Here, I’m going to highlight three UK-listed dividend stocks I like the look of as we approach July. If I was looking to invest in dividend-paying companies today, these three would be high up on my buy list.

A sleep-well-at-night stock

I’ll start with Reckitt (LSE: RKT). It’s a FTSE 100 consumer goods company that operates in the areas of health, hygiene, and nutrition. It offers a prospective yield of 2.8% at the current share price.

I think Reckitt could play a valuable role in my portfolio right now as it’s a defensive stock. Its brands include ever-popular names such as Dettol, Strepsils, and Nurofen. People are unlikely to stop buying these brands if we see a recession. So, owning this stock is not going to keep me awake at night.

Reckitt’s recent Q1 results were encouraging. During the quarter, the company was able to raise its prices by 5.3%. This led to 5.6% like-for-like sales growth and helped offset cost pressures.

Reckitt is not a cheap stock. Currently, the forward-looking P/E ratio is about 20, which adds a little risk. I’m comfortable paying the higher valuation though, given the company’s defensive attributes.

Real assets

Next up is Renewables Infrastructure Group (LSE: TRIG). It’s a FTSE 250-listed investment company that owns a portfolio of clean energy assets. It currently sports a yield of about 5.1%.

I like this stock for two reasons. First, renewable energy is a booming industry with a long growth runway. So, I think the company is likely to do well over the next decade.

Secondly, the company owns a portfolio of ‘real assets’. These are physical assets that have real intrinsic value due to what they provide to society. These assets can be a good hedge against inflation as their revenues are often inflation-linked. That’s the case here. When inflation rises, so does its revenues.

A risk here is that the stock is currently trading at a premium to its net asset value (NAV). In other words, if I bought shares now I’d be paying a price that’s higher than the sum of the company’s assets.

I don’t mind paying a premium here, however, given the long-term potential.

A small-cap dividend play

Finally, in the small-cap space, I like Impax Asset Management (LSE: IPX). It’s a niche investment company that specialises in sustainable strategies (a high-growth market). The prospective yield here is about 4% right now.

Impax shares have taken a big hit in 2022 and I think this is unjustified. Recent results for the six months to 31 March showed a 64% rise in adjusted operating profit. Meanwhile, the interim dividend was raised by 31%, which suggests management is confident about the future.

It’s worth noting that if stock markets drop, Impax’s earnings will be impacted. After the recent share price fall, however, I think a lot of risk is priced in.

With the stock now trading with a P/E ratio of 15, I’d be happy taking a small position here.

Stephen Wright: Rightmove

My top growth stock for May is Rightmove. Its business generates around £226m in operating income using just £12m in fixed assets, and its dominant market position is protected by a strong network effect.

As a result, earnings have increased by 200% over the last decade, pushed along by share buybacks. It also has an extremely strong balance sheet with more cash than debt. I’ve been admiring this company for a while, and I’m excited to have finally had the share price reach a level that I’m happy buying it at.

Stephen Wright owns shares in Rightmove.

Royston Wild: Hochschild Mining

I think there’s a good chance precious metals prices could soar as worries over global growth and soaring inflation increase. For this reason, I’d buy silver miner Hochschild Mining (LSE: HOC) for my portfolio in May. 

Mounting concerns over possible stagflation could boost silver prices in the near term. And over the longer term, they could increase as improving economic conditions likely supercharge industrial demand for the dual-role grey metal. 

City analysts think Hochschild’s earnings will rise 8% in 2022. They believe the company’s bottom line will improve 26% in 2023, too. 

Current projections leave the South American mining stock looking quite cheap as well. Today, Hochschild trades on a price-to-earnings (P/E) ratio of just 9 times for 2022. FTSE 100-quoted silver miner Fresnillo’s forward multiple sits at double this level. 

Royston Wild does not own shares in Hochschild Mining or Fresnillo. 

Edward Sheldon: Calnex Solutions

My top growth stock this month is Calnex Solutions (LSE: CLX). It specialises in testing and measurement services for telecommunication networks.

