First is Primary Health Properties (LSE: PHP), which announced its latest acquisition on Tuesday. The company is to buy Sarak Group Limited, along with its Crwys Medical Centre in Cathays, Cardiff. The deal is worth £4.5m, of which £1m will be settled in new shares.

Why does this attract me? I think there are plenty of companies and assets out there that are valued too cheaply right now. PHP’s chief executive Harry Hyman says the company has “a strong pipeline of opportunities in the UK and Ireland and are well positioned to continue to grow our portfolio.”

The acquisition only makes a modest addition to Primary Health’s overall portfolio of 516 properties, but it sounds like it could be followed by plenty more.

My main caution is over the current price. PHP shares are on a lofty growth valuation with a trailing P/E of 26. But I’m going to look more closely at this one.

A substitute for cows

My next FTSE 250 pick is Hilton Food Group (LSE: HFG). Hilton has agreed “to acquire the remaining 50% shareholding of leading vegan and vegetarian manufacturer, Dalco Food.“

CEO Philip Heffer said the buyout “will further strengthen Hilton’s position within the vegan and vegetarian market, at a time when our customers are increasingly seeking out innovative, high quality vegetarian products at scale.”

Is Hilton’s expansion into this area of the food business a good one? I think it could be, considering the growing movement away from meat products. We only need to look at where the Beyond Meat share price has gone in the US to get a feel for the potential of this market.

We’re looking at a more modest growth valuation here, but there’s also been a fair bit of volatility. Hilton shares have gone nowhere overall since I looked a year ago. And that up and down trend could continue. I’m still tempted, mind.

FTSE 250 property investment

The third acquisition that caught my eye today comes from LondonMetric Property (LSE: LMP). With the retail business so badly hammered by the pandemic lockdown, there must be plenty of commercial properties available at good prices now, right? LondonMetric seems to think so.

The FTSE 250 real estate investment trust has just announced the acquisition of three urban logistics warehouses for a total of £35.4m. One is in Worthing, one in Uckfield, and the third in Exeter. Chief executive Andrew Jones says the three are “in good locations and let on long leases with certainty of income growth.”

What’s the risk? Well, the commercial real estate business faces a very uncertain future. And I think we could be in for a period of stagnation in occupancy and rental incomes. But I can’t help feeling that could make this a good time to buy for those happy with the risk. And I’m a big fan of investment trusts of all varieties.

The FTSE 250 tends to be more attractive to growth investors. It’s a stopping-off point for those companies working their way up to the top tier, so that’s perhaps not surprising. It can be more volatile too, but that can be put to advantage when looking for oversold bargains.

Playtech (LSE: PTEC) is a good example. In the early days of the Covid-19 slump, the FTSE 100 quickly lost a third of its value. But over the same short timescale, the FTSE 250 fell more than 40%. And the Playtech share price crashed by 65%.

FTSE 250 recovery

But Playtech shares recovered way faster than the two indexes. They’re now only 11% down on the year so far. The FTSE 100 and FTSE 250 are pretty much tied on drops of approximately 20%.

Playtech, which provides trading software used by the gambling and finance industries, saw its price drop 8% Thursday on the release of first-half figures. Does that mean avoid, or does it just offer a better buying opportunity?

The hit is due to a 22% fall in revenue for the half, to €564m. Reported profit fell 85%, but the firm revealed an adjusted profit fall of a less painful 36%. That might not look great, but the company described the performance as resilient. And it reported an “exceptional” performance from its TradeTech division – though it looks like it will probably be selling off that business.

Playtech looks like an oversold FTSE 250 stock to me.

Speedy rebound

I was also drawn to Hilton Food Group (LSE: HFG), the international food packing business, on Thursday. The Hilton share price gained a couple of percent on the day, and has shown a better 2020 performance all round.

After an early dip, Hilton Food shares recovered quickly. The price is now 10% up since the beginning of the year, and the half-time figures show why. Revenue climbed 40% to £1,264.2m, with adjusted operating profit up 19.6% at constant currency.

Net bank debt did rise by 35%, but at £131.7m I’m really not concerned. The company lifted its interim dividend by 16.7% to 7p per share. So who says FTSE 250 shares are all about growth and not income?

Full-year outlook

Hilton confirmed that full-year results should still be in line with expectations. So we should see full-year EPS around 10% ahead, continuing the trend of recent years. If the final dividend is raised in line with the interim, we’d see a yield of around 2%. That’s not the biggest on the market, but I’d take a strongly progressive dividend over a higher but static yield any day.

We’re looking at two very different companies here, and I rate both as long-term buys.

We will all need to continue eating whether a painful and prolonged recession is coming or not. This makes companies involved in getting food onto our plates, like packaging giant Hilton, one of the safest bets out there.

The FTSE 250 firm’s decision last month to maintain its dividend policy underlines its exceptional defensive qualities. Its sales outlook remains robust and it has a rock-solid balance sheet with plenty of cash on the books too. I’d happily buy Hilton despite its high price-to-earnings (P/E) multiple of above 25 times. It’s worth every penny in my book.

Defence star

Avon Rubber (LSE: AVON) makes respiratory protection and other equipment for the military, police and firefighters, as well as milking equipment for farmers. It’s another FTSE 250 share I’d happily buy for my ISA. Mankind’s attraction to conflict has been a consistent aspect of human history. The geopolitical and terrorist threats that have boosted defence spending over the past decade are arguably more pronounced now than they were 10 years ago too. Expect such spending by major Western nations to remain robust.

Sales data from the Stockholm International Peace Research Institute shows how military spending surged to multi-year peaks in 2019. There are signs emerging that defence expenditure will keep rising despite the costs of battling the coronavirus crisis in the near term and beyond too.

For example, the US Indo-Pacific Command last month submitted a plan to Congress that would boost its spending by $20.1bn during the five years to 2026.

Avon Rubber is a major supplier to the US armed forces and is thus in prime position to ride this environment. Its masks and body armour are in hot demand, and its recent acquisition of 3M’s ballistics business has reinforced its relationship with the Department of Defense still further.

The FTSE 250 company’s forward P/E ratio of around 27 times doesn’t make it look cheap. This, though, is a fair valuation given Avon’s exceptional sales outlook that its cutting-edge products provides. This is a share I’d happily buy for my own Stocks & Shares ISA.

Another ISA star

Share pickers seeking safe havens should also pay Dechra Pharmaceuticals (LSE: DPH) close attention today, I feel. Healthcare is one of the most defensive sectors out there. And this one allows investors to ride the booming animalcare market.

But it’s not just that spending on our companion animals should remain strong despite the upcoming recession. Dechra’s drugs are also widely used to help livestock producers. And so like Hilton Foods, our need to keep our bellies full provides this FTSE 250 share with strong earnings visibility too.

This share commands a prospective P/E ratio of 29 times. I don’t care, though. I’d happily buy it for my ISA during these tough times and hold it for many years to come.

FTSE 250-quoted Hilton provides the packaging that is essential in the sale of meat. Its indispensable operations underpinned today’s solid full-year release. It said that “the evolving Covid-19 outbreak has led to an increased demand for protein-based products produced by the group” and that its facilities “remain fully operational.”

It added that “to date they have responded superbly and have risen to the challenge.”

Incidentally, for 2019 Hilton said that revenues had leapt 11% (in constant currencies) year-on-year to £1.81bn. As a consequence, adjusted pre-tax profit swelled 10.2% on the same basis, to £49.7m.

A rare treat

Hilton’s performance has been so encouraging in the face of the coronavirus outbreak that it resisted the temptation of slashing the dividend. It kept it on hold at 21.4p per share instead. With dividend cuts coming left, right and centre from elsewhere, this is cause for some celebration.

The packaging powerhouse said that it had applied “significant downside sensitivities” to its cash flow forecasts related to the Covid-19 crisis. Even under its projected worst-case scenario it said that the company should “continue to operate well within its banking covenants and has adequate headroom under its existing committed facilities.”

As of December, Hilton had a hefty £110m of cash on its books. It also had current committed, but undrawn, loan facilities of £116m.

Sailing on

Clearly this Cambridgeshire-based growth share should have little to fear on the demand front. A consumer trend that is moving increasingly towards protein-rich diets has been exacerbated by the coronavirus outbreak.

Hilton’s main worry is the impact of a rising infection rate on its workforce and its supply chains. And this particular issue will remain unknown for a little while to come. But for the time being, the company looks in good shape to ride out any trouble.

It said that it has “established business continuity and flexible buy models and supply options” and that “there have not been any significant issues experienced to date” in securing material. The firm has around 40 different suppliers across the globe.

A great growth stock

It would be a mistake to consider Hilton just as a solid safe haven for these troubled times. The company, which operates in more than a dozen countries, remains committed to long-term expansion and recently opened new facilities in Poland and Australia. It is setting itself up to deliver brilliant growth over the coming decade and beyond.

City analysts expect Hilton to keep growing annual earnings in spite of the coronavirus outbreak. An 8% increase is predicted for 2020, giving rise to expectations of fresh dividend growth and thus a 2.4% yield. A forward price-to-earnings (P/E) ratio around 20 times is high on paper, but as a reliable lifeboat in bad times, I think Hilton is worth every penny. I think it’s a top buy right now.

Good results

Today’s half-year results report reveals to us further progress with the trading figures. Compared to the equivalent period last year, and in terms of constant currency rates, revenue rose 6.5% and adjusted earnings per share moved 9% higher. The directors expressed their satisfaction with the firm’s progress by pushing up the interim dividend just over 7%.

It’s the kind of outcome we’ve become used to from Hilton Food. Over the past five years or so, revenue has increased by around 47%, earnings close to 60% and operating cash flow about 33%. That’s decent, defensive-looking and well-balanced growth to my eyes, and the directors have passed the firm’s success on to shareholders with an almost 70% lift in the dividend over the period.

But income isn’t the only way Hilton Food has proved to be a decent investment. The share price is almost 260% higher over the five-year timeframe, reflecting the underlying progress in operations and suggesting a valuation re-rating has occurred. At today’s share price close to 985p, the forward-looking price-to-earnings ratio for 2020 runs just above 20 and the anticipated dividend yield is a little below 2.5%.

Steady expansion

It’s not a bargain, for sure. But City analysts following the firm have pencilled in low double-digit advances in earnings for this year and next – the firm’s steady expansion grinds on, driven by initiatives to broaden the product offering with existing customers and to take on new customers selectively.

The management puts great emphasis on building long-term partner arrangements with its customers, which is one reason Hilton Food remains one of Tesco’s main suppliers some 25 years after the packaged meat supplier first established itself, initially to supply Tesco from its facility in Huntingdon, UK. Indeed, executive chairman Robert Watson said in today’s report: “In the UK we are now packing 100% of Tesco retail packed red meat.”

However, one risk shareholders face is that the company’s turnover is derived from just a handful of customers. So far, that risk hasn’t jumped up to bite it, but the loss of a big contract in the future can’t be ruled out. Nevertheless, I reckon the way the firm keeps ploughing investment into international operations across Europe makes it a strong partner for supermarket chains such as Tesco.

There’s no sign of any weakness in the growth trajectory of operations, and I think the firm’s expansion ambition is encouraging given its breadth and depth. At some point in the future, Hilton Food could grow enough to make its customer base look more diversified. Meanwhile, the share price chart shows consolidation, suggesting that the company could be growing into its valuation. I’m tempted by this stock.

Today I want to look at two stocks which I think should provide reliable dividends and growth for the foreseeable future.

An essential ingredient?

Tate & Lyle (LSE: TATE) is a familiar brand, but the Tate & Lyle-branded products you buy at the supermarket are probably made by American Sugar Refining, which bought Tate’s European sugar business in 2010.

Although the company does still produce some bulk ingredients, such as starch and corn fructose syrup, its main growth focus is specialist ingredients used by food producers.

Many of these products are used by major food brands. They are generally harder to substitute with cheaper alternatives than commodity-type ingredients like granulated sugar. This makes them more profitable.

Another very profitable area of the group’s business is its Sucralose sweetener division, whose main brand is Splenda.

Long-term opportunity

I’ve pulled some numbers from last year’s results so you can see how the group’s profit margins vary across its business:

In my view, this points to a long-term opportunity. Higher profit margins in the speciality ingredients and Sucralose businesses mean that if sales rise, profits will rise more quickly than they would from bulk ingredients sales.

Even if that doesn’t happen, I think Tate & Lyle has the qualities needed for a long-term investment. The group hasn’t cut its dividend for 21 years. Profits margins are fairly stable and cash generation is good, with only a limited amount of debt.

The stock also looks affordable to me, on 14 times 2019 earnings with a 4.2% dividend yield. I’d be happy to buy these shares today and never trade them again.

We can’t get enough

My second pick also comes from the food industry, which I see as a good defensive option for the long term. After all, whatever else happens, we can’t stop eating.

And it seems that one food we can’t get enough of is meat. Hilton Food Group (LSE: HFG) specialises in producing meat products for supermarket chains in the UK and other developed markets.

Hilton’s share price has risen by 80% over the last five years and by 430% since its flotation in 2007. Over the last five years, sales have risen by 50%, while pre-tax profits have risen by 72%.

More to come?

Management isn’t stopping there. The last two years have seen significant investment in the business. The acquisition of seafood supplier Seachill helped to expand the group’s product range into new markets. Meanwhile, new plants are expected to open in New Zealand and Australia in 2019 and 2020, supporting further growth.

One risk for investors is that most of the group’s sales come from just a handful of big customers. The shares aren’t cheap either. As I write, they trade on 21 times 2019 forecast earnings and offer a dividend yield of just 2.4%.

However, I see this as a good business that’s well run. For long-term investors, I think this could be a fair price to pay.

I’ve been impressed by the performance of Hilton Food Group (LSE: HFG), which has just delivered another cracking set of full-year results.

The company, which specialises in food packaging, is unusual in including tonnage in its figures, with 2018 volumes up 13.5% to 344,784 tonnes. That brought in a revenue gain of 21.5%, leading to a 26.7% boost to pre-tax profit, and a 20.2% hike in earnings per share.

Expansion

The only slight downer for me was seeing 2017’s net cash of £25.4m turning into net debt of £26.8m, but there have been acquisitions during the year.

Chairman Robert Watson said: “In 2018, we continued to deliver on our strategic objectives to build a significantly bigger and more diversified business,” and that includes global expansion, with the development of Australian joint ventures playing a significant part. If that continues, a modest level of net debt won’t really worry me.

Hilton’s recent steady earnings growth is forecast to continue for the next couple of years, and that comes at a price. We’re looking at P/E multiples of 22 and 19 for 2019 and 2020, which some might see as high for such an unexciting business as food packaging.

But give me well-managed dullness every time — and a progressive dividend yielding around 2.5% adds an extra little attraction.

Favourite

I’m always wary of investing in companies to which I have a personal attraction, and that includes Greggs (LSE: GRG). But when I went there this morning to get my breakfast steak and cheese baguette, the place was crowded, as it typically is, while Subway a few doors away was, as usual, pretty much deserted.

Greggs has been growing its earnings for a number of years, bucking the trend of economic squeezes and belt-tightening. It goes to show that high-quality and modestly-priced high street food offerings will still attract the breakfast and lunch crowd even in tough times.

Another thing I like about Greggs is its marketing success in developing its brand. I think its vegan sausage roll promotion was masterful, as was its response to critics. And one of the things I look forward to most when we’re approaching Christmas is a Greggs’ Festive Bake.

