Rupert Hargreaves: Morgan Sindall

As the UK economy recovers from the pandemic, the construction sector seems to be taking off. As such, I’d buy Morgan Sindall (LSE: MGNS).

As one of the country’s largest construction groups, the firm looks set to benefit from rising activity in the sector.  Indeed, according to a recent trading update, the firm expects to report profit-before tax in the first half of its financial year 46% above 2019 levels. Its backlog has also continued to grow. It is up 5% compared to the year-ago period.

These figures are encouraging, but the construction industry can be volatile. So, Morgan’s fortunes for the year could still change.

Nonetheless, with revenues expanding, I’d buy the stock today.

Rupert Hargreaves does not own shares in Morgan Sindall.

Edward Sheldon: Unilever

My top British stock for August is consumer goods giant Unilever (LSE: ULVR).

Unilever’s share price took a hit in July after the company published its half-year report. Investors didn’t like the fact that earnings were impacted by cost inflation.

I think this share price pullback has provided a nice entry point. Overall, the results showed that Unilever is heading in the right direction. Sales growth came in at 5.4%, while e-commerce sales were up 50%.

With the stock now trading on a forward-looking P/E ratio of less than 20 and offering a prospective yield of around 3.5%, I think it’s a good time to be buying.

Edward Sheldon owns shares in Unilever.

Kevin Godbold: IMI

IMI (LSE: IMI) makes “highly engineered” products such as actuators and valves.

The business scores well against quality indicators, such as return against equity and operating margin. There’s a robust record of operating cash flow and earnings barely faltered through the pandemic. Looking ahead, City analysts have pencilled in a double-digit percentage increase in earnings for 2022.

With the stock near 1725p, the forward-looking earnings multiple is around 18. That’s not cheap and the valuation adds risk for shareholders. But IMI has earned its rich rating. And I’d want it in my portfolio for August and beyond.

Kevin Godbold does not own shares in IMI.

Royston Wild: The Vitec Group 

The Vitec Group’s (LSE: VTC) share price has risen strongly over the past 12 months. And I think that the UK engineering share could gain more ground when first half results are posted on Thursday, 12 August.  

Demand for Vitec’s cameras and broadcast equipment is soaring right now. The firm saw product orders rocket 50% to record levels in the five months to May, it said in its latest statement. And this prompted the business to upgrade its forecasts for the full year.

It’s true that electronic equipment shortages could hamper Vitec’s sales recovery. However, I believe this risk is baked into the share price right now. Today the small cap trades on a forward price-to-earnings growth (PEG) ratio below 0.1. 

Royston Wild does not own shares in The Vitec Group.

Paul Summers: ASOS

Following the huge (overdone) fall of its share price in July, my top stock for August is fast-fashion firm ASOS (LSE: ASC). 

Sure, the company faces some near-term issues relating to its supply chain and slowing sales. There’s also the threat of an online sales tax to consider. However, the stock hasn’t been this cheap since last September. Margins are slowly improving and newly acquired brands will help boost growth in time. 

I’m confident this AIM-listed star will shine again once travel restrictions are lifted and we need fresh wardrobes for holidays. 

Paul Summers has no position in ASOS

Zaven Boyrazian: BP

With the world shifting to renewable energy solutions, BP (LSE:BP) is transforming itself into one of the largest green energy providers over the next decade. Its existing portfolio heavily relies on oil. However, due to increased environmental pressure, that may soon no longer be the case.

It’s already investing in wind, solar, bio and hydrogen energy solutions. And BP estimates it will be generating 50GW by 2030. That’s roughly enough to power 15 million homes.

The transition undoubtedly has risks that could cause short-term disruptions to profits. But over the long term, I believe BP stock and its 5.4% dividend yield will continue to rise in August and beyond.

Zaven Boyrazian does not own shares in BP.

Nadia Yaqub: Aviva

A lot has been happening at Aviva (LSE: AV). The new CEO, Amanda Blanc joined the firm last year. It has also been disposing of assets to focus on its core businesses. And the insurance company announced that it’s going to be making a substantial capital return to stockholders.