Calnex has generated strong growth in recent years on the back of the rollout of 5G network technology and looking ahead, I think it’s likely to continue doing so. Recently, the group advised that it was seeing “high demand” for its testing solutions and that its order book was sitting at “record levels”. It added that the board was confident it can deliver “significant, sustainable growth” over the coming years.

It’s worth pointing out that Calnex shares have had a good run recently, so they could experience a pullback in the short term. In the long term, however, I think they could go much higher as the company grows its revenues and profits.

Edward Sheldon owns shares in Calnex Solutions.

G A Chester: Impax Asset Management 

My rule of thumb for asset managers is they may offer value if priced at less than 3% of their assets under management (AUM). 

The last time I looked at fast-growing sustainable investing pioneer Impax Asset Management (LSE: IPX), its shares were trading at over £11. The market capitalisation was £1.5bn, meaning it was priced at 4.7% of its £32.2bn AUM. 

As I’m writing, the shares are below £7, the market cap is £910m, and it’s priced at 2.4% of £38bn AUM. Despite market and fund-outflow risks, I think Impax now offers value. Its half-year results are scheduled for 1 June. 

G A Chester has no position in Impax Asset Management. 

Zaven Boyrazian: Focusrite

Focusrite (LSE:TUNE) is a global audio equipment manufacturer targeting music industry professionals and hobbyists at home. Despite live events being cancelled during the pandemic, demand for its award-winning products continued to rise as artists shifted to working from home.

Music festivals are now back in business, restoring a portion of lost income. Yet recent supply chain disruptions have led to a slowdown in sales, sending the share price in the wrong direction.

However, the nature of the problem is ultimately short term. And with management’s long-term strategy uncompromised, the recent tumble looks to me like a fantastic buying opportunity for my portfolio.

Zaven Boyrazian does not own shares in Focusrite.

Christopher Ruane:  S4 Capital

Digital ad agency group S4 Capital (LSE: SFOR) saw its shares fall sharply after 2021 results were delayed twice. That has made me more nervous about governance at the company. But boss Sir Martin Sorrell has promised to fix that. I expect him to deliver.

Meanwhile, the unaudited results showed very high sales growth. S4 says 2022 has started ahead of already strong expectations. Any further governance slips are a risk. But the selloff looks overdone to me at this point. I am strongly considering topping up my position.

Christopher Ruane owns shares in S4 Capital.

John Choong: Rolls-Royce

Rolls-Royce (LSE: RR) recently posted a trading update, and it showed quite a bit of promise in recovery. Despite its flawed balance sheet, the firm is making some progress as it estimates to achieve positive free cash flow by Q3 this year.

Its other segments in defence, power systems, and new markets also posted encouraging developments, as orders continued to increase. Rolls-Royce is also set to grow its revenue in the low-to-mid single digit percentage range. So, with the share price below £1, this could be an opportunity to grab shares on the cheap and capitalise on the potential rebound.

John Choong has no position in any of the shares mentioned.

Paul Summers: AJ Bell

The awful performance of stock markets combined with the rise in the cost of living has hit trading at investment platforms such as AJ Bell (LSE: AJB). However, this is just the sort of quality growth stock I’d want to load up on in anticipation of a big recovery. 

A P/E of 25 isn’t cheap but it’s a far more palatable valuation than a year or so ago. This company consistently generates great margins and returns on capital.

With more people recognising the importance of planning for retirement, AJ Bell is one to tuck away, in my view.

Paul Summers has no position in AJ Bell

Roland Head: Standard Chartered

A FTSE 100 bank might seem an odd choice for a growth stock. But shares in Asia-focused Standard Chartered (LSE: STAN) look very cheap to me when compared with City growth forecasts.

Analysts’ estimates suggest StanChart’s earnings could rise by 15% this year and by 30% in 2023. But despite this bullish outlook, the bank’s shares still trade at a near-50% discount to their 1,120p book value.