Bright future

Expanding its offering to pre-packed frozen food market seems like a canny move too, and like my colleague Tezcan Gecgil, I can see Greggs’ management quality leading to a healthy long-term future for the company.

But if there’s a downside, it’s the share price. At P/E multiples of more than 20, it looks at least fully-valued to me, and I don’t see the same expansion possibilities (especially not internationally) as I expect from Hilton Foods.

Well-covered dividend yields of a little over 2% add some attraction. But with the share price having soared since mid-2018, I’m half expecting to see it faltering for much of 2019 as investors take profits.

Still, I have until April 2020 to use my next ISA allowance, so I’ll be watching where the Hilton Foods and Greggs share prices go.

Superficially attractive

Marks & Spencer (LSE: MKS) is a case in point. As things stand, if you bought the stock at almost anytime in the last quarter of a century, and are still holding today, the share price is almost certainly lower than the price you paid. Factor in inflation and the picture is even less pretty.

The dividend record is also hugely disappointing. In nine of the last 20 years, the company has either slashed the payout, or failed to increase it from the prior year. Another flat dividend is expected for the current year. This would give a paltry and sub-inflationary five-year compound annual growth rate (CAGR) of 1.9%.

I view M&S’s current ‘cheap’ forward price-to-earnings (P/E) ratio of 11 and dividend yield of 6.5% as only superficially attractive. However, my Foolish colleague Roland Head reckons current chairman Archie Norman’s turnaround record with other retailers is a cause for optimism. But other well-qualified executives have previously tried and failed to put M&S on a path to sustainable growth. And with conditions on the high street being tougher than ever, this is a stock I’m happy to avoid.

Meaty but pricey

FTSE 250 firm Hilton Food Group (LSE: HFG) was established in 1994 to run a meat packing facility to supply Tesco UK. It’s since expanded its foods, customers and geographical reach. The shares have risen 550% since its stock market flotation in 2007 and its dividend has increased at a CAGR of around 10%.

The group is very well managed by an experienced team. Customers like Tesco can drive hard bargains when it comes to contractual renewal terms (at five- to 10-year intervals) and the competitive nature of the market is evident in Hilton’s operating margin, which is running at 2.7%. Despite this, the company delivers an impressively high return on capital employed.

One concern I have about Hilton. Although the business has grown and expanded, customer concentration remains a risk. Just four customers provide 96% of the group’s revenue, led by Tesco at 48%. I don’t see this as fatal to the investment case, but combined with Hilton’s pricey forward P/E of 24 and modest dividend yield of 2.2%, I’m inclined to avoid the stock at the present time.

Fag-tastic value

Returning to the FTSE 100, one company I’d be happy to buy right now is £25bn tobacco group Imperial Brands (LSE: IMB). This cash-generating machine trades on a forward P/E of 10, with a prospective dividend yield of 7%.

For decades, tobacco companies have overcome or adapted to all manner of obstacles and delivered excellent returns for investors in the process. Consolidation in the industry has left it dominated by a relatively small number of big players. And while there are new entrants in the emerging market of next generation products (electronic cigarettes and so on), the tobacco giants have the financial clout to dominate here, too.

Imperial has delivered nine consecutive years of 10% dividend growth and its policy is to maintain that rate over the medium term. It bodes well for the next generation of investors in the company.

Both of these companies have a long track record of profitability and dividend growth. In my view they are both shares you could buy today and safely forget for 10 years.

Family owners take the long view

There aren’t many FTSE 100 stocks that are still family-owned and run. One exception is Associated British Foods (LSE: ABF). Chief executive George Weston is a member of the founding Weston family, which controls around 55% of the group’s shares.

ABF is an old-fashioned conglomerate. It owns budget fashion retailer Primark as well as a number of food and ingredients businesses. These include Twinings, Ovaltine, Jordans and Allied Bakeries plus AB Sugar, a major global sugar producer.

Primark has been a star performer in recent years and now accounts for more than half of all profits. Meanwhile, conditions have been tougher in some other parts of the business. The group has continued to invest selectively in new opportunities, including expanding Primark into the USA.

This conservative and long-term approach is typical of family-run businesses, who don’t want to risk the wealth they’ve built up over generations. After all, I estimate that the Weston holdings generate a dividend income from ABF of about £177m per year.

Is 28% fall a buying opportunity?

Investors have started to become wary of the group’s dependence on Primark for growth. Associated British Foods’ share price has fallen by 28% over the last year.

To some extent, this caution may be justified. This week’s trading update showed that total sales at Primark are expected to have risen by 6% this year, but like-for-like sales are down by 2%. This means that the retailer is increasing its sales by adding new stores, but that existing stores are selling less.

However, management guidance is for group profits to continue growing this year. Analysts expect earnings per share to rise by 5% and have pencilled in a 6.8% dividend increase.

With the shares now trading on just 16 times earnings and offering a 2% yield, I think it could be time for long-term investors to start buying ABF.

Packing a lot of growth

Another growth stock that’s been on my watch list for a long time is Hilton Food Group (LSE: HFG). Shares in this meat-packing business rose by more than 3% on Tuesday after it reported a 25% rise in half-year sales, which rose to £863.6m.

Pre-tax profit was 20.9% higher, at £22.3m and the group’s adjusted earnings rose by 10% to 21.2p per share. This supported a 12% increase in the interim dividend, which will rise to 5.6p per share.

This strong growth was driven by a 12.7% increase in the quantity of food sold. Higher pricing on fish helped lift sales, along with the launch of a fresh food offering in Central Europe.

I’d sit tight

The group’s share price has risen by 122% over the last five years, outperforming ABF by 100%. Hilton shares don’t look cheap at all on 23 times forecast earnings.

But the group’s return on capital employed of 16% makes it more profitable than its supermarket customers or indeed ABF. These high returns fuel strong cash generation and have allowed Hilton to expand while maintaining a net cash balance.

In my view this quality is probably worth paying for. I maintain my buy rating on this firm.

However, with the FTSE 100 and FTSE 250 both having made gains in recent years, the valuations of some dividend growth shares seem to be excessive. With that in mind, here is one FTSE 250 dividend share that seems overpriced to me, as well as a FTSE 100 income stock which I feel could be worth buying for the long term.

Improving performance

The FTSE 250 share in question is Hilton Food Group (LSE: HFG). The specialist food packing business recorded a positive performance in the 28 weeks to 15 July, with it being in line with management expectations. It has continued to grow the business through additional volumes, as well as through close cooperation with retail partners.

In the last four years, the company has grown dividends per share at an annualised rate of 10%. This is an undeniably impressive performance, and shows that the company has sought to reward its shareholders at the same time as profitability has increased. And with the stock having a payout ratio of around 50% of earnings, further dividend growth could be ahead.

But despite its rapid dividend growth, Hilton Food Group appears to lack a margin of safety. It trades on a price-to-earnings (P/E) ratio of around 26, which suggests it is priced for rapid growth. But since its bottom line is due to rise by ‘only’ 8% this year and by 6% next year, it could prove to be a disappointing performer when it comes to capital returns.

Income potential

In contrast to that one, the income investing prospects of FTSE 100 water services company Pennon (LSE: PNN) seem to be highly appealing. The stock has a dividend yield of around 5% at the present time, and is due to raise dividends by 7% in the next financial year. Its stable track record of dividend growth suggests that inflation-beating income returns could be ahead over the medium term. This could appeal to a wide range of investors even though inflation has cooled in recent months.

While regulatory risk remains high across Pennon’s industry, the company appears to offer defensive characteristics relative to the rest of the FTSE 100. Although the current bull market may have a long way still to run, risks such as a trade war could mean that investor sentiment declines over the short run.

In such a scenario, the company could become increasingly popular due to its lower positive correlation with the performance of the wider economy. And with Brexit set to take place next year, it could offer a relatively certain income outlook in uncertain times.