By contrast, a number of dividend stocks offer yields of 6% or more per year — equivalent to £6,000+ on an investment of £100,000. Today, I want to look at three high-yield dividend stocks that are all held by fund manager Neil Woodford.

A sustainable 8% yield?

Shares in giftware retailer Card Factory (LSE: CARD) have fallen by 23% over the last year. Despite this, the firm seems to be a good, profitable business that’s likely to be a long-term survivor.

Figures released today showed sales rose by 3.3% to £436m last year. The company reckons it gained market share, despite falling high street footfall. Although operating profit fell 6% to £70.8m last year, this still represents a profit margin of 16%. That’s higher than most other retailers.

The group’s high margins are helped by its policy of designing and producing cards in house. Cash generation is strong and the total dividend (including special dividends) for 2018/19 will be 14.3p, representing 81% of adjusted earnings.

Card Factory shares now trade on 10 times earnings and boast an 8% yield. I think that’s probably too cheap for such a good business. Buy.

A complicated picture

Card Factory’s business is refreshingly simple. The picture is more complicated for high-yielding sub-prime lenders Provident Financial (LSE: PFG) and Non-Standard Finance (LSE: NSF).

The two firms are currently in the middle of a hostile takeover battle. This appears to have been orchestrated in part by Woodford, whose funds own about 25% of both companies.

Non-Standard is much smaller and was founded in 2014 by former Provident boss, John Van Kuffeler. He wants to buy his former employer, Provident Financial, which is currently in the middle of a difficult turnaround.

Van Kuffeler’s credibility has taken a hit this week after it emerged his firm’s past dividends have breached accounting rules. If the NSF finance team can’t even manage dividends successfully, then I think it’s worth asking whether they have the skills needed to merge with a much larger and more complex business.

Provident chairman Patrick Snowball certainly thinks that Non-Standard should take a step back. In a new letter to shareholders, he pointed out that the NSF team might not have the experience required to run Vanquis Bank, a regulated bank that’s a core part of the Provident business.

Snowball also took a swipe at Woodford and the other shareholders who’ve backed the deal so far, suggesting: “We see no benefit to those invested in Provident who do not have a similar holding in NSF.”

A speculative buy

Provident’s turnaround is challenging and may not be a complete success. But I don’t see any reason why NSF — which has lost money each year since its 2015 flotation — is likely to run the business any better.

Van Kuffeler’s plans to focus more heavily on doorstep lending also seem backwards to me. I think Provident’s broader portfolio of products and services makes more sense, given the increasingly tough regulation of high-cost lending.

NSF and Provident both have forecast dividend yields of more than 6%. In my view, Provident is the better buy. I’d avoid NSF, for now.

Backing management 

Non-Standard and Provident are both similar businesses. They provide short term high-cost credit to customers who might have been shut off from traditional lenders. 

For a long time, Provident was the leader in this field under the stewardship of former CEO John van Kuffeler. However, shortly after this transformational CEO left, the wheels started to come off. The new management tried to restructure the business by altering the way it collects outstanding credit. The result was chaos. Collections slumped from more than 70% to around 50%, and many employees left the business, taking their customers with them. Companies like Non-Standard benefitted from this exodus.

And now Non-Standard, which is led by none other than John van Kuffeler, is trying to capitalise on its rival’s problems. 

Unsolicited offer 

Non-Standard has made an unsolicited £1.3bn offer for the group, which is supported by shareholders on both sides. 

Neil Woodford and his former employer Invesco own the majority of both companies and they are pushing for the merger to go ahead. However, Provident is trying to de-rail van Kuffeler’s offer, and that’s why I’d sell Provident and invest £2k in Non-Standard today. 

Provident is several times larger than Non-Standard and, if the deal completes, it will leave the former’s shareholders owning the majority of the company. This isn’t the perfect outcome, but I think combining the two groups is the right decision. Van Kuffeler’s record shows that he knows how to run a business like Provident, and run it well, so I think he’s the best candidate for the job. 

On the other hand, Provident’s current management doesn’t seem to be cut out for the job. They’ve attacked Non-Standard’s offer, stating that it has “major strategic flaws, contains a number of misguided assumptions about the Provident business and includes future plans which we consider to be fraught with execution risk.”