Property losses in China and recession risks are a concern. But if CEO Bill Winters can deliver on Standard Chartered’s turnaround potential, I think the shares could perform very well.

Roland Head has no position in Standard Chartered.

Here are three income stocks that I believe now exhibit all of these qualities.

The top income stocks

In my search, I am not necessarily looking for the highest yields on the market, but those offering high-quality dividends. Cranswick (LSE: CWK) is a good example. At the time of writing, the company offers a dividend yield of 2%.

However, this is covered 2.8 times by earnings per share, giving the organisation plenty of headroom to increase the distribution further in the year ahead. It also has a strong balance sheet and lots of cash to invest in growth, which may only help improve profitability and, as a result, dividend growth. 

Sadly, this growth cannot be taken for granted. Challenges the company may face include rising prices and supply chain disruption.

Despite these potential headwinds, I would be happy to buy the food producer for my portfolio of income stocks right now. 

Green energy income

At the upper end of the yield scale is Renewables Infrastructure (LSE: TRIG). This company invests in a portfolio of renewable energy assets in the UK and Europe.

It has developed a diverse portfolio of assets over the past couple of years, taking additional investment from shareholders rather than borrowing money. This means the corporation has a solid balance sheet. As the company’s portfolio of renewable assets has grown, it has been able to increase its dividend steadily. 

At the time of writing, the stock supports a dividend yield of 5.2%. This looks incredibly attractive in the current interest rate environment. 

While the outlook for the renewable energy industry is only becoming brighter by the day, the group may have to navigate a couple of challenges over the next few years. Competition for renewable energy assets is only increasing, putting pressure on asset values. If asset values rise too much, the corporation may struggle to earn a sustainable return on its investment. This could have a knock-on effect on the dividend. 

Even after taking this potential challenge into account, this company remains one of the top income stocks I would buy today. 

Growth and income

The final company on my list is Impax Asset Management (LSE: IPX). This financial services firm has carved itself a niche in the asset management market. It focuses on offering strategies that focus heavily on ESG criteria. This approach is resonating with investors. As assets have flowed towards the business, profit has increased tenfold over the past six years. 

This trend may not continue as the rest of the financial services industry catches on to the opportunity. Staying ahead of rivals is probably the most significant challenge Impax faces right now. 

Still, I am encouraged by the company’s competitive advantages and growth potential. As profits have expanded, the firm’s dividend has also increased tenfold since 2016. At the time of writing, the stock supports a dividend yield of 2.9%.

This yield and growth potential is the reason why I rate Impax as one of my top three income stocks. 

The first is consumer products seller Up Global Sourcing (LSE: UPGS). Recent full-year results showed how well it is doing despite supply chain disruption and increased freight costs. Revenue was up 17.9%, while profit before tax was up 13.7%.

The acquisition of Salter Brands should have a significant impact on earnings next year, which could in itself boost the share price.

Up Global Sourcing could be a great passive income share because earnings are growing strongly and the dividend has risen to 5.02p this year — a big rise from last year’s 3.96p. Dividend cover remains more than twice above earnings, so there’s no indication the dividend is in any danger of not growing.

Up Global Sourcing is acquisitive, which is a risk and net debt has increased as a result, but overall I think the shares could create a good, sustainable passive income.

Quality company and great passive income

Impax Asset Management (LSE: IPX) strikes me as one of the best growth shares for passive income and share price appreciation around. Earnings per share are consistently very high, margins are high as is usual in the asset management industry, and dividend growth has been very good indeed.

Revenue growth, which is important to measure when it comes to growth shares in my opinion, has been incredibly good. From 2016 to 2020 revenue went from £21.1m to £87.5m, while net profit soared from £4.18m to £17.6m. That rate of growth both in revenue and profit shows the quality of the company. It’s also very cash generative, as evidenced by the huge amount of cash on the balance sheet. This should protect investors in any downturn in the economy and indeed help Impax to pay a dividend even if growth for any reason were to slow down.

The only real issue I have is with valuation and dividend cover. The shares are undoubtedly expensive on a forward P/E of 27.2. That’s not completely out of kilter with other asset managers but it is higher than many other growth shares. Also, the dividend cover is below two, which is lower than I’d like to ideally see. Overall though, if the price fell, I might consider picking up some shares for the huge share price growth and passive income potential.

A quick look at another option

A final option is a little-known UK company called Hargreaves Services. It’s not to be confused with Hargreaves Lansdown, which is completely separate. The former, and the one I’m concerned with, grew its dividend by 327% from 2020 to 2021. Of course, that did follow a pandemic-induced dividend cut in 2020 but still it’s phenomenal growth. It’s a small-cap and its financials aren’t the best, but if it can turn around successfully, it offers potentially one of the best passive incomes from a smaller company.

There are a lot of shares in the UK that can offer investors passive income. For me, though, these three growth shares — which combine income alongside the potential for major share price growth — are ideal investments. I’d be happy to add all three to my portfolio right now. 

Personally, I love this kind of volatility. That’s because it tends to throw up fantastic buying opportunities for long-term investors like me. With that in mind, here’s a look at three ‘high-growth’ UK stocks I’d buy today.

A top UK FinTech stock

One UK stock that strikes me as a buy right now is Alpha FX (LSE:AFX). It’s a fast-growing FinTech company that specialises in foreign exchange management and corporate payment solutions.

There are two main reasons I like AFX. The first is that the company’s growing at a phenomenal rate. Revenue for the six months to 30 June, for example, was up 90% year-on-year.

The second is that the company’s ‘founder-led’. Research shows that founder-led companies quite often turn out to be good long-term investments. To date, AFX CEO Morgan Tillbrook has certainly shown to be an adept leader.

This stock does sport a higher valuation. Currently, it has a P/E ratio of around 42, which adds risk. I’m comfortable with this though, given the company’s rate of growth and historical track record.

Under-the-radar tech stock

Another stock I like the look of right now is Cerillion (LSE: CER). It’s an under-the-radar technology company that offers billing, charging and customer relationship management software solutions.

This company’s also growing rapidly. Between FY2016 and FY2020, for example, revenue increased nearly 150%. For the year ended 30 September, analysts expect revenue growth of 23%.

Earlier this week, Cerillion posted a very encouraging trading update. This told investors it has a “strong pipeline” of new business opportunities from both existing and prospective new customers and remains well-positioned as it enters the new financial year. This leads me to believe the outlook for the stock is attractive.

As with AFX, there’s some valuation risk here. Currently, the stock sports a forward-looking P/E ratio of about 30. So if growth slows, the stock could fall.

I don’t see this valuation as a deal-breaker however, as Cerillion appears to be a high-quality business.

Poised for strong growth

Finally, a third UK stock I’d buy right now is Impax Asset Management (LSE: IPX). It’s a niche investment firm that specialises in sustainable strategies.

The reason I like this stock is quite simple. Today, interest in sustainable investing is booming. All over the world, investors have decided that they want to invest in companies that make a positive contribution to society. Impax is benefitting from this trend.

The increased interest in sustainable investing is reflected in Impax’s recent results. For the year to 30 September, the group saw record inflows of £10bn.

“Asset owner interest in the transition to a more sustainable economy continues to build. As an authentic, specialist investor with global reach, Impax has a strong foundation for further expansion,” said CEO Ian Simm recently.

A key risk here is that earnings could take a hit if global equity markets fall. This could hit the share price.

But with the stock currently more than 20% off its recent highs and now trading on a forward-looking P/E ratio of around 25, I think the risk/reward proposition is attractive.

However, with changing political and consumer priorities, the orthodoxy has shifted. Many investors now see companies with a green agenda as likely big winners of the future. Green has gone mainstream.

Here, I’ll discuss a specialist asset manager and a green energy stock. The valuation of one is too rich for me. But I think the premium price of the other is worth paying.

