7p per share. Such a jump is indicative of a very confident board. Right now, the small-cap’s shares have a chunky forecast yield of 5.2%. This payout is also safely covered 1.5 times by expected profits.

Although there can be no guarantees in the stock market (and Premier’s fortunes will be dictated by some things beyond its control), I think all this makes the company a good dividend pick. Taking into account its strong financial position, the shares are reasonably priced at 13 times earnings.

Gateley

Legal services firm Gateley (LSE: GTLY) looks to be another decent income stock from the small-cap world, in my opinion. 

In last week’s trading update, the business stated that trading had “continued to improve” over H2. It’s now predicting that full-year revenue will be at least £120m — up 9.3% on the previous year. Pre-tax profits will also be up at least 8.1% to £16m.

Analysts have the company returning 7.98p per share in dividends. That becomes a yield of 4% based on last Friday’s closing share price. Again, the payout looks likely to be sufficiently covered by profits (1.6 times). Like Premier, Gately has a reassuringly large net cash position (£20m). 

As far as drawbacks go, I do need to remember that Covid-19 could continue impacting companies offering professional services. It’s also worth mentioning that the free float (the number of shares available to buy on the market) is relatively low, making it a fairly illiquid stock. This can potentially lead to big increases in the share price. Sadly, the reverse is also possible. 

H&T

Pawnbroker, gold purchaser and jewellery retailer H&T (LSE: HAT) may not be everyone’s cup of tea, but I think it has good dividend credentials.

While only a prediction, analysts have it returning 7.46p per share in FY21. That gives the lowest yield of the three income stocks discussed here (2.7%). However, H&T also has the highest amount of dividend cover (2.6 times profits). Of course, the payout could end up being better if trading goes well over the rest of the year.

Clearly, H&T’s outlook is also dependent to some extent on what happens regarding Covid. Even though the firm provides “essential financial services” and has an online presence, it really needs high streets to remain open. Based on the success of the vaccination programme so far, I’m optimistic. Even so, Boris Johnson may still end up changing his road map in June. 

On a more positive note, a strong balance sheet suggests H&T is capable of weathering further storms. A rebounding gold price won’t do any harm either.  

The number of UK share market millionaires has rocketed over the past decade. Eagle-eyed investors bought quality stocks in the depths of the 2008/2009 banking crisis. And then they watched them soar in value as economic conditions improved and corporate earnings rebounded.

It’s a strategy that investors today can replicate following the Covid-19-related crash of early 2020. I’ve bought UK shares that have fallen sharply in value in my Stocks and Shares ISA. And there are plenty more I’m thinking of adding to my shares portfolio for 2021 too.

2 top UK shares on my ISA watchlist

Here are a couple of top stocks on my ISA radar today. I reckon they could help me make a fortune during the new bull market:

#1: Gateley Holdings

Merger and acquisition (M&A) activity has slowed to a trickle in 2020. It’s no surprise as profits outlooks have become muddied and balance sheets experienced severe pressure. But it looks like things could be about to turn significantly higher as the global economic recovery kicks in.

Comments from Ross Mitchinson, co-chief executive of Numis Corporation, illustrate how takeover fever is beginning to take off. He’s just said that “we’ve quite a bit of M&A picking up… [and] there will definitely be a pick-up in inbound M&A.” This all bodes well for Gateley Holdings (LSE: GTLY). This UK share is the country’s most active M&A legal advisor by deal volume.

City analysts expect Gateley to record a fractional earnings rise in this financial year (ending April 2021). But things are likely to heat up as that M&A action improves and ongoing expansion boosts profits. I think a forward price-to-earnings (P/E) ratio of 16 times represents an attractive entry point for long-term investors to buy in at.

#2: Wizz Air

2021 could be an explosive year for Europe’s airlines should a mass rollout of Covid-19 vaccines successfully transpire. It might be too late for many flyers, sure. But those with strong balance sheets like Wizz Air Holdings (LSE: WIZZ) stand to gain from a further thinning of the competition next year and beyond.

This particular airline is the best way to play booming wealth levels in Central and Eastern Europe. Its planes jet all over the continent but the Hungarian flyer has the best footprint in these emerging regions than any other in the fast-growing budget segment. Forget about Wizz Air’s huge losses that it’ll rack up in this unusual fiscal year (to March 2021). I think this UK share has ‘millionaire maker’ printed through it.

It’s true that you take on some risk by buying shares because share prices and dividends can fall as well as rise. But in many cases, an underlying business that is performing well can deliver a rising share price and annual increases in the dividend payment. So, as well as taking on the extra risk, by holding shares in companies, you expose yourself to extra opportunities as well.

Good figures and an impressive record

When things click on the stock market, there’s nothing nicer than seeing your capital increase as a stock rises, alongside an income stream from dividends that increases in size a bit each year. One share that I think looks capable of delivering those benefits to shareholders in the coming years is Gateley Holdings (LSE: GTLY), the professional and legal services company.

I find the figures in today’s full-year results report to be encouraging. Revenue rose just over 20% compared to the previous year and adjusted diluted earnings per share increased by almost 18%. The directors expressed their satisfaction and confidence in the outlook by slapping an extra 14.3% on the total dividend for the year.

Since arriving on the stock market around four years ago, the firm has been making strong operational progress. The dividend is now more than 40% higher than the maiden payment in 2016, and the share price has risen just over 60% since the stock first traded on the stock market in 2015. Those strike me as impressive returns for shareholders so far, and City analysts following the firm expect earnings to advance by a mid-single-digit percentage during the current trading year to April 2020, suggesting further progress ahead.

Trading well and a positive outlook

The year was a busy one for Gateley during which it achieved “record-breaking” revenue above £100m, its highest-ever staff numbers, and three acquisitions. Looking ahead, trading in the current year has started well and the directors are confident of achieving further growth in the business in the years to come.

Despite the robust growth and strong operational momentum, Gateley is maintaining, the valuation doesn’t look stretched to me. With the share price at 165p, the forward-looking price-to-earnings multiple for the trading year to April 2020 runs close to 12 and the anticipated dividend yield is around 5.3%.

Gateley is no giant with its market capitalisation running near £182m, but I’m impressed by its trading record as a public limited company and believe it could grow to become a much larger enterprise. I wouldn’t bet the farm on it, but I think the combination of income and growth that the stock appears to offer makes it eligible for a place in a diversified portfolio.

You may not have heard of Gateley Holdings (LSE: GTLY) or VP (LSE: VP) so here’s why they’re worthy of your investment cash.

More great news

Gateley is a share I’m particularly excited about. Since it listed on AIM four years ago, it’s been rapidly growing its headcount across the UK and the Middle East to capitalise on the soaring demand for legal services. This has helped to power earnings — and thus dividends — higher over the period.

I’m pleased to say that its strong bottom-line momentum is yet to show signs of running out of steam. Indeed, the release of more excellent trading details on Tuesday illustrated that energy. Revenues soared 20.1% in the six months to October to £46.4m, a period which also saw organic sales rise by 10.2%. Pre-tax profit also jumped 18.6% to £5m.

What’s more, with cash conversion at the firm improving by 2.1% year-on-year to 87.4%, the business elected to hike the interim dividend by an eye-popping 18.2%, to 2.6p per share.

The headcount at Gateley’s core legal operations has risen by almost 50% since its IPO in 2015, underpinning the relentless profit growth of recent years. Looking away from the steady expansion at its bread-and-butter divisions, the company’s foray into other professional services, like tax and accountancy matters, adds another layer of growth potential for the years ahead.

In the meantime, City analysts forecast an earnings increases of 11% for the year to April 2019 and 9% for fiscal 2020. And these projections underpin dividend predictions of 7.8p and 8.4p per share for these respective years, up from 7p last year, yielding a jumbo 5.6% and 6%.