I like that the Board is shareholder friendly. Further details on this capital distribution will be released later on in the year. In my opinion, things are changing for the better. The shares pay a dividend yield of 7% and are trading on a cheap price-to-earnings (P/E) ratio of 7x.  

Nadia Yaqub does not own shares in Aviva

Roland Head: B&M European Value Retail

Discount retailer B&M European Value Retail (LSE: BME) has performed well over the last 18 months. Its stores qualified as essential retail and remained open, enjoying bumper trading.

Since its IPO in 2014, B&M has consistently been more profitable than the big supermarkets. I expect this to continue, even as the boost from Covid-19 fades away.

The main risk I can see is that B&M’s success will attract increased competition. So far, I don’t see much sign of this.

B&M’s share price has pulled back recently, as the market prices in slower growth. I think that’s left this business looking very affordable.

Roland Head has no position in B&M European Value Retail.

Tom Rodgers: Grafton Group

I see Grafton Group (LSE: GFTU) as one of the best FTSE 250 stocks to buy in August. The building materials and DIY retailer has profited from the home refurb boom and early shareholders have been rewarded with a 70%+ share price growth in 12 months.

I see much more upside on the cards, however, because the well-run business raised its profit forecast on 8 July after a strong first half of the year. Its buyout of Finland’s workwear distributor IKH also adds another income stream for 2021. Now seems to be a good time to buy to cash in on these profits. 

Tom Rodgers does not own shares in Grafton Group

Christopher Ruane:  Lloyds

High street bank Lloyds (LSE: LLOY) has recently slowed down after a strong share price performance this year. It’s up a third in 2021 and 60% over the past 12 months.

I see a buying opportunity. A possible price driver is the likelihood of a growing dividend. The bank has committed itself to a progressive dividend policy. It is now sitting on excess capital which could help fund it.

Any weakening in the housing market is a risk. As the UK’s leading mortgage provider, Lloyds is heavily exposed to housing.

Christopher Ruane owns shares in Lloyds.

G A Chester: Centamin 

The share price of gold miner Centamin (LSE: CEY) has more than halved since this time last year. It’s been the victim of two common risks that can dent such a stock. Namely, a weakening of the price of gold and an operational setback. 

However, I can see two reasons for optimism right now. First, continuing massive money printing by governments should be supportive of the gold price. Second, Centamin appears to have stabilised operations. 

It reiterated its production and costs guidance for 2021 in a report on 22 July. I reckon further positive noises in its half-year results on 5 August could see returning investor interest in the stock. 

G A Chester has no position in Centamin.

Manika Premsingh: BP

The FTSE 100 oil biggie BP (LSE: BP) will release its second quarter results at the start of August. They could come in strong. We need to look no farther than crude oil prices to know this, which are at pre-pandemic levels. Companies like BP are direct beneficiaries of this trend, as was already visible in the quarter before. The numbers could look better purely because of base effect as well. The same time last year was one of high restrictions, so there was little travel demand and oil prices were relatively low.

I reckon that its share price can rise as results come in, particularly if there are positive developments on the dividend front.

Manika Premsingh owns shares of BP

A FTSE 100 firework

An improving advertising market suggests to me that ITV (LSE: ITV) could be one of the best buys today. This FTSE 100 stock is due to release first-quarter financials on Wednesday, May 5, a release I think could provide the broadcaster’s share price with a dose of rocket fuel. The ITV share price is up around 70% over the past 12 months but it has stagnated more recently. A fresh reminder of solid industry trends could prompt a renewed rush of investor interest.

The UK blue-chip share declared in early March that “we are seeing more positive trends in the advertising market in March and April,” and added that “the majority of our programmes are now back in production.” A robust update from industry peer STV Group last week has underpinned my faith in another solid update from ITV this week too. The Scottish broadcaster said that the recovery in the advertising market has come in “ahead of expectations.” Trading updates from other advertising-related businesses like FTSE 100-quoted WPP have also indicated improvements in broader marketing spending.

Again, ITV’s share price has risen terrifically during the past year. Yet the company still trades on a reasonable price-to-earnings (P/E) ratio of 13 times for 2021. This leaves plenty of space for a fresh re-rating of the FTSE 100 firm’s stock. There’s a lot I like about ITV, and as a long-term UK share investor I particularly like the brilliant progress made by its expanding ITV Studios arm.

I’m mindful, however, of the rising threat of streaming giants like Netflix, Disney and Amazon and what this could mean for ITV’s profits in the years ahead. It’s no longer the dominant name in commercial broadcasting it once was so that’s a major risk.

Another best share to buy?

IMI (LSE: IMI), which is a FTSE 250 engineer, updated the market just last week. And it closed at its most expensive price for seven years as a result. IMI announced that it had enjoyed “strong performance in the first quarter across all three divisions” and paid tribute to the “improving trends in our major end markets” too. This robust trading encouraged the firm to hike its full-year earnings expectations too.

As my colleague Jonathan Smith said, such a robust statement so early in the year is unusual. It leads me to believe that further upgrades could be in the offing too, leaving the door open to more share price strength (the IMI share price has more than doubled over the past 12 months). And this could make it one of the best UK momentum shares to buy right now.

Bear in mind, though, that the company currently trades on a forward P/E ratio of 23 times. This sort of elevated rating could cause the share price to retrace if trading momentum begins to lose steam.

What does IMI do?

IMI operates three main divisions. These are precision, critical, and hydronic engineering. The precision arm is the largest of the three, generating around 50% of revenue last year. In plain English, the business designs and makes valves, pressure monitoring controls, flow control devices, and other heating/cooling systems. This is for a variety of end users, including in the medical, rail, and automation fields.

In comparison to the tech companies that get a lot of the limelight, IMI is what I’d call an old-fashioned engineering company. The products it manufactures gets sold, and the engineering solutions get paid for. One of the elements I like about this structure is that it’s easy for me as an investor to look through documents and understand where the money comes in and where it goes out. 

The IMI share price has done very well over the past year. It doesn’t surprise me that an engineering firm like IMI hasn’t been massively impacted by the pandemic. In fact, 2020 adjusted profit before tax was up 9% versus 2019. This is one reason why I think the share price has offered impressive returns.

Another reason I think the IMI share price is up in the long term is due to the profit margins. This came in at 17.3% in 2020, and the company expects it to be in the region of 18%-20% for this year. That level of margin is healthy, and helps it to ensure that the bottom line is green at the end of the year. Investors likely have seen this, and are confident to buy in for the long term.

The IMI share price spike

In the short term, the IMI share price spiked 11% yesterday following a positive trading update. Revenue was up 7.7% in Q1 2021 on the same period last year. The update spoke of “strong performance in the first quarter across all three divisions and the improving trends in our major end markets”. Profitability for the full-year 2021 was also upgraded.

I think the IMI share price jumped so high on this news because it’s quite early in the year to be calling such strong performance out. Usually upgrades or downgrades to annual performance are done in Q3 or later. Calling it out now is bold, and very positive.

I do see a risk that could prevent the rally from continuing. The business is still going through a restructure, and the costs for 2020 (£39m) exceeded the benefits (£30m). It does expect a net benefit in 2021, but I’m a little concerned about the ongoing high costs involved here.

However, given my bullish long-term reasons mentioned above, I do this the rally could continue and so am considering buying in.

A UK industrial heavyweight

IMI (LSE: IMI) may not be a company you’re familiar with. This £3bn FTSE 250 engineering firm specialises in “products that control the precise movement of fluids” and has clients in most major industrial sectors.

Trading has been good this year, with weakness in sectors such as oil and gas being offset by gains from the group’s medical division, whose products include ventilators. I’d guess this will be a one-off boost, but even so, I’m pleased to see that profits are expected to rise slightly this year and be stable in 2021.

I don’t know what the future holds for the world economy. But IMI has a track record of double-digit profit margins and strong cash generation. With the stock trading on 15 times earnings and offering a forecast dividend yield of 2.1%, I would feel confident buying this UK share today.

An overlooked FTSE 100 star?

FTSE 100 firm DCC (LSE: DCC) is an Irish energy group. It owns a range of businesses, including LPG and heating oil suppliers and fuel stations in a number of countries. DCC also has businesses distributing technology and healthcare products to trade customers.

DCC looks well run to me, with stable profit margins and comfortable levels of debt. One attraction for me is the dividend, which has doubled since 2013. Although the current dividend yield is only 2.7%, I’m happy to accept a lower upfront yield when buying shares with a strong track record of income growth.

The shares currently trade on about 16 times forecast earnings. I think this could be a useful addition to my portfolio. I’d be happy to buy the stock today.

A UK share I’d buy for income

My final pick is Telecom Plus (LSE: TEP). This is a utility share with a much stronger record of growth than most its rivals. The reason for this is that the group is a reseller that bulk-buys gas, electric, mobile, and broadband then resells these services through its Utility Warehouse business.

Telecom Plus is still chaired by Charles Wigoder, who joined the company in 1998 and has built it into a £1.1bn FTSE 250 business. Mr Wigoder owns about 12% of the group’s shares. This suggests to me that his interests should be well-aligned with those of shareholders.

I like to see owner-management at companies, because in my experience it often results in reliable long-term returns. That’s the case here, in my view. The Telecom Plus share price has risen by 270% over the last 10 years. The dividend has doubled since 2012.

Last week’s half-year results showed profits up slightly, despite the disruption caused by the spring lockdown. CEO Andrew Lindsay expects the number of customers and services sold to increase modestly over the full year.

This UK share is up by more than 50% from the lows seen during the March stock market crash. Despite this, Telecom Plus still looks reasonably valued to me, with a forecast dividend yield of 3.9%. Given the group’s track record of growth, I’d be happy to buy the shares at this level.

In this piece, I’m going to look at two shares from my list. Although I think they look reasonably priced now, I’d really like a chance to buy into these proven performers on the cheap.

The best retail share?

My first pick is fashion and homewares retailer Next (LSE: NXT). It might seem odd to consider investing in high street stores when so much retail has shifted online, but Next is big online too. More importantly, as sales continue to shift online, the company has already made plans to gradually close its stores if they become unprofitable.

Next’s latest sales figures suggest to me it’ll operate fewer stores in the future. During the three months to 24 October, online sales rose by 23%, while store sales fell by 18%.

However, what matters most is total sales rose by 4.1%. This suggests customers still find the group’s offer attractive. This is probably helped by the growing range of third-party brands now sold through Next’s online marketplace.

Why I’d buy Next

Despite this headwind, Next’s management feels confident enough to upgrade the profit guidance for the year to a mid-estimate of £365m, up from £300m in September. That’s an impressive increase in such a short period, highlighting strong recent trading.

Indeed, despite the impact of lockdown earlier this year, the group remains one of the most profitable UK retailers — it has much higher profit margins than big online names such as ASOS and Boohoo.

Looking ahead to next year, Next stock trades on around 15 times forecast earnings, with a dividend yield of 2.7%. I think that’s a fair price, but I’d jump at the chance to pick up this dividend stock in a market slump.

An overlooked dividend stock?

My second choice is a company that’s less well known. Industrial group IMI (LSE: IMI) specialises in fluid engineering. It makes parts and equipment used in sectors including healthcare, energy, and transportation.

Trading this year has been stronger than I expected, helped by a one-off increase in ventilator sales due to coronavirus. According to an update last week, the company now expects total sales this year to be just 5% lower than last year.

I think that’s a good result in the circumstances, considering that some of the firm’s customers closed their factories during lockdown.

IMI’s strong trading is consistent with its long-term record. Over the last 20 years, IMI’s share price has risen fourfold. Until this year, the group’s dividend hadn’t been cut since at least 1993.

These are unusually strong figures for an industrial firm, which makes me think the company has a differentiated product range and a strong management culture. Other attractions include double-digit profit margins and low levels of debt.

IMI currently trades on 14 times 2021 forecast earnings. That’s okay, but I’d like to buy this FTSE 250 dividend stock a little more cheaply. So I’ll be watching closely over the coming months.

Three quarters of UK companies cut or suspended their shares in the second quarter of this year, including this pair. However, my stock picks here are the first to restore their dividends AND make up all lost payments in full. That’s impressive, and explains why I think they’re among the best shares to buy now.

Defence specialist BAE Systems (LSE: BA) crashed by more than a third in March. Unlike many stocks on the FTSE 100, the BAE share price has scarcely recovered since. That seems odd, given that in July, it reinstated the £460m dividend payout it deferred in April. It also declared an interim dividend of 9.4p a share.

BAE is one of the best shares to buy now

Chief executive Charles Woodburn said demand for BAE’s weaponry remains high, unsurprising given today’s uncertain world. On the other hand, it’s civil aerospace division has been hammered. That isn’t surprising either, given that BAE makes parts for Boeing passenger aircraft.

Woodburn said full-year profits will be lower due to the pandemic, but the second half should be better and I think there is an opportunity here. The BAE share price is trading at just 10.5 times earnings, a modest valuation. It now offers a forecast yield of 5.1%, covered 1.7 times by earnings. Analysts expect earnings to drop 7% this year, but jump 15% in 2021.

The FTSE 100-listed group has a market-cap of £15.09bn, but relatively low net debt of £2.04bn. Better still, it’s winning new business. In September, it secured an £87m contract with the US Navy, while its Tempest programme should support 20,000 jobs a year for decades. That’s why I reckon BAE Systems looks like one of the best income and growth shares to buy now.

I’m also tempted by IMI (LSE: IMI), another top stock to put on your watchlist. The engineering group crashed in March (along with almost everything else) but has made a striking comeback since. The IMI share price is now up 40% in the last six months. Clearly, I’m not the only one who thinks it’s one of the best UK shares to buy now.

I’d buy the FTSE 250 dividend hero

It was lifted by a positive set of interims in July, which saw adjusted pre-tax profits rise 5% to £116m, boosted by a temporary surge in demand for ventilator parts due to the coronavirus pandemic. However, total revenues fell 5% to £867m, due to lower volumes across most of its business.

IMI gave loyal investors a major boost by reversing its decision to suspend the 2019 final dividend payment. It’s being made in full now, with chief executive Roy Twite saying it’s now affordable due to “robust” first-half profit and cashflow.

The FTSE 250-listed company’s current 1.3% yield is forecast to rise to 2.1% next year, generously covered 2.9 times by earnings. My biggest concern is that you’ve missed the best of the post-crash share price recovery. However, the IMI share price isn’t too expensive at 15.9 times earnings. It’s another top dividend growth share that you might consider buying today.

Specialist engineering

FTSE 250 engineer IMI (LSE: IMI) may not be a name you’re familiar with. IMI specialises in fluid engineering – controlling the movements of fluids within larger systems. Areas where the company is active include medicine, automotive engineering, and heating and cooling systems.

A surge in demand for ventilators helped the group deliver a strong performance during the first half of 2020. IMI’s pre-tax profit rose by 1% to £94m during the six months to 30 June, despite a 5% reduction in sales.

Debt levels look very comfortable to me and IMI has a decent dividend history. However, the company has opted to reduce its payout in order to support future growth. I think this makes sense. IMI’s results suggest to me that the company is able to invest its own cash in areas that will generate attractive returns.

The shares look fairly priced to me, on 17 times forecast earnings, with a yield of 2.3%. But I think this could be an excellent buy-and-hold stock.

How to invest if you’re worried about another crash

Stock market conditions remain very uncertain, in my view. If you’re unsure how to invest in these difficult circumstances, one option is to hedge your portfolio. Rather than doing something clever (and risky) with derivatives, my approach is to own shares in IG Group Holdings (LSE: IGG).

FTSE 250 firm IG is the UK’s largest online financial trading business. Clients can place leveraged bets on the movement of a huge range of financial securities. When markets get volatile – as we saw in March and April – IG enjoys a sharp rising in trading activity.

IG’s pre-tax profit rose by a staggering 52% to £295.9m during the 12 months to 31 May. This lifted the group’s operating profit margin to nearly 45%.

Although profits are expected to be lower this year, IG has always been a highly profitable business. With the stock trading on 15 times forecast earnings and offering a yield of 5.9%, I think the shares are still priced to buy.

Buy and forget

Utility shares used to be boring and reliable. I’m not sure if this is still true, but one company that has lived up to this promise is Telecom Plus (LSE: TEP).

This group trades as Utility Warehouse and is essentially a reseller, offering its members utility services, broadband, mobile, and other home services under one bill.

Telecom Plus’s selling points for customers are value and simplicity. The group markets by word-of-mouth and a small army of self-employed agents. It’s a system that seems to work well, perhaps helped by the fact that founder Charles Wigoder still chairs the company and controls 17% of its shares.

Although the stock currently looks fully-priced on around 22 times forecast earnings, cash generation is strong, and the shares offer a forecast dividend yield of 4.2%. The payout has not been cut since 2005, suggesting that this is a fairly reliable payout.

I see long-term growth and income potential in Telecom Plus and rate the stock as a long-term buy.

Food ingredients and additives

Tate & Lyle (LSE: TATE), the food ingredients and additives manufacturer and supplier, delivered decent adjusted half-year results at the beginning of November. Sales, earnings and the interim dividend all rose by small, single-digit percentages.

Chief executive Nick Hampton said in the report that in the firm’s Food & Beverage Solutions division, an increased focus on pricing and mix management delivered “strong” growth.  Meanwhile, the profit from the Primary Products division came in lower because of “challenging” market conditions. But both divisions achieved productivity gains and good discipline on costs led to higher cash generation.

The company is on a drive to simplify its business, which is “driving momentum across the organisation and supporting performance.” However, the directors expect a flat outcome with earnings for the full year.

Meanwhile, with the share price close to 734p, the forward-looking earnings multiple for the trading year to March 2021 is just under 13 and the anticipated dividend yield is 4.25%. I think that looks like decent value.

Precision engineering

IMI (LSE: IMI) designs, manufactures and services “highly engineered” products that control the precise movement of fluids, such as actuators and valves.

In the third-quarter update released in November, the company said it is making “good” progress with its business-improvement and cost-reduction initiatives, and in the face of weak markets, has been working hard to reduce costs and improve margins. Sales came in a little lower in the quarter, but margins were up.

Looking ahead, the directors think that revenue in the entire second half of the year will show another small decline when compared to the 2018 equivalent period. But profits should come in flat. Meanwhile, the firm has finished its structural review and has a plan to drive the business forward in the coming years.

With the share price close to 1,135p, the forward-looking earnings multiple for 2020 is just over 15 and the anticipated dividend yield is around 3.8%. I think the stock is attractive.

Healthcare

Mediclinic International (LSE: MDC) delivers private healthcare in Southern Africa, Switzerland and the Middle East. The half-year results report released in mid-November showed revenue up 9% compared to the equivalent period the year before and flat earnings.

Chief executive Dr Ronnie van der Merwe said in the report that all three divisions grew revenue, EBITDA and patient volumes in the period. And the firm is making progress adapting the business to current healthcare trends and changing regulatory environments, “especially at Hirslanden in Switzerland.”

The company has a growth agenda and aims to expand by offering more services in the healthcare field such as day clinics, primary care facilities, sub-acute hospitals, radiology, precision medicine, IVF and digital healthcare solutions.   

Meanwhile, with the share price near 399p, the forward-looking earnings multiple for the trading year to March 2021 is just under 14 and the anticipated dividend yield is 2.1%, with the payment set to be covered a generous 3.5 times by predicted earnings. I’m tempted to buy some of the shares.

Overall, I reckon all three of these businesses are improving and the valuations remain modest.  

Precision engineering

The figures in July’s half-year results report from IMI (LSE: IMI) were flat but “in line with expectations.” The firm designs, manufactures and services “highly engineered” products that control the precise movement of fluids, such as valves and actuators. And the report tells us that the precision engineering business is being affected by weakness in the industrial automation segment, but there’s been strong growth in orders and “robust” margins in the critical engineering division.

Right now, the directors are engaged in a strategic review “looking at all aspects” of the business. And despite anticipating a modest decline in organic revenue in the second half of 2019, they expect overall profits to hold flat for the year compared to 2018, “supported by business improvement initiatives.”

I’m optimistic that IMI will emerge from its review process to implement changes that will lead to more effective execution of operations. In the meantime, with the share price close to 915p, the forward-looking earnings multiple sits just below 12 for 2020 and the anticipated dividend yield is around 4.7%. That strikes me as an undemanding valuation, and the stock would sit well in my portfolio.

Pubs and brewing

Greene King (LSE: GNK) delivered steady-as-she-goes full-year results in June with revenue up around 2% and earnings about 3% higher. The directors held the dividend flat for the year.

The Suffolk-headquartered outfit has around 2,730 pubs, restaurants and hotels in England, Wales and Scotland, and around 81% of the estate is either freehold or long leasehold. 1,687 of the properties are retail pubs, restaurants and hotels, and 1,043 are tenanted, leased and franchised pubs.

You might be familiar with the firm’s brands such as Greene King Local Pubs, Chef & Brewer, Farmhouse Inns and Hungry Horse. The firm is also known for its brewing business, which has brands such as Greene King IPA, Old Speckled Hen, Abbot Ale and Belhaven Best.

The sector has been troubled for years, resulting in many pub closures, as I’m sure you’ve noticed. In fairness, Greene King’s dividend has been flat for the past four years too, suggesting tough trading conditions. But I think the company’s estate is probably made up of survivors on the pub scene.  

Meanwhile, there’s change at the top with a new chief executive warming up his seat after starting earlier this year, which could usher in positive change for the enterprise. And the valuation looks attractive to me. With the recent share price close to 593p, the forward-looking earnings multiple is around nine for the trading year to April 2021 and the anticipated dividend yield is about 5.6%.

IMI (LSE: IMI) is an engineering firm that makes equipment for controlling the flow and dispensing of fluids… a description that could even send me to sleep before the end of the sentence.

It manages to get cash flowing nicely too, paying a steadily progressive dividend that’s yielding around 4.3%. This year’s dividend is predicted to grow by 2.1%, so just a little ahead of inflation, as it has been in recent years. At yields above 4%, inflationary rises every year are just fine by me.

Steady

The current year is expected to be flat, earnings-wise, and that was reinforced by Friday’s first-half figures — revenue down 1%, pre-tax profit down 3%, EPS down 2%, and the dividend raised by 2%.

While the company expects organic revenue to decline a little in the second half too, chief executive Roy Twite said that “second half profits are expected to be similar to last year, supported by the business improvement initiatives pursued by each of the three divisions.”

Net debt picked up a little, from £459m to £516m, and that’s something I’ll want to keep an eye on for the full year. But with IMI having a market-cap of £2.8bn, it doesn’t count for a lot of its valuation. Forecast P/E multiples of 13.7 for this year, and dropping to 13 next, look reasonable to me. Not screaming bargain territory, but I think attractive for a company with such well-covered and apparently sustainable dividends.

IMI is a firm candidate for a FTSE 250 income investment for me.

Oversold?

Shares in specialist recruitment firm Hays (LSE: HAS) slumped in October last year, after an update revealed a slowdown in net fee income, blamed on Brexit concerns.

Prior to that, Hays looked to be on a bit of a growth valuation, with P/E multiples getting up around 16 to 17. Annual EPS growth coming in between 14% and 21% over the previous few years lent support for that, but since then we’ve seen forecasts pared back.

The City is now expecting a flat earnings year for the year just ended in June (with results due 29 August), and a modest single-digit rise in 2020. A final quarter update earlier in July reinforced that, showing flat overall net fees — down a couple of percent in the UK & Ireland and Australia & New Zealand regions, up a couple of percent in Germany and Rest of the World.

Free cash

One thing I like about Hays is that it doesn’t have a lot of demand for capital expenditure, leaving it free to return spare capital to shareholders in the form of special dividends. 

This year’s ordinary dividend is expected to provide a 2.5% yield, and the City’s analysts are suggesting that will be boosted to above 6% by specials. I like the strategy of paying modest ordinary dividends and making extra special returns when the cash is there. It helps avoid the over-stretching that can happen when a company tries to commit itself to big ordinary dividends.

Considering Hays’ strong cash flow, resilient business and dividend policy, it also makes it into my list of top FTSE 250 income opportunities.