Provident is also attacking Non-Standard’s share price performance. In a press release published today, Provident states “NSF’s share price has fallen on average 20% since its acquisitions and its share price has fallen 30% since it announced the issuance of new shares to acquire Everyday Loans.“

This may be true, but considering Provident’s own share price is down more than 81% over the past three years, the attack seems a bit petty. 

The better buy 

All of the above leads me to conclude that Non-Standard is the better buy for investors today. 

The company might have underperformed over the past few months, but its experienced management team is worth backing, in my opinion. Van Kuffeler has an impressive track record of creating value for investors, and the combined Non-Standard/Provident should give him a stable platform to build on. 

Even if the deal doesn’t go ahead, I think the outlook for Non-Standard is bright as the business continues to build on is successes (and Provident’s failures). Without the merger, analysts believe the firm’s revenue will double over the next two years. Over the same period, analysts are expecting Provident’s revenues to flatline. 

Their shares have fallen by 75% over the last two years, as the firm has struggled to recover from a botched restructuring and regulatory problems. A once-generous dividend has been cut by about 90%.

This sad story has now taken an unexpected twist. As I’ll explain, I think it might be time for shareholders to move on.

Woodford backs surprise takeover

Fund manager Neil Woodford owns 25% of Provident Financial. He also owns nearly 24% of the firm’s much smaller rival, Non-Standard Finance (LSE: NSF). This company was founded in 2014 by John van Kuffeler, who was previously Provident Financial’s chief executive.

NSF has been a disappointing investment so far. Since floating on the market in 2014, it’s reported losses every year. The firm’s shares have fallen by about 40%.

Woodford appears to think that Provident and NSF would do better if they pooled their resources. Along with his former employer Invesco, he’s backed a takeover offer by NSF for Provident Financial.

NSF has a market-cap of about £183m — it’s roughly 15% the size of Provident, at £1.3bn. So the deal will be an all-share affair. NSF is planning to issue Provident shareholders with 8.88 new NSF shares for each Provident share they own.

At the time of writing, the deal valued Provident stock at 532p, a premium of less than 5% to Thursday’s closing price. The deal already has the backing of Woodford, Invesco and another firm. Collectively, they control 50% of Provident shares, so this takeover seems almost certain to proceed.

My view

Provident’s recovery hit a stumbling block in January when it warned losses from bad debts would be worse than expected. The group’s turnaround was certainly taking longer than expected, but progress was being made. Analysts had pencilled in a 10% rise in earnings for 2019, and forecast a dividend yield of about 7%.

Van Kuffeler claims that Provident has “lost its way.” But, in my opinion, combining two under-performing companies is not generally a good way to create one good company. A complicated restructuring will now be required, along with several divestments.

In my view, there’s too much risk and complexity in this deal. I’d avoid NSF and Provident Financial.

This is what I’d buy instead

I don’t own every stock I write about favourably. But one stock I do own is sub-prime lender Morses Club (LSE: MCL). Woodford Funds also has a stake in this firm, but it’s only 9.3%. Woodford’s investors may wish that the fund manager had taken a larger stake in Morses Club’s flotation. Since floating in 2016, the firm’s shares have risen by about 45%, and paid a string of generous dividends.

The business took advantage of Provident’s problems in 2017 to increase its market share. Profit margins have improved too, and it generates a return on equity of about 25%.

The shares currently trade on 11 times 2019 forecast earnings, with an expected dividend yield of 5.1%. The business has very little debt and continues to look good value to me. I hold the shares and continue to rate them as a buy.

Provident used to be the UK’s largest and most respected lender in this space, but the company’s problems over the past two years have dented its reputation. As a result, Non-Standard Finance (LSE: NSF), which is supported by star fund manager Neil Woodford, has seen a surge in business.

Growth opportunity 

Non-Standard is led by John van Kuffeler, who founded the business after leaving none other than Provident where he had a 23-year career — including six years as CEO and 17 years as chairman — before he retired in 2013.

Kuffeler has been quick to take advantage of his former employer’s troubles. It’s estimated that his new business has acquired 500 ex-Provident workers over the past 12 months, who all come with their own book of clients — essential in the doorstep lending business.

According to the company’s results for the year to 31 December, the business added a total of 650 new staff during the year and opened 34 new offices to meet the rising demand for it services. Total revenue increased 48% and the total number of customers grew by 24%. That was not only thanks to the higher number of self-employed agents, but the acquisition of George Banco, which helped catapult the firm into the number two position in the UK guarantor loans market.

Overall impairments — a key measure of group credit quality — declined in the year to 24% of normalised revenue, from 29% in 2016. This helped normalised pre-tax profit to grow 42% to £13.5m and allowed management to announce a full-year dividend of 2.2p per share, up 83%, giving a dividend yield of 3.5%.

Growth ahead

As Non-Standard finance continues to build on its strengths as a lender and expand, I believe that earnings can continue to grow at a double-digit rate. So do City analysts, who have pencilled in earnings per share growth of 52% for 2018. Based on this forecast, the shares are trading at a forward P/E of 10.8. The company is also expected to announce a 42% increase in its dividend payout for 2018, giving an estimated forward dividend yield of 4.3%.

Non-Standard isn’t the only doorstep lending firm that has benefited from Provident’s troubles. Morses Club (LSE: MCL), another of Neil Woodford’s small-cap income plays, has also reported an uplift in activity over the past 12 months. 

According to a trading update issued at the beginning of March, ahead of the company’s fiscal 2018 full-year results, total credit granted increased 21% to £174m for the year as overall customer numbers increased 6% to 229,000. For the year as a whole, City analysts are expecting the group to report earnings per share growth of 34%, followed by an increase of 22% for fiscal 2019, as the firm continues to build on the opportunity offered by Provident’s troubles. 

And like Non-Standard, Morses has also reported an improvement in the credit quality of its borrowers. According to the March trading update, the company also saw impairments “at the upper end” of guidance, thanks to the “quality” of its 229,000 customers.

Based on these estimates, shares in Morses Club are currently trading at a forward P/E of 10.3 and support a dividend yield of 5.6%.

Kevin Godbold: Savills

United Kingdom-based real estate services provider Savills (LSE: SVS) has enjoyed well-balanced growth of revenues, earnings and cash inflow over the past few years. An update in January revealed the firm experienced “a stronger than anticipated finish to the year“ in several of its businesses around the world during 2017. The operational progress reflects in a rising share price and in a dividend payment that has increased 220% over the last six years.

I reckon the trading momentum looks set to continue through February and beyond — yet at a share price around 1,010p, the valuation remains undemanding.

Kevin Godbold does not own shares in Savills.

Rupert Hargreaves: Royal Mail

After a rocky 2017, 2018 is already shaping up to be a good year for Royal Mail (LSE: RMG). In mid-January the company announced that, thanks to a strong performance over Christmas, revenue for the nine months to December 24 rose 2% overall. Parcel volumes jumped 6% year-on-year while revenue at its European parcels business climbed 10%.

This revenue growth should fuel further share price gains for 2018. Shares in the company currently trade at a forward P/E of 12.7 and support a dividend yield of 5.3%, which is around 2.5% above the FTSE 100 average. The payout is covered 1.5 times by earnings per share. If you’re looking for a cheap income play, Royal Mail could be a perfect pick for your portfolio.

Rupert does not own shares in Royal Mail.

Royston Wild: Bellway

Even though the trading environment remains pretty favourable for Britain’s housebuilders, Bellway (LSE: BWY) for one can still be picked up for next to nothing.

City analysts are expecting the business to keep its long-running growth story rolling with a 12% earnings rise in the year to July 2018. And this leaves the FTSE 250 firm dealing on a dirt-cheap forward P/E ratio of 8.4 times (as well a corresponding PEG reading of 0.7).

Bellway pleased the market in November with news that “trading has remained strong” during the first nine weeks of the new financial year, these conditions helping the firm’s order book to leap 17.4% to £1.36bn as of October 1. A similarly robust update on February 8 could provide the builder’s share price with some extra fuel.

Royston Wild does not own shares in Bellway.

Harvey Jones: Just Group

FTSE 250 pension and retirement specialist adviser Just Group (LSE: JUST) has struggled following a dip in equity release lifetime mortgage and care home plans, but the future looks brighter.

The £1.41bn company, created in 2016 by the merger of Just Retirement and Partnership, should rebound as growth in income drawdown offsets the annuity slump, and the equity release market continues to grow rapidly after nearly doubling in two years. Just Group has boosted margins from 3.3% to 8.9% in two years, yet trades at just 9.4 times forward earnings. A forecast yield of 2.6%, covered 4.3 times, suggests scope for progression on this front too.

Harvey Jones has no position in Just Group

Bilaal Mohamed: Micro Focus

My top stock for February is FTSE 100 technology firm Micro Focus International (LSE: MCRO). The global software giant is likely to see a significant level of growth in earnings over the next few years following the recent merger with Hewlett Packard Enterprise’s (HPE) software unit.

Indeed, in its recent half-year results the Newbury-based group revealed a mammoth 80.3% rise in  revenues to $1.2bn, with the newly acquired HPE software business contributing a very significant $569.8m. 

I see the recent dip in the share price as a great entry point for new investors, with the shares now trading on a forward price-to-earnings (P/E) ratio of just 14. 

Bilaal has no position in Micro Focus International.

Paul Summers: Non-Standard Finance

Subprime lender Non-Standard Finance (LSE: NSF) could be a great pick for both growth and income chasers going forward, assuming it can capitalise on the ongoing issues at Provident Financial.

Early indications are positive. By the end of December, the net loan book of Non-Standard’s Loans at Home business had climbed 53% in value to £51.2m thanks to the recruitment of 442 new agents — most of whom came from its battered peer. Non-Standard’s other businesses, including branch-based Everyday Loans, are also performing strongly.

With shares trading at just under 12 times forecast earnings, a yield of 4.2% and full-year numbers expected on 13 March, now might be a good time to buy a slice of the company.

Paul Summers has no position in Non Standard Finance.

Edward Sheldon: DS Smith

I quite like the look of FTSE 100 newcomer DS Smith (LSE: SMDS) at its current price. In my view, the packaging specialist, whose customers include Amazon and Asos, could be a good way to capitalise on the e-commerce boom.

DS Smith’s growth prospects this year look good. Revenue is expected to rise 19% for FY2018, while earnings per share and dividends are forecast to jump 5% and 7% respectively. Yet, the valuation remains attractive. The forward P/E is 14.9 which seems reasonable to me. A prospective dividend yield of 3.2% adds weight to the investment case.  

Edward Sheldon owns shares in DS Smith

Roland Head: Direct Line Insurance Group

Investors in home and motor insurance group Direct Line Insurance Group (LSE: DLG) are set to enjoy a 7.1% dividend yield for 2017.

This isn’t a one-off, either. The insurer has delivered a string of special dividends in recent years. And while these payouts are never guaranteed, I expect the group’s strong cash generation to result in a similar cash return this year.

City analysts agree. They’ve pencilled in a total payout of 26.2p per share for 2018, suggesting a yield of 7.0%. With the stock on a forecast P/E of 12, I’d rate this as an income buy.

Roland Head has no position in Direct Line Insurance Group.

Alan Oscroft: Kier Group

The demise of Carillion has certainly spooked investors in the outsourcing and construction sector, with fears that the contagion could spread to Interserve. But one competitor that I think is suffering unjustly is Kier Group (LSE: KIE), which has just put out an update that’s seriously making me reach for the buy button.

Kier carries debt, but that should be falling between now and 2020, and the firm’s well-covered forecast dividend yields of more than 6% look very attractive. Add earnings growth forecasts, and forward P/E multiples of only around nine to the mix, and I’m seeing an oversold bargain.

Alan Oscroft has no position in Kier Group.

Peter Stephens: Unilever 

Finding a mix of growth potential and defensive characteristics could be key to investment success at the present time. The current bull market could continue, or run out of steam. Rherefore, Unilever (LSE: ULVR) could be a sound buy.

The company is forecast to post a rise in earnings of 7% this year and 11% next year. This puts it on a PEG ratio of 1.5, which is low compared to sector peers. At the same time, its range of brands, customer loyalty and geographical spread mean that it is likely to perform relatively well in a variety of market conditions.

Peter Stephens owns shares in Unilever.

G A Chester: National Grid

Shares of National Grid (LSE: NG) have hit multi-year lows of late. I reckon now could be a good time to buy a slice of this business, which has a near-monopoly of ownership, and actual monopoly as operator, of Britain’s gas and electricity transmission infrastructure. It also owns an attractive portfolio of assets in the US.

I think concerns are overdone about regulators crimping profitability and Labour Party talk of renationalising utilities. Trading at less than 14 times forecast earnings and with a dividend yield of 5.6%, the stock is cheaper than it’s been in a long time.

G A Chester has no position in National Grid.

Jack Tang: National Express Group

My top stock pick for February is bus and rail operator National Express Group (LSE: NEX). The company stands apart from its transport sector peers by reporting strong earnings growth at a time when many are saying the industry is on a decline. Looking ahead, I reckon this outperformance is set to continue, due to its strong international growth, recent US tax changes and an improving UK performance.

Valuations remain undemanding despite bullish tailwinds, with shares in the company trading at 11.7 times its expected earnings this year. And there’s a 3.7% prospective dividend yield to look forward to, with City analysts expecting a 9% rise this year.

Jack Tang has no position in National Express Group.

In recent weeks however, the company’s star has fallen. Indeed, the sheer number and scale of Provident’s issues — two profit warnings in quick succession, the departure of its CEO, an exodus of workers, a probe by the Financial Conduct Authority and the cancellation of its dividend — lead me to suspect that any recovery in its fortunes will require a monumental dollop of patience from its remaining owners.

For investors intent on bringing forward the age at which they can retire however, I think now represents a great opportunity to profit from Provident’s mismanagement through buying shares in one of its rivals. 

Better prospects

£200m cap Morses Club (LSE: MCL) is the UK’s second largest doorstep lender and likely to benefit hugely from Provident’s woes. Indeed, if last Thursday’s update is anything to go by, the latter’s shares could prove to be a great buy-and-hold investment.

Signposting its interim results in early October, the company announced that trading over H1 had “continued to be strong” with a total of £82.2m of credit issued — 25% more than over the same period in 2016. The number of customers also “increased substantially” to roughly 233,000 as a result of organic growth and territory builds. Progress on the latter has been ahead of management expectations with the firm also keen to stress that recent investment would not have an adverse effect on full-year earnings.

While CEO Paul Smith was understandably “delighted” with how Morses Club was performing, investors may also be comforted by his belief in the need to build new product streams “carefully over time” rather than through “quick-fire initiatives“. On this front, the development of its digital platform — which should allow it to offer a number of innovative services to customers — looks promising.

Trading on a still-rather-reasonable 13 times forecast earnings, the shares look a great buy, even taking into account the prospect of increased regulations being placed on those operating in the industry. They also come with a chunky 4.5% forecast dividend.

That said, this isn’t the only option available to investors. Peer Non-Standard Finance (LSE: NSF) is another attractive proposition. 

Like Morses Club, Non Standard is in the process of executing a high growth strategy with investment in new branches and an increase in the number of agents helping it to register a 26% increase in pre-tax profits during the first half. According to management, the recent acquisition of lender George Banco now means the company has a “leading position” in each of its business divisions.

While the shares are slightly more expensive to acquire than those of Morses Club, a valuation of 15 times forecast earnings isn’t exactly prohibitive. Dividend hunters may also wish to note the whopping 67% hike to the interim payout as an indication of just how confident management is in the full-year outlook. Analysts now expect the company’s shares to yield 3.9% in the current year — a rise of almost 150% on that returned to investors in 2016. 

And diversified subprime lender Non-Standard Finance (LSE: NSF) is also taking its opportunity by accelerating growth in the doorstep lending division by hiring more agents at a rapid clip. Indeed in H1 results released this morning, the company’s management went out of its way to say: “The restructuring of a major competitor has presented us with a significant opportunity to grow.” No prizes for guessing who that competitor is…

On top of growing its doorstep lending business, which is already the third largest in the UK, the company’s secured loan- and branch-based lending divisions also grew nicely during the six months to June. All together, underlying revenue rose 16% year-on-year (y/y) to £52m and underlying pre-tax profits jumped 26% to £5.4m. The relatively young company is still loss-making at a statutory level due to expansion but these losses are narrowing as the benefits of increased scale roll in.

In addition to this very good set of interim results the company also announced the £53m acquisition of guaranteed loan provider George Banco that will make NSF the clear number two player in this market. The acquisition will be earnings accretive in 2018, which isn’t surprising as George Blanco recorded £9.3m in revenue and £4.1m in EBITDA over the past year.

NSF has been given what could be a once-in-a-lifetime opportunity to gain and hold market share at the expense of Provident. So far it appears management is taking advantage of this which, together with growth in its other business lines, rising dividend payments, and an attractive valuation of 13.6 times forward earnings, makes it worth taking a closer look at.

A safer option 

A more established growth stock that’s caught my eye is speciality chemical producer Sythomer (LSE: SYNT). The company works closely with clients to design everything from synthetic rubber for medical gloves to binding for magazines and has grown at a respectable clip in recent years through organic expansion and small acquisitions.

In 2016, this twin-pronged growth strategy led to sales rising 10.8% y/y, in constant currency terms, and a full 20.2% at actual exchange rates. This boost from the weak pound could be a one-off, but the growth of the underlying business through very good trading in Europe and Asia should be welcomed.

Aside from diversified revenue streams and geographic markets, I’m also attracted to Synthomer’s solid profitability. Last year’s operating profits of £130.2m represent margins of 12.4% that were impressively resilient given rising raw material prices in Europe.

With a good business model of exploiting its expertise in niche sectors, high growth potential, and a reasonable valuation of 16.8 times forward earnings, Synthomer is certainly one company I’ll continue following closely.

Only just getting started 

Since mid-2012 shares in S&U have risen by 142% excluding dividends. Over this period the company has returned 330p to shareholders via dividends, giving a total return of 179%. Since 2012, the company’s earnings per share have more than doubled from 92.6p to 200p as the group has benefitted from growth in the non-traditional finance market. 

S&U is focused on the specialist motor finance market, a market that has seen explosive growth in recent years. It has been active in this market since its founding in 1938, and while there are concerns about the level of lending to car owners since the financial crisis, with such a rich history behind it, it is likely S&U is prepared for all eventualities.

And after doubling earnings in the past five years, City analysts are expecting the group’s growth to continue in the years ahead. Analysts have pencilled-in earnings per share growth of 17% for the fiscal year ending 31 Jan 2018, followed by growth of 15% for the next year, taking earnings per share to 231p. Based on this estimate, shares in the company are currently trading at a 2019 P/E of 8.7. 

Analysts also believe management will increase the company’s dividend payout by 27% over the next two years, which should give a dividend yield of 5.8% by 2019. Based on these metrics, S&U looks to be an incredibly attractive income and growth play.

Cheap growth

Non-Standard Finance (LSE: NSF) does not have the same extensive history as S&U, but City analysts are still expecting explosive growth in the years ahead for the company. 

After reporting losses for the past two years, for 2017 the company is projected to report a pre-tax profit of £22.8m and earnings per share of 5.3p. Next year pre-tax profit is expected to leap higher to £31m on revenue of £132m, which should translate into earnings per share of 7.9p, up 48% year-on-year. 

Considering this explosive growth rate, it’s no surprise shares in the company have risen by 32% year-to-date, and there could be further gains ahead. Indeed, even after recent gains, shares in Non-Standard Finance only trade at a forward P/E of 13.6, falling to 9.2 for 2018, a valuation which looks remarkably cheap considering the company’s explosive earnings growth. 

Further, city analysts have pencilled-in a dividend of 2.8p per share for this year and 3.9p for 2018, giving a forward dividend yield of 5.5% and plenty of room for further payout growth with a dividend cover of two. Once again, another non-traditional lender that looks to be a great income and growth play.

This stock has been a steady performer in recent years and has become one of Neil Woodford’s top holdings. At the end of May, it was the third-largest holding in Woodford’s Income Focus Fund and the fourth-largest in the fund manager’s flagship Equity Income Fund. So what’s gone wrong?

Staff shortages

Provident is in the process of switching its doorstep lending organisation from using self-employed collecting agents to a smaller number of employed “Customer Experience Managers”. This change seems to be causing more disruption than expected.

The company says that the restructuring has caused a £40m shortfall in loan collections and resulted in new lending levels £37m lower than during the same period last year. Vacancy levels among the collection workforce have been running at 12%, twice the expected rate.

The new organisation will take effect in July, when operating performance is expected to improve. But the shortfall in collections and lending will take time to make up. Management now expects the consumer credit division to generate a profit of £60m this year, down from £115m last year.

This is disappointing, especially as on 12 May, the company said that the impact would only be “up to £10m for 2017”. However, the group reported a net profit of £262.9m last year, so a one-off shortfall of £55m should be manageable.

Should you sell?

This workforce reorganisation appears to have been badly planned or perhaps poorly executed. But this should be a fixable problem. As far as we know, it shouldn’t affect the company’s medium-term performance.

Provident’s management has performed well in recent years, delivering average earnings per share and dividend growth of 15% since 2011. With the stock trading on a forecast P/E of 13.3 and with a prospective yield of almost 6%, I would hold on after today’s news.

A top Woodford small-cap

Neil Woodford appears to be keen on the sub-prime credit sector. His fund participated in the IPO of doorstep lender Non-Standard Finance (LSE: NSF) in 2015 and the stock remains a significant holding in both of his income funds.

Although it’s a new arrival on the stock market, this company was founded in 1938. The firm remains a fan of using self-employed collection agents and has said it has no intention of copying its larger rival Provident in switching to employed staff.

For investors, Non-Standard Finance presents an interesting income opportunity. Following a number of acquisitions, normalised revenue rose from £14.7m to £81.1m last year, while normalised operating profit rose to £13.8m. Further growth is expected this year and the company plans to start paying out 50% of normalised earnings per share. This gives the stock a forecast yield of 3.5%, rising to 5% in 2018.

Buying at current levels could lock in an attractive long-term income stream. For investors who are happy to invest in this sector, Non-Standard Finance may be worth a closer look.

Today I’m looking at three super-high-income stocks Woodford has been buying since 12 April. I agree with him that these stocks are attractive investments at current prices.

The REIT stuff

Generally, property isn’t an asset class Woodford’s particularly interested in. However, he’s been impressed by the excellent returns delivered by retail specialist NewRiver REIT (LSE: NRR) and sees potential for “a very attractive income stream … as well as long-term capital growth.”

He participated in placings at 300p and 325p in June and December 2015 and added further to his holding in the market sell-off following last year’s Brexit vote. These purchases were for his Equity Income Fund but I suspect the 3.4m shares (£11.5m) he picked up last week were for his new Income Focus Fund. If so, the NewRiver holding would represent a bit over 2% of the portfolio.

This FTSE 250 firm delivered a 20p dividend for its last financial year and analysts are forecasting 21.5p for the current year. At today’s share price of 337p, you’re looking at a very juicy prospective yield of 6.4%.

Buy cheaper than Woodford

Non-Standard Finance (LSE: NSF) is another stock Woodford first bought for his Equity Income Fund. The company offers financial services to the significant part of the UK population that is unable to access mainstream products.

Woodford participated in the company’s IPO at 100p in February 2015 and also in a placing at 85p to fund an acquisition a year later. If his recent purchase of 5.2m shares (£3.14m) is for his new Income Focus Fund, Non-Standard would represent about 0.6% of the portfolio.

The company paid a small maiden dividend last year but the policy is to move to a payout of 50% of normalised annual post-tax earnings. With the shares trading at 60.5p today (a significant discount to Woodford’s earlier buy prices), analysts’ forecasts imply a yield of 4.6% this year, accelerating to 6.4% next year.

New kid on the block

AIM-listed Morses Club (LSE: MCL) is in the same subprime-lending sector as Non-Standard Finance but appears to be a new holding. Woodford disclosed an interest in almost 9.7m shares (£12.3m) last week, which would represent 2.2% of the Income Focus Fund portfolio, although the shares may also have been bought for the Equity Income Fund.

Either way, Morses is another appealing dividend stock. A 6.3p payout for the year ended 28 February is expected when it releases its annual results next Thursday, followed by a rise to 6.9p. This gives a yield of 4.9% increasing to 5.4% at a current share price of 127.5p.

NewRiver, Non-Standard and Morses all look attractive prospects to me, particularly for investors seeking a high income in retirement. However like Woodford, I see these as smaller holdings in a portfolio to sit alongside a core of FTSE 100 blue chips.