Despite the recent share price bump, Gateley still trades on a low, low forward P/E ratio of 11.4 times. I believe that this rating is far too cheap given the company’s breakneck top-line momentum.

Another income star

Like Gateley, VP has also been splashing the cash to expand its geographical and operational base. The benefits of this programme were laid bare in November’s latest financial statement.

Following the acquisition of Brandon Hire last year, both revenues and profits boomed between April and September — by 42% and 22%, respectively. As a consequence, the half-time dividend was hiked by more than a fifth year-on-year to 8.2p per share.

An expected 10% earnings hike for the full year to this March results in a prediction for a 30.3p total dividend, yielding a chubby 3.1% and suggesting a meaty upgrade from last year’s 26p reward. And the yield moves to 3.3% for fiscal 2020 as a predicted 7% profits rise by City analysts leads to an anticipated 32p dividend.

The rental equipment company has proved immune to the wider implications of Brexit so far. Yet this resilience is not reflected in its low valuation, in my opinion, with a forward P/E multiple of 10.2 times. Like Gateley, I reckon VP is a great budget buy right now, particularly for those seeking excellent dividend growth.

Whether you’re hunting for big dividend yields or proven profit generators there’s no shortage of contenders amongst the capital’s smaller indices. In fact, if you’re looking for both right now then a quick glance at Gateley Holdings (LSE: GTLY) is definitely worth your while.

The firm is a specialist in commercial law with operations spanning from the UK to Dubai. Since listing on AIM back in 2015 — it was the first business of its kind to do so — it has continued its long story of churning out robust earnings growth, culminating in last year’s impressive double-digit-percentage advance.

And trading at the business remains extremely robust, leading brokers to suggest more sustained earnings growth (rises of 8% and 9% are predicted for the years to April 2019 and 2020 respectively). A critical driver of its strong performances has been its dedication to investing across the business.

Expanding its labour base is one such way that Gateley continues to thrive, and last year it bulked up the average fee-earning staff numbers on its books to 509 from 457 the year before, up 11.4% year-on-year. But what has really lit a fire under the bottom line is the company’s dedication to hunting down tasty acquisitions.

Acquisitions coming thick and fast

After making its first two acquisitions back in fiscal 2016 Gateley now has the bit firmly between its teeth. The legal eagle made a further two takeovers in the last 12-month period and since then it has seized business psychologist Kiddy & Partners to boost its employment services portfolio.

The business is showing little appetite to slow down on the M&A front. At this week’s AGM, non-executive chairman Nigel Payne said it continues to hunt for “additional complementary businesses which are earnings accretive and assist in diversifying the Group even further.”

Gateley certainly has the financial clout to keep its spending spree on the boil. Cash generation remained impressive last year and operating cash flow rose to £12.2m, up from £7.7m in fiscal 2017, while net debt tumbled £4.1 year-on-year to just £0.7m.

Delicious dividend yields rise to 5%

To the delight of income investors, Gateley’s rock-hard balance sheet and bright earnings prospects are leading the City to predict that dividends can keep growing and that it can offer inflation-busting yields as well.

Last year’s 7p per share total dividend is anticipated to advance to 7.5p in the present period, and again to 8.2p in the following year. As a consequence, yields stand at 4.6% and 5% for fiscal 2019 and 2020 respectively.

The market seems fairly oblivious to Gateley’s exceptional growth (and income) prospects, however, and this is reflected in the company’s cheap forward P/E ratio of 13.8 times. I’m convinced that the law specialist is a share that offers plenty of upside at current prices.

Thanks to its multi-year Devro 100 growth strategy, designed to supercharge sales growth and slash costs, the business has seen revenues from emerging markets rebound sharply, and especially from China, Russia and South East Asia.

The strong progress the sausage casings maker is seeing in these territories was underlined by latest trading details released this week in which the firm said: “The Devro 100 programme continues to progress well, with actions on track to deliver the targeted cost savings for the year.” It added that it made “good progress” with its productivity and output targets at its US plant, while its China factory continues to “perform well” too.

Porky dividends

My optimistic take on Devro’s profits outlook is copper bottomed by City analysts’ consensus, which also suggests strong earnings growth from here. Indeed, rises of 12% are forecast for both 2018 and 2019 respectively.

Current forecasts leave the business dealing on a forward P/E ratio of 15.4 times, a pretty undemanding valuation in my opinion, given that its revenues-boosting plan is clicking through the gears and population increases will likely deliver strong demand growth for its edible collagen tubes.

It is in the dividend stakes where Devro really sets itself apart, however. With the business finally on course for sustained profits growth again, and cash generation also steadily improves, dividends are expected to get moving again after years of being locked at 8.8p per share.

A 9.1p reward is forecast for 2018 and this jumps to 9.4p for next year. As a consequence, yields stand at a chubby 4.2% and 4.4% for this year and next.

Take this advice

Investors on the hunt for punchy payout growth should also pay Gateley Holdings (LSE: GTLY) close attention today.

Supported by broker predictions of further earnings growth with rises of 16% and 7% predicted for the years to April 2018 and 2019, dividends are expected to keep growing as well, keeping yields well above the market average.

A 7.1p per share reward is estimated for the current period, up from 6.6p last year and yielding an impressive 4.5%. And the 7.5p dividend anticipated for next year drives the yield to 4.8%.

An added bonus for those considering Gateley is that the business trades on a forward P/E ratio of 14.4 times, comfortably inside the accepted value terrain of 15 times or below.

And this rating is far too cheap in my opinion. Demand for Gateley’s legal and professional services continues to grow at a splendid rate, and the business remains dedicated to building scale to keep business rolling in (its headcount swelled 6.4% year-on-year during July-December to 763).  I reckon the AIM-quoted company is in great shape to deliver solid profits and dividend growth in the years ahead.

However, even though this business is relatively young, it is growing like a weed, and at its current speed, it won’t be long before it graduates off AIM and moves into the big league. 

The results are in 

Today Tatton published its maiden interim results for the six-month period ended 30 September following its IPO in July. 

During the period, discretionary assets under management expanded 15% (since March 2017), and AUM grew by 33% year-on-year. Growth in AUM helped the company expand revenue by 31% to £7.3m and adjusted earnings before interest and tax lept by 56% year-on-year. 

Due to the costs associated with its IPO, Tatton reported a profit before tax of only £0.5m for the period, but going forward, IPO costs should not be repeated indicating strong profit growth in the years ahead. 

As well as robust underlying earnings growth, the firm reported a cash balance of £10.5m at the end of the period. 

Growth ahead

Tatton’s solid results have enabled management to announce today an inaugural interim dividend of 2.2p per share. This looks as if it could be a sign of things to come. 

The group is a relatively unique business as it offers on-platform-only discretionary fund management, regulatory, compliance and business consulting services to investment advisors across the UK. These services allow investment advisors to lower costs and concentrate on clients’ needs, rather than focusing on time-consuming, costly compliance issues. 

As more advisors flock to the firm’s offering, City analysts expect Tatton’s earnings per share to grow by 6% this year, and 19% for the fiscal year ending 31 March 2019. Considering the young age of the company, and the growth reported today, I believe that these could be conservative forecasts. Based on the current City estimates, however, the shares are trading at a forward (YE 31 March 2018) P/E of 20.4, which seems to me to undervalue this high-growth business. 

Reach for the stars

Over the past 12 months, shares in Gateley Holdings (LSE: GTLY) have charged higher by 55% as the law firm has improved its offering through acquisitions. Today the company announced that revenue for the six months ended 31 October grew 9.8% and adjusted EBITDA expanded 6.3%. Substantial investment in its client offering held back the group’s overall performance. 

Still, for the full year City analysts are predicting earnings per share growth of 13%, followed by an increase of 7% for the fiscal year ending 30 April 2019. On the back of these forecasts, the shares are trading at a forward P/E of 15.8 falling to 14.9. Considering the company’s steady earnings growth, a mid-teens multiple seems to me to be suitable for the shares. 

I believe the outlook for the group is bright because the market for professional services (it provides legal advice to the financial, corporate and property sectors) has only grown for the past few decades, and it does not look as if this trend will end anytime soon. And as financial sector regulation becomes more complex, it should be able to capitalise on this opportunity.

As well as steady growth, it also supports a dividend yield of 4.2%.

At the same time, the rise in the FTSE 100 has made it more challenging to obtain high yields in many cases. Add to this a difficult future for the UK economy and the prospects for a high and rising dividend seem relatively low.

Despite this, there are some stocks which could be of interest. Here are two examples which could be worth buying and holding for the long run.

Upbeat performance

Reporting on Monday was national commercial law firm and complementary professional services business Gateley (LSE: GTLY). The company’s trading update showed that it has made good progress in the first six months of the year. Activity levels have been robust, with strong growth in the company’s Corporate and Property service lines helping to generate revenue growth of 10%. Increasing staff numbers and further investment in its growth prospects mean that the business remains confident in its medium term outlook.

With a dividend yield of 4.3%, Gateley offers a real income return at the present time. The company’s bottom line is forecast to rise by 14% this year and by a further 7% next year. This suggests that dividend growth could be brisk. And with a dividend coverage ratio of 1.5, future dividend growth appears to be sustainable. There may also be significant opportunities for further investment in order to allow the business to generate additional earnings growth. Therefore, with inflation set to move higher, the company could be a sound income investment for the long run.

Wide margin of safety

Of course, the FTSE 100’s rise has not meant that all stocks are now trading on excessive valuations. Life insurer Aviva (LSE: AV) may be within 10% of its five-year high, but still has a price-to-earnings (P/E) ratio of just 9.6. Furthermore, with its bottom line due to rise by 5% next year its rating is forecast to fall to only 9.1. This suggests that it offers a wide margin of safety and could deliver high capital growth in the long run.

In terms of its income prospects, Aviva’s dividend yield of 5.1% is surprisingly high. It pays out just under half of profit as a dividend, and looks set to maintain this payout level as a proportion of profit in the long run. This should provide a sustainable level of growth for the business, while also providing its investors with a robust income outlook.

Therefore, with a mix of value, income and capital growth appeal, the stock could be a sound buy for the long run. While it may take time for investor sentiment to improve, the investment case for Aviva appears to be compelling at the present time.

Non-executive chairman of the corporate lawyers, Nigel Payne, said the business continues to perform well and is trading in line with management’s expectations. Following a year of “significant expansion and investment,” he said Gateley continues to achieve “solid” organic growth, while remaining focused on making sure that “complementary acquisitions which are earnings accretive to the group” happen.

“Driven by the strength of its service offering, its ability to retain and attract excellent staff and expand on existing client relationships, Gateley remains well placed for the future.  Further new recruits have settled in well across the group including professional staff in Gateley Hamer, Gateley Capitus and across its core national legal divisions,” Payne added.

The statement confirms the terrific momentum seen recently over at Gateley. The Birmingham-based firm announced in July that revenue boomed 15.7% in the 12 months to April, to £77.6m, a result that drove pre-tax profit 18.8% higher to £13.1m. The result reflected the vast sums Gateley is splashing out on organic investment as well as acquisitions.

Gigantic yields

Last year’s hearty profits boost prompted the company to hike the dividend to 6.6p per share from 5.64p in fiscal 2016.

And with the City expecting further hefty earnings rises (increases of 15% and 7% are estimated for this year and next), chances are that payouts should continue stomping higher. Indeed, current forecasts suggest that a dividend of 7.2p in the year to April 2018 is in the pipeline, while a 7.6p reward is chalked in for 2019.

These figures yield an incredible 4.6% and 4.9% respectively. And with Gateley also carrying a very attractive forward P/E ratio of 14.4 times (not to mention a corresponding PEG multiple bang on the bargain watermark of 1), I reckon those seeking great growth and income shares at a discount need to give the business serious attention.

Recruit another bargain

I also believe SThree (LSE: STHR) is a terrific bet for those looking to make their fortune on a budget.

Earnings are predicted to swell 12% in the year to November 2017, and by a further 10% next year, leaving the recruitment specialist dealing on a forward P/E multiple of 14.5 times (as well as a PEG rating of 1.2).

And looking at the dividends, while a projected payment of 14p per share for fiscal 2017 would be flat from the prior period, this still yields a mighty 4.1%. SThree is expected to get dividends rising again from next year, although an amount of 14.1p expected in 2018 yields the same.

I am convinced SThree is a brilliant bet for those seeking abundant returns for many years to come. Its international expansion programme continues to deliver titanic results, and gross profits rose 5% during June-August, to £73.7m, led by its US unit where profits surged 20% year-on-year.

And with the company having chosen to focus on the fast-growing contract market, I believe it should remain on course to deliver exceptional shareholder returns in the years ahead.

Trading well

The firm delivers commercial law and complementary professional services and arrived on the stock market on 8 June 2015. That’s a positive for me because newly listed firms tend to be well financed and are often run by keen directors out to make their mark. The fact that Gateley was the first UK law firm ever to list on the stock market enhances the argument, I reckon.

The figures are good for the year’s trading to 30 April. Revenue pushed up 15.7% compared to the year before, basic earnings per share (EPS) lifted 15.3%, and the directors crowned the year’s achievements with a 17% hike in the total annual dividend.

Organic and acquisitive growth

Strong cash generation helped the firm execute its second acquisition during September 2016 and the integration is going well. Organic and acquisitive growth seems prominent on the agenda, supported by a business that is “well balanced and resilient,” said chief executive Michael Ward.

Following an “excellent” second half of trading, the operational momentum continued in the first two months of the current trading year. Mr Gateley put such progress down to the strength of the service offering, the depth of client relationships and growth in the firm’s teams of skilled professionals.

At today’s share price around 184p, you can pick the shares up on a forward price-to-earnings (P/E) rating of just over 17 for the year to April 2018, and the forward dividend yield runs at 3.9%. City analysts expect earnings to grow 13% that year and to cover the dividend payout almost 1.5 times. Although the valuation is quite full, I reckon the firm may have a bright future.

Defensive qualities

It’s hard for me to imagine conditions when legal services will not be in strong demand. so, I reckon Gateley’s business has a potentially robust defensive element to it. Meanwhile, Swallowfield (LSE: SWL) is another firm that strikes me as having defensive, evergreen cash-generating qualities.

The company develops, formulates, and supplies personal care and beauty products on a contract basis to major brand owners and also produces its own portfolio of brands. We last heard from the firm on 6 July when it told us how the trading year to June had turned out. Trading has been brisk and the directors expect to report revenues up 30% on a constant currency basis with the full-year results in September. Excluding acquisitions, the organic element of that growth should come in around 7%.

Emerging branded consumer goods business

Within the set-up, the firm’s own brands are performing well and driving some of that growth. In June 2016, the company enhanced its own-brand offering with the acquisition of The Brand Architekts Limited, which joins the stable to sit alongside organically developed brands such as Bagsy and MR. and the 2015 acquisition of The Real Shaving Company.

At a share price around 362p, the shares change hands on a forward P/E rating of 15 for the year to June 2018, and earnings are predicted to lift 16% that year, which seems like a fair valuation given what is known.