Impressive growth

Founded in 1998, Impax Asset Management (LSE: IPX) has been a pioneer in the development of investing in the transition to a more sustainable global economy. Its funds have become increasingly popular.

For the six months to 31 March, Impax reported record net inflows of £6.8bn. This, and impressive market gains of £3bn, lifted its assets under management (AUM) from £20.2bn at the start of the period to £30bn at the end. It also reported that after the period end, AUM had increased further to £32.2bn by 30 April.

Valuation

My rule of thumb for asset managers is to buy when the stock is valued at below 3% of AUM. I’d hold at up to 4%. And then sell (if I owned the stock) or avoid (if I didn’t) should it get above 4%. Impax is currently valued at 4.7% of AUM. As such, I’m avoiding it at the present time.

It’s possible I could miss out by sticking to my rule of thumb. Impax is increasing AUM at an impressive rate and could perhaps rapidly ‘grow into’ its valuation. In a recent research note, Equity Development has projected AUM to reach £72bn by 2025. However, I’m not swayed by FOMO (fear of missing out) or a current-year forecast dividend yield of 1.1%.

A green stock I’d buy

Right now, I’m much keener on investing in wind farms owner Greencoat UK Wind (LSE: UKW). The company has established a strong track record of acquiring high-quality assets since coming to market in 2013. And in its annual results, issued in February, it said: “The pipeline of potential acquisitions remains healthy.”

The UK government’s plan for a Green Industrial Revolution to achieve carbon neutrality by 2050 requires a quadrupling of current offshore wind generation capacity. And Greencoat’s increasing scale gives it the ability to invest in offshore wind farms (typically significantly larger than onshore).

Valuation

Greencoat is scheduled to announce its half-year results and latest net asset value (NAV) on 28 July. Based on NAV at the last year end, and adjusting for a subsequent placing and dividend distribution, I estimate the stock trades at around a 10% premium to NAV.

It’s not unusual for owners of physical assets that generate resilient cash flows to trade at a premium. Primary Health Properties is another example. In buying Greencoat, I do have to accept the risk of a de-rating of the stock should management fall short in identifying, selecting and executing further investments that deliver satisfactory returns. In such an event, Greencoat’s attractive RPI-linked dividend (forecast 2021 yield of 5.5%) might also be at risk.

UK shares to buy

The first company I’d buy is the asset management group Impax Asset Management (LSE: IPX). Impax is a specialist investment manager, targeting opportunities arising from the transition to a more sustainable global economy. This section of the investment market is booming, and I think it will continue to do so, particularly for firms like Impax.

Investors want to know what their money is backing more and more, and some asset managers can’t provide the level of information required. Others don’t offer any advice at all, and some have provided misleading information.

Impax has a strong reputation for providing balanced guidance and, at a time when there’s so much misinformation across the sector, the business has benefited. On 31 December 2020, assets under management totalled £25.2bn, up 25% quarter-on-quarter. This was a new record high for the group. 

I think this trend could continue, and that’s why I’d buy the stock as part of a portfolio of UK shares today. Of course, there’s no guarantee Impax’s assets under management will continue to increase.

If its reputation takes a hit, investors may quickly withdraw funds. This could become a problem for the group. Other challenges the corporation may face include higher costs due to an increased regulatory burden. Staffing costs may also increase as competition in the responsible investing space heats up.

All of these challenges could hit the company’s bottom line. And if the bottom line does come under pressure, Impax may have to cut its dividend. The stock currently supports a dividend yield of 1.9% based on City forecasts, which are always subject to revisions. 

Cloud communications 

The demand for cloud computing services has hastened over the past 12 months. The pandemic has accelerated a trend that was already in place. This has led to windfall profits for companies like Gamma Communications (LSE: GAMA).

According to current analysts’ projections, the company could report a 33% increase in profits for 2020. These are just projections at this stage and are by no means guaranteed. 

Still, as a way to invest in the booming cloud computing market, I’d back Gamma. It’s one of the few UK shares that offer exposure to this sector. The company has a cash-rich balance sheet, which will help fund expansion. It also pays investors a small dividend, a yield that’s expected to hit 0.8% for 2020. This might be small, but only a handful of cloud computing stocks offer investors a regular income. 

I think Gamma has a bright future, but we can’t overlook the company’s risks. Cloud computing, and technology in general, is a viciously competitive sector. The group is only small (with a market capitalisation of £1.5bn) compared to some of its American peers. If they wanted to, Gamma’s American peers could crush the business. That’s the most significant risk the firm faces at present, and it’s something I’ll be keeping a close eye on going forward. 

Nevertheless, considering the company’s growth potential and modest dividend yield, I’d buy the stock for my portfolio of UK shares today. 

That said, I’m kicking myself for not buying a few stocks that I analysed throughout the year. Here’s a look at three companies I regret not buying.

Impax

Asset manager Impax (LSE: IPX), which focuses on sustainable investment strategies, is a stock that I’ve been interested in for a while. The reason for this is that interest in sustainable investing is increasing at an exponential rate right now.

Back in late October, IPX shares were trading at around 260p and the P/E ratio was around 20. That looked quite appealing to me and in a report on 24 October, I said that the stock was a ‘buy’. But unfortunately, I didn’t buy the stock myself. I regret that now, as the share price has climbed around 40% since then to 369p on the back of strong full-year results in which assets under management climbed 21% for the year.

Would I buy Impax now? Probably not, to be honest. Given that the forward-looking P/E has climbed to 30, there’s not much value left, in my view. For now, the stock will remain on my watchlist.

Restore

Restore (LSE: RST), which provides essential services such as document storage and shredding to offices and workplaces, is a stock that was well and truly beaten up in the final quarter of last year. Indeed, by early 2019, its P/E ratio was just 10 – an absurdly cheap valuation given the company’s growth.

When I covered Restore on 18 March at 295p, I said that the stock was a ‘buy’ and that it deserved to trade on a P/E ratio of at least 15, meaning there could be 50% upside. However, I didn’t buy it myself and I regret it. Since then, the stock has soared to 554p on the back of strong results, which means that it has gained nearly 90%.

Is there any value left now? Well, currently, analysts expect the group to generate earnings of 29.4p for next year. That puts the stock on a forward P/E of 18.8. That’s not outrageously expensive, however, it’s also not a bargain valuation. 

Workspace

Finally, FTSE 250 property group Workspace (LSE: WKP), which provides flexible office, co-working, and meeting room solutions to fast-growing, early-stage companies in London. I listed WKP as my top stock for February but never bought it myself.

Like so many other UK-focused companies, Workspace was hit by Brexit uncertainty throughout the year and there were several occasions when you could have picked the stock up for around 800p with a yield of 4%+. In hindsight, that was a bargain. Today the shares change hands for over 1,200p, meaning they’re 50% higher. With the forward-looking P/E ratio now at 26, the stock looks fully valued, in my view.

Ultimately, the takeaway here is that short-term share price weakness can present fantastic buying opportunities. Throughout the year, WKP released some strong results and raised its dividend significantly, but this wasn’t reflected in the share price. If only I’d followed Warren Buffett’s philosophy and loaded up when others were fearful…

There’s absolutely nothing wrong with this approach, of course. However, by allocating a little bit of capital to fast-growing smaller companies, investors could potentially boost their overall portfolio returns. 

With that in mind, today I want to highlight two exciting small-cap stocks that have outperformed the FTSE 100 by a wide margin in recent years.

Alpha FX

Alpha FX (LSE: AFX) is one of my favourite smaller companies. While the FTSE 100 has gone backwards over the last two years, AFX has more than doubled investors’ money!

An under-the-radar financial services company, Alpha specialises in providing foreign exchange (FX) hedging services to small- and medium-sized businesses. Combining high-level currency expertise with pioneering technology, the group helps companies manage their FX exposure more efficiently. Clients include high-profile names such as ASOS, Halfords, and Holland & Barrett.

The reason AFX shares have performed so well recently is that the company is growing at a prolific rate. For example, in its most recent half-year results, issued in early September, the group reported revenue growth of 60% and earnings per share growth of 49% (good luck trying to find that kind of growth in the FTSE 100!).

More recently, in an update last week the company advised that trading has continued to be strong and that it expects earnings for the year to be ahead of the market’s expectations.

Are AFX shares priced to buy today? Personally, I’d wait for a pullback before buying. Given that the share price is up nearly 40% in two months, I think there may be better buying opportunities ahead if you’re patient.

Impax Asset Management

Another small-cap stock that has outperformed the FTSE 100 by a significant margin is Impax Asset Management (LSE: IPX). It’s an asset management firm that specialises in sustainable investments – a huge growth area. Over the last two years, its share price has risen around 76%.

Like Alpha FX, Impax has grown at a rapid rate in recent years. For example, between its fiscal year (FY) 2015 and FY2018, the group’s net profit climbed from £3.6m to £11.4m, which represents a compound annual growth rate of 47%. And earlier this month, the company reported that its assets under management had grown 20% over the 12-month period to the end of September.

Looking at the investment case, I see considerable appeal in Impax. Profitability, as measured by operating margin and return on equity is high, while cash flow is healthy. The company also has a great dividend growth track record, having registered 10 consecutive dividend increases now.

Additionally, the valuation seems very reasonable – with analysts forecasting earnings per share of 12.8p for the year ending 30 September 2020, the forward price-to-earnings ratio is 20.2.

All things considered, I see Impax as a ‘buy’. I think the stock has the potential to keep smashing the FTSE 100 in the years ahead.

As a result, there’s been considerable consolidation within the sector in recent years as firms have acted to strengthen their market positions and boost their margins, and this is a trend that looks set to continue. With that in mind, here’s a look at two highly profitable niche asset managers I think could be takeover targets.

Impax 

Impax Asset Management (LSE: IPX) focuses on sustainable investing which seeks to consider both financial return and social/environmental good. Founded a little over 20 years ago, the group offers a range of thematic and unconstrained global equity strategies as well as real asset funds focused on the growth opportunity arising from a sustainable economy.

It’s this niche focus I believe makes Impax a prime takeover target as public interest in issues such as climate change and environmental protection is increasing and the demand for sustainable investments is on the rise. Impax, which has won awards for its sustainable investing in the past, could be a great fit for a larger asset manager looking to boost its presence in this area, in my view.

Impax has grown significantly over the last decade and today’s half-year results show further progress. The group enjoyed inflows of £887m over the six months to 31 March, boosting assets under management by 6% to £13.3bn, while revenue and profit before tax jumped 32% and 69%, respectively.

Moreover, in a statement of confidence from management, the interim dividend was hiked 36%. Chief executive Ian Simm commented: “Impax’s specialist expertise as investors in the transition to a more sustainable economy is resonating with a range of asset owners around the world, and the company remains well placed for further growth.”

Impax shares have fallen on today’s results, but I would view any share price weakness as a buying opportunity. The shares are not particularly cheap (forward P/E of 25), but given the growth story, I think they deserve a premium.

Liontrust

Another asset management company I think could be a takeover target is Liontrust (LSE: LIO), which runs a range of specialist investment funds and also has a focus on sustainable investing. It had just under £13bn in assets under management at 31 March.

While many other asset management companies have been struggling recently, Liontrust has been thriving. For example, for the year to 31 March, the group enjoyed record net inflows of £1.8bn, which boosted its assets under management by 21%. This is a particularly strong performance given the UK asset management industry as a whole experienced negative retail fund flows in six out of the seven months to the end of February.

Liontrust shares currently trade on an attractive P/E of just 13.2 which I think could increase the group’s takeover appeal. There’s also a healthy yield of around 4% on offer right now. Overall, I see considerable investment appeal in this small-cap champion.