[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

Airtel Africa 

What it does: Airtel Africa provides telecommunications and mobile money services in 14 African countries. 

By Royston Wild. Airtel Africa’s (LSE: AAF) share price has slumped in recent weeks. I’d use this as an opportunity to buy a top growth stock at a discount. 

Today the telecoms business trades on a forward price-to-earnings (P/E) ratio of 6.5 times. This is far below what, say, FTSE 100 rival Vodafone trades on (the earnings multiple here sits at 10.8 times).

City analysts think Airtel’s annual earnings will rise 12% in this financial year. They are tipped to increase 11% next year, too. 

I’d buy the business to capitalise on soaring demand for telecoms and financial services products in Africa. It is the second-largest telecoms provider on the continent, and has been growing revenues and earnings by double-digit percentages for the past 17 quarters. 

Product penetration across Airtel’s portfolio remains quite low. Meanwhile, personal wealth levels in its markets are increasing sharply. I think this perfect blend should deliver excellent long-term earnings growth at the company. 

Royston Wild does not own shares in Airtel Africa. 

Somero Enterprises

What it does: Somero Enterprises designs and sells concrete levelling equipment used by construction companies worldwide.

By Zaven Boyrazian. Somero Enterprises (LSE:SOM) is a designer and manufacturer of laser-guided concrete-laying screed machines. It’s hardly the most exciting business out there, but it plays a pivotal role in the US construction industry.

With the American congress recently passing a $1trn infrastructure investment bill, management has had little trouble finding customers for its products. So, it’s hardly surprising that the group recently hit record revenues.

Despite this, Somero shares have tumbled more than 20% over the last 12 months. It seems investors are getting increasingly agitated about supply chain disruptions, which are having a significant impact on its non-US operations.

However, while frustrating, this is ultimately a short-term problem. And seeing a solid high-growth company trading at a P/E ratio of 7.3 looks too cheap in my eyes. That’s why I’m tempted to bolster my existing position by buying more at today’s stock price.

Zaven Boyrazian owns shares in Somero Enterprises.

Chemring Group

What it does: Chemring Group designs, develops, and manufactures advanced technologies for the defence industry.

By Charlie Carman. China’s rise and the Russo-Ukrainian war have boosted demand for products developed by Chemring Group (LSE: CHG). Defence budgets are expected to increase across its four home markets: the UK, the US, Norway, and Australia.

The group’s order book reached £678m in September, covering expected full-year 2022 revenues. New contracts with NATO members for the company’s countermeasures and energetics business indicate a robust manufacturing pipeline for 2023 and beyond.

Chemring’s other main arm focused on sensors and information also looks healthy. In H1 2022, this division generated 21% revenue growth and a 27% hike in operating profit.

Granted, net debt is currently £18.5m, which could limit future growth prospects. However, a 52% reduction in this figure since H1 2021 shows a positive trajectory.

In my view, significant barriers to entry in the sector contribute to the defence stock’s long-term potential, provided it remains at the forefront of developing state-of-the-art technologies.

Charlie Carman does not own shares in Chemring Group. 

Darktrace

What it does: Darktrace is a cybersecurity company, and uses AI to develop autonomous detection of cyber threats.

By Alan Oscroft. A couple of brokers have price targets on Darktrace (LSE: DARK) of around twice the current share price. I’d never buy the stock based on that, but it’s inspired me to re-examine the company.

The shares got a little overheated last year, but then crashed after some negative reports. Over 12 months, Darktrace shares have now lost around 60% of their value.

Darktrace recently reported a 46% rise in full-year revenue, with a small net profit of $1.5m. It also confirmed 2023 guidance for a 31-34% increase in annual recurring revenue. Predicted adjusted EBITDA margin is in the 15-18% range.

The company has since reported a 29% year-on-year increase in net new customers in its first quarter, reiterating its full-year guidance.

We’re looking at a forecast P/E multiple of 130 as far out as 2024. So there’s definitely valuation risk there. But I think it could be the start of sustainable growth.

Alan Oscroft does not own Darktrace shares.

Marks and Spencer

What it does: M&S is one of the UK’s biggest retailers. It specialises in selling clothing, beauty, home products, and food products. 

By John Choong. Marks and Spencer (LSE: MKS) shares are currently trading at a P/E ratio of 7. Despite the grocery industry being known for its low margins, I think M&S could be an exception and be an excellent growth stock for the long term.

It’s no secret that Marks and Spencer’s products are priced on the higher side. Therefore, it may seem contradictive to buy its stock when consumers are ‘down trading’. However, I believe that the retailer’s target market (middle and upper class) isn’t necessarily trading down in groceries. Instead, they’re trading down in eating out, and choosing to seek value in purchasing M&S’ great-tasting packaged meals. After all, Tesco indicated this trend in consumer behaviour.

With the grocer’s latest cost-savings plan and exciting lines of clothing to be launched, I think the company’s top and bottom lines should benefit over the long term as it continues to fulfil its growth plans. As such, I think M&S shares have the potential to head higher from their current levels.

John Choong has positions in Marks and Spencer.

Safestore

What it does: Safestore is a leading supplier of self-storage services in the UK and continental Europe

By Christopher Ruane. The Safestore (LSE: SAFE) share price over the past year might not suggest a compelling growth story. The shares are down 25% in 12 months.

But I think that offers an attractive buying opportunity for me to increase my stake and would consider doing so if I had spare money to invest.

In the most recent quarter, revenue grew 15% compared to the same period last year. That is part of a pattern of long-term growth I expect to continue. Self-storage continues to see growing demand in the UK. Safestore’s well-established brand can help it benefit from that. The company is developing a pipeline of new properties equivalent to around 14% of its current floor space.

A worsening economy could lead some tenants to try and cut their costs by reducing storage space. That might hurt profits. But I am upbeat about the company’s prospects and see strong growth opportunities ahead.

Christopher Ruane owns shares in Safestore.

Rightmove

What it does: Rightmove is the UK’s most popular property portal, providing advertising services to new home developers and estate agents.

By Paul Summers: Shares in property site Rightmove (LSE: RMV) have tumbled nearly 40% in 2022 as investors have become increasingly skittish over the impact of higher interest rates on the UK housing market. I regard this as an opportunity.

At face value, a P/E ratio of 21 doesn’t seem like a bargain. However, it’s far less than the five-year average of 32. This presents as an even better deal when Rightmove’s massive market share, healthy financial position, and staggeringly high margins are taken into account. 

A recovery won’t happen overnight and things could easily get worse for the stock depending on what the Bank of England decides to do about rates in early November. But it does feel like a lot of fear is already priced in.

And let’s not forget that Rightmove makes money even if the properties it lists fail to attract buyers or renters.

Paul Summers has no position in Rightmove.

Rightmove

What it does: Rightmove makes money by listing estate agents on its website and selling additional advertising products.

By Stephen Wright. My Best British growth stock to buy in November is Rightmove (LSE:RMV). I think that now could be a terrific time to add to my investment in this stock.

Right now, the UK property market is under pressure. Rising interest rates have been making mortgages more expensive and slowing down the demand for housing. 

As a result, shares in Rightmove have fallen by around 37% since the start of the year. But I’m seeing this as an opportunity. 

The company has a dominant position in an industry that typically has high margins and it generates significant amounts of cash. There might be some turbulence in the near future, but I think that the business will do well as the economy recovers.

Furthermore, the company has been buying back its own stock over the last few months. To me, this indicates that management also sees the stock as undervalued.

Stephen Wright owns shares in Rightmove.

Diageo

What it does: Diageo is a global leader in alcoholic beverages with products sold in more than 180 countries.

By Ben McPoland. Diageo (LSE: DGE) has been firing on all cylinders for many years. The British drinks giant has a portfolio of over 200 brands, including Guinness, Johnnie Walker and Baileys.

The share price is down this year, though, with the looming possibility of a global recession. Consumers, however, don’t tend to give up their favourite tipple, even during economic downturns. They are unlikely to switch from something like Johnnie Walker (the world’s most popular Scotch whisky) to a cheaper alternative. People basically put these drinks into the “affordable luxury” category.

This consumer loyalty to Diageo’s brands gives it a powerful competitive edge. And, due to its wide global presence, the company stands to benefit as disposable incomes rise in regions like Asia and Latin America.

The shares trade at a P/E ratio of 24, which isn’t particularly cheap. But I think the premium price is warranted for Diageo.

Ben McPoland owns shares of Diageo. 

As a long-term investor, short-term economic wobbles aren’t all that concerning. Watching my portfolio tumble with each passing week is never fun. But with so many terrific businesses now trading at dirt-cheap valuations, prudent investors could unlock immense long-term wealth by buying today.

So when I see one of my companies offering a 6.5% dividend yield paired with excellent fundamentals and a solid long-term growth strategy, I can’t help but get excited.

One of the best dividend shares to buy today?

While listed on the London Stock Exchange, Somero Enterprises (LSE:SOM) is very much an American business, generating around 80% of its revenue in the US. As a reminder, the company is a designer and manufacturer of laser-guided concrete-laying screed machines.

Laying concrete is hardly the most exciting business out there. But it remains a critical step in building and maintaining infrastructure. And with the US government signing a $1trn infrastructure investment bill last year, the group isn’t struggling for growth opportunities.

Looking at the latest interim results, half-year revenues hit a record high of $68.5m. And with its Michigan facility expansion on track for completion before the end of this year, the group’s operating capacity is set to surge by more than a third.

Despite hitting these milestones, shares are down around 24% since the start of the year. As such, the P/E ratio now sits at a modest 7.8 for a company that continues to deliver growth and dividends. In fact, earlier this month, management raised dividends by 11%, pushing the yield to its current level.

That’s why I think this could be one of the best UK dividend shares to buy today.

Inspecting investor concerns

As impressive as Somero Enterprises continues to be in my eyes, I’m not blind to the fact that the company is having to deal with some headwinds. And this could be the reason why the stock has taken a tumble lately.

While performance in its US markets continues to thrive, international operations aren’t fairing as well. With Covid-19 still ravaging certain parts of the world, global shipping delays are plaguing operations in Europe and China.

The group has successfully offset inflationary pressures by raising prices, which is encouraging. However, even with these mitigating actions, margins have still suffered, leading to a 5% contraction in pre-tax profits.

As frustrating as this is, I don’t believe it merits a quarter of the company’s market capitalisation to be wiped out, especially since these are ultimately short-term problems.

It’s possible that further volatility in margins will translate into a lower share price. But at the current valuation, these UK dividend shares simply look too cheap, considering the quality of the underlying business. At least that’s what I think. And it’s why I’m tempted to bolster my existing portfolio position today.

So the question is, what are the best UK shares to buy now?

Finding buying opportunities and avoiding value traps

Historically, plenty of businesses have found ways to adapt to high inflationary environments and continue to expand operations. But the subsequent rise of interest rates is what seems to trip up most UK shares that find themselves in this type of situation.

The higher cost of debt makes securing additional loans more challenging and expensive. Sadly, this also drives up the cost of using equity to raise capital. Therefore, with the money supply being restricted, businesses dependent on external financing could soon find themselves in a world of trouble.

However, there are some exceptions. A high debt balance isn’t desirable in our current environment. Yet, for firms generating plenty of cash flow to absorb the cost of higher interest, I see little reason to panic. After all, used correctly, debt can be a powerful tool to fuel growth.

One FTSE 100 stock that doesn’t meet these criteria in my mind would be Cineworld. Shares are down 70% over the last 12 months. And there is understandable hope for a recovery now that cinemas have reopened and studios are releasing a tightly packed schedule of films.

However, in my opinion, this is a full-blown value trap. With $9.23bn of debt equivalents on its balance sheet, returning to pre-pandemic levels of profitability will simply be insufficient to cover interest expenses, let alone generate any profit.

Is this one of the best UK shares to buy now?

If I’m looking for minimal debt and an abundance of cash flows, which company is the best one to invest in today? Well, for my personal portfolio, I’ve got my eyes on Somero Enterprises (LSE:SOM). The group operates within the United States and designs concrete-laying screed machines.

It’s certainly not the most exciting organisation out there. But with more than $1trn of capital being injected into renewing American infrastructure, management has had little trouble finding growth opportunities.

Shares of the UK-listed business are down 20% over the last 12 months. That certainly seems strange when looking at the latest results. Revenue in 2021 grew at a record 51%, reaching $133.3m, while operating cash flows climbed 21% to $36.9m. And, best of all, the firm is entirely debt free, operating at a pre-tax profit margin of 33.5%!

Like any investment, there are risks. And in the case of Somero, it’s quite vulnerable to the weather. As concrete can’t be laid while it’s raining, heavy storms can disrupt projects resulting in delayed income. In fact, that’s exactly what happened in 2019. And with climate change becoming an ever-present threat, future performance might be a bit lumpy.

Yet, given its solid balance sheet, substantial cash flows, and proven business model, I feel this is still one of the best UK shares to buy now.

Buying when stocks are falling is a scary prospect. But it’s something I’ve been doing in my Stocks and Shares ISA since the start of the year. And while I may be taking a loss today, I feel I’ll be able to generate significant returns in the future. Let’s explore two UK shares that are on my portfolio buy list.

Best UK shares to buy for a comeback?

Investing in gaming stocks is a risky move. And, recently, Frontier Developments (LSE:FDEV) perfectly demonstrated why. The poorly-received launch of its Elite Dangerous: Odyssey title, combined with underwhelming pre-order sales of its Jurassic World Evolution 2 project, resulted in a sharp cut in revenue guidance. And that translated into the stock price plummeting.

With a lot of capital invested into single projects, any duds can have enormous financial consequences. That’s something I feel every investor ought to know before entering this stock market sector. However, Frontier has a reputation for continually improving its games even after release. And it seems this reputation continues to be well-founded.

Sales of Jurassic World Evolution 2 have picked up and reached 1.3 million units. Player reviews for Odyssey have been improving steadily as bugs and performance issues are addressed. And its publishing arm saw huge success with the launch of Warhammer 40,000: Chaos Gate Deamonhunters in May.

So it’s not surprising to hear that the company hit record revenues, growing by 26%. And yet shares of this UK game developer are still down 40% over the last 12 months, due of the stock market correction, among other factors. Pairing that with an impressive line-up of new game releases over the next two years makes this stock look like a bargain buy for my portfolio. At least, that’s what I think.

Constructing profitability

While the pandemic created quite a few disruptions to the construction industry, most of those headwinds have largely evaporated. Just looking at the latest results from Somero Enterprises (LSE:SOM) shows clear evidence of this. Why? Because revenue and pre-tax profits surged by 51% and 81% respectively.

As a reminder, the group designs, develops, and sells concrete-laying screed machines, drastically reducing the manpower and time required to complete industrial construction projects. And with operations based in the United States, Somero has been successfully capitalising on the $1trn infrastructure government spending plan.

Yet shares of this UK-listed enterprise are still down 12% over the last year. There are looming concerns that a recession will significantly impact operations. And these fears are not entirely unfounded.

However, while a recession may cause short-term disruption, I believe the long-term strategy remains untainted. And with $42m of cash on its books to weather the potential storm, I’m willing to take the risk and buy this business at a double-digit discount.

Right now, there’s no shortage of options available to me. However, two from lower down the spectrum particularly appeal — one of which I already own.

10% yield!

The share price of laser-guided equipment manufacturer Somero Enterprises (LSE: SOM) has been on a downward trajectory like nearly everything else. In fact, the value of the company has dropped by almost 30% in 2022, so far.

As frustrating as such falls are, I’m not about to give up on the stock. Far from it. There are a couple of reasons.

First, Somero seems to be trading just fine. Prior to last month’s Annual General Meeting, the company said it expected full-year revenue, profits and cash generation to be “in line” with previous guidance thanks to a “healthy” non-residential construction market.

Second — and the reason I’m highlighting it here — Somero is an awesome income share, in my opinion. Right now, my shares are yielding a forecast 10%!

Cyclical income share

Naturally, there are risks. Somero’s line of work clearly has a cyclical element to it. Put simply, construction tends to slow when economic clouds gather.

However, the payout still looks to be reasonably covered by profit as things stand. As such, I’d be surprised if a cut were necessary. Even so, I’m still making a point of mitigating some of this concern by also investing in very different sectors.

Trading under eight times expected earnings, Somero looks like a high-income steal to me.

Down, but not out

A second share I’d buy for the dividends would be Liontrust Asset Management (LSE: LION). You probably don’t need me to tell you that money managers tend not to do too well when there are financial headwinds. As a general rule of thumb, people are more inclined to save rather than invest at times like these.

Given the above, it’s no surprise that Liontrust’s shares are out of favour. Actually, that’s an understatement. They’ve tumbled by almost 60% in 2022 alone!

So why would I buy now? Well, a valuation of just lower than eight times earnings is tempting, considering the quality hallmarks it boasts. In better times, this is a high-margin business and one that delivers lofty returns on the capital it employs.

There’s also that dividend stream. At nearly 8%, this stock doesn’t (currently) yield as much as Somero, but it’s still an awful lot more than I’d get from a typical cash savings account. The mid-cap business also has a great record of raising its cash returns on an annual basis.

No sure thing

Of course, Liontrust stock can easily sink lower if investors get even more skittish about the near-term economic climate. However, these are just the sort of market conditions that should suit a long-term-focused Fool like myself. And when sentiment does eventually improve — and I can confidently say it will — the company should benefit from an influx of money.

Again, so long as I don’t become too dependent on any one income share, I should be fine. I’d feel comfortable buying Lionstrust stock today.

[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]

SSE

What it does: SSE produces energy and runs a transmission and distribution business in Scotland and England. 

By Royston Wild. Selecting robust dividend stocks in the current climate requires extra care. Soaring inflation is threatening to derail the global economy and by extension profitability for UK plc. This could have significant ramifications on shareholder payouts in the near term and beyond. 

This is why I think buying SSE (LSE: SSE) shares could be a good idea for investors. I believe the biggest threat facing this FTSE 100 stock in the near term is a painful hit from any windfall tax. 

It’s my opinion that SSE is as close to a stress-free stock one can get in these uncertain times. The business generates electricity, one of life’s essential phenomena. It also operates a power distribution and transmission division that connects 3.8m homes and businesses. 

I wouldn’t just buy the utilities business for its robustness, though. I think earnings here could soar over the next couple of decades as it increases investment in renewable energy sources. It hopes to increase renewables output fivefold in the decade to 2031. 

SSE’s forward dividend yield sits at a healthy 5.5%. 

Royston Wild does not own shares in SSE. 

Rio Tinto

What it does: Rio Tinto owns and operates a number of mines around the world. Its largest product is iron ore.

By Stephen Wright. I’m looking carefully at Rio Tinto (LSE:RIO) shares in July. The stock is a Dividend Aristocrat, meaning that it has increased its base dividend consistently over the last 25 years. 

I think that the stock is facing some headwinds that might give investors a decent opportunity to buy shares at a reasonable price in July. 

High commodity prices have been helpful to Rio Tinto’s business recently and the company has done a good job of taking advantage of this. But I think that this might abate slightly in July.

With interest rates rising and inflation still at high levels, I think that demand for finished goods is going to decline. I anticipate this weighing demand for Rio Tinto’s raw materials and bringing the stock down.

If this happens, I’m looking at buying shares for my portfolio.

Stephen Wright does not own shares in Rio Tinto.

Redrow

What it does: Redrow is a FTSE 250 housebuilder with a focus on building good quality mid-priced homes designed for existing homeowners.

By Roland Head. I find that founder-led businesses are often safer investments in troubled times, thanks to prudent financial management. Redrow (LSE: RDW) founder Steve Morgan has retired and only owns 15% of the business, but I think his influence remains.

Like all housebuilders, Redrow’s share price has fallen in recent months. But the stock is starting to look cheap to me, with a 6% dividend yield that’s covered three times by forecast earnings.

Of course, there’s still a risk we’ll see a much deeper slowdown than the market is expecting. However, Redrow started the year with £240m of net cash and a £1.5bn order book. That’s equivalent to nine months’ sales.

My sums suggest Redrow’s 6% dividend yield will be safe, even if we do suffer a recession. For this reason, I think this could be a top dividend stock to buy in July. I’m considering Redrow for my own portfolio.

Roland Head does not own shares in Redrow.

Primary Health Properties  

What it does: Primary Health Properties is a real estate company that owns healthcare properties across the UK and Ireland.

By Edward Sheldon, CFA. There are a few reasons I’ve selected Primary Health Properties (LSE:PHP) as my top dividend stock for July.

The main reason is that the company has defensive attributes. Not only does it operate in a defensive industry (people aren’t going to stop going to the doctor because there’s a recession), but a large chunk of its revenues are backed by the UK government. So, it’s a sleep-well-at-night stock, to my mind.

Another reason is that it owns ‘real assets’ – physical assets that have real value to society. In the past, these kinds of assets have protected investors against inflation.

Additionally, there’s a nice dividend here. At present, the prospective yield on offer is around 4.7%.

This dividend stock does have a slightly higher valuation. Currently, the forward-looking P/E ratio is around 20, which adds some risk.

However, I’m comfortable with the valuation here given the company’s defensive attributes and attractive yield.

Edward Sheldon has no position in Primary Health Properties. 

Warehouse REIT

What it does: Warehouse REIT owns a diverse collection of well-positioned warehouses across the UK, primarily serving e-commerce enterprises.

By  Zaven Boyrazian. With the pandemic accelerating the adoption of e-commerce, a growing problem has emerged. More products are being bought and sold online, requiring greater warehousing space that seems to be running out.

Warehouse REIT (LSE:WHR) is one of several players trying to solve this challenge. And so far, it’s significantly enjoying the tailwinds of surging demand. With the value of its storage facilities climbing and management successfully raising rental prices, free cash flow has exploded over the years, resulting in an attractive dividend yield of 4.2% today.

A lot of its property acquisitions have been funded through debt. And now that interest rates are rising, margins are expected to be squeezed. In fact, that’s why its shares have tumbled by 12% since the start of 2022. But with underlying operating margins standing at around 70%, I don’t see this as a major threat, making the recent drop a buying opportunity for investors, in my eyes.

Zaven Boyrazian does not own shares in Warehouse REIT.

HSBC

What it does: HSBC is a global banking and financial services firm, with segments ranging from mortgages to investment banking.

By Andrew Woods. HSBC (LSE:HSBA) showed resilience following a fall in profit during the pandemic. Between 2020 and 2021, pre-tax profit more than doubled from $8.7bn to $18.9bn, in line with a bounce back in consumer demand and a more favourable economic environment. The 2021 dividend payment of $0.25 per share equated to a dividend yield of 4.5%. HSBC has been consistent with its yields over the past five years. 

The company may now also benefit from rising interest rates. In the UK and US, these rates are now at 1.25% and between 1.5% and 1.75%, respectively. More rises may come in July. Interest rates are important for a business like HSBC, because they can dictate how much it can charge for its lending services. These products may include loans and mortgages. The cost-of-living crisis, however, may deter some potential customers from taking on more debt, which could be bad news for HSBC.

Andrew Woods does not own shares in HSBC.

Phoenix Group Holdings 

What it does: Phoenix Group Holdings is the largest long-term savings and retirement business in the UK. It offers a range of life and pension products across several brands.  

By Harshil Patel.  Currently yielding 8%, Phoenix Group Holdings (LSE:PHNX) is my top dividend stock pick for July. With the average FTSE 100 share yielding 4%, Phoenix Group is a breath of fresh air when searching for dividend income.  

With consumer price inflation rising to over 9%, it comes close enough to battling rising prices.  

2021 was an outstanding year for Phoenix. It delivered record cash generation that allowed for a 3% lift in dividend. With resilient cashflow and a strong balance sheet, I reckon the future looks bright. 

It has demonstrated an excellent track record with strong dividend growth over the past decade. Much of that growth came from new acquisitions, but what’s exciting is that this year’s dividend growth arrived organically.  

Phoenix is proving to be a growing and sustainable business. Another characteristic I like is its resilience in volatile markets like the one we have currently. It seems its hedging approach might make it more resilient versus many of its peers.  

Harshil Patel does not own shares in Phoenix Group Holdings.

Unilever

What it does: Unilever is a fast-moving consumer goods company dealing with branded products in beauty, personal care, foods, refreshment and home care.

By Kevin Godbold. I’m delighted Unilever (LSE: ULVR) appears on my high dividend yield stock screens. The company’s attractions led to the valuation being too high for my taste for years — until now.

Worries about recession, the war in Ukraine and the cost of living crisis have all conspired to drive the stock price down this year. However, in April, chief executive Alan Jope delivered a reassuring update on recent trading. “We are executing well in a very challenging input cost environment,” he said. And he reckons underlying sales growth of 7.3% had been driven by strong pricing.

And that’s excellent news because it means Unilever’s strong brands are maintaining pricing power. That suggests an ability to protect margins in inflationary economic environments.

Meanwhile, Unilever’s financial and trading record is a thing of beauty. And I have confidence the business can maintain its rising dividend stream in the years ahead.

Kevin Godbold does not own shares in Unilever (yet, but likely will do soon!)

British American Tobacco 

What it does: Operating in 175 markets worldwide, British American Tobacco manufactures and sells cigarettes as well as other nicotine products.

By Charlie Carman. Unclouded by falling tobacco consumption in developed markets, British American Tobacco (LSE: BATS) is a top FTSE 100 performer in 2022. The share price has increased 30% this year to date.  

It’s a true Dividend Aristocrat. British American Tobacco shares offer a 6% dividend yield and shareholder distributions have risen consistently since 1999. In addition, the company announced a £2bn share buyback programme earlier this year.

There are regulatory threats facing this tobacco giant in many key markets. For example, the US Food and Drug Administration recently announced plans to set maximum nicotine levels in cigarettes and other tobacco products.

However, the company aims to counteract such challenges via its reduced-risk vapour products and tobacco-free nicotine pouches. It’s targeting 50m consumers of non-combustible products by 2030.

The tobacco industry’s demise has long been predicted but failed to materialise. I believe British American Tobacco shares can boost my portfolio’s returns for years to come.

Charlie Carman owns shares in British American Tobacco. 

Somero Enterprises

What it does: Somero is a manufacturer of laser-guided equipment used to place and screed concrete slab in buildings.

By Paul Summers: I’m biased when it comes to Somero Enterprises (LSE: SOM). I’ve held this high-quality, US-focused company within my S&S ISA for a few years now. Quite a bit of this has to do with the dividend stream it offers.

As I type, Somero is forecast to yield almost 10% in the current financial year. That’s going to take an awful lot of the sting out of galloping inflation. This cash return is also likely to be reasonably covered by profit, meaning it should actually get paid.

One risk I need to continue bearing in mind here is that Somero is undoubtedly a cyclical business. As such, the share price could head lower in the near future if a recession becomes a reality.

However, the stock already trades at less than eight times earnings. So, I suspect/hope a lot of bad news is already priced in.

Paul Summers owns shares in Somero Enterprises.

Grafton

What it does: Grafton is a merchant that sells all sorts of building materials. These include timber, decor, DIY items, and more.

By John Choong. Grafton (LSE: GFTU) is one of the few potential beneficiaries of the government’s new Help to Build scheme. Unlike Help to Buy, the new initiative won’t directly benefit the traditional property developers. This is because the new initiative is only available for houses built by self or custom-builders. Due to Grafton’s excellent relationship with independent builders, it could stand to benefit from the tailwind of the new scheme.

While the group has a manufacturing segment, the bulk of its revenue comes from its distribution businesses. This is where I expect most of the growth to come from. So, if the group’s top line receives a boost from new builds, I expect both its share price and dividend pay out to increase substantially, hence making its current share price cheap. After all, it’s currently trading at a P/E ratio of 9.14. Not to mention, Grafton has healthy profit margins too, which makes it an attractive stock for investors to purchase.

John Choong has no position in Grafton

I already hold both of these shares, but I’m thinking about adding to my positions in July. The surging cost of living means that I’m keen to increase my passive income. And I reckon both of these companies are likely to deliver long-term gains from current levels.

Direct Line: a big dividend share

FTSE 250 insurer Direct Line Insurance Group (LSE: DLG) is a well-known UK motor and home insurer. The company also has a fast-growing business insurance operation and owns breakdown operator Green Flag.

I’ve held Direct Line shares in my portfolio for several years. They’ve provided me with some of the biggest dividend payments I’ve ever received.

One downside is that growth has been minimal. The UK insurance market has been a tough place to be, with strong competition and aggressive pricing.

Claims costs have risen too. Rather than slashing prices to win new business, Direct Line CEO Penny James has chosen to invest in new technology and stay disciplined on pricing.

Hidden value?

I believe this long-term focus should start to pay off as market conditions stabilise. But I have to admit that evidence is mixed so far. Direct Line’s pre-tax profit was flat last year, at around £450m. Policy numbers were also largely unchanged too, at 14.6m.

Fortunately, Direct Line’s impressive profitability continued to support generous dividends. The company generated a return on tangible equity of almost 24% last year, driving strong cash generation.

My research suggests that rising interest rates and new UK rules on pricing are likely to favour larger insurers like Direct Line over time.

With a dividend yield of 9% expected for 2022, I’m happy to remain patient. Indeed, I may add to my holding this summer to take advantage of the current weakness.

Somero Enterprises: essential tech for retailers

Huge retail warehouses are an increasingly common sight in most western countries. But the high racking and automated handling systems installed inside them can only be used if the floor is perfectly level.

AIM stock Somero Enterprises (LSE: SOM) is a market leader in this area. This US company produces the equipment needed to pour perfectly flat concrete floors of almost any size. Many of the company’s larger units are laser-guided and far more accurate than traditional techniques.

Somero also offers training and round-the-clock support for its equipment and will fly technicians to customer sites when needed. People I know who work in this sector say it’s a very well-respected business.

Somero’s share price has fallen since the start of the year as investors have priced in the risk of a recession. There is certainly some risk that an economic slowdown will hit construction activity and cause profits to drop.

However, the company’s latest trading update reported “healthy” market conditions and solid demand so far this year. Somero is also debt-free and carries plenty of surplus cash.

Broker forecasts price the stock on just eight times forecast earnings, with a dividend yield of 9.8%. Somero shares look good value to me at this level.

1: Once it’s gone, it’s gone

Note to self: the £20,000 annual ISA allowance doesn’t carry over. In other words, I won’t be able to put £40,000 in during the next tax year if I decide not to make any contributions in the 2021/21 tax year. As such, I’ll be cramming as much cash into this account as possible before 5 April.

Clearly, there’s no obligation to actually invest this money before the ISA deadline. However, with markets in a funk for a variety of reasons, I think putting my money to work sooner rather than later will really pay off.

2: What’s boring/unknown can be profitable

Just because the deadline is approaching does not mean I should buy what’s flavour of the month. In fact, many of my better buys have been those that rarely attract fanfare. To be brutally honest, some of them are rather boring. Examples include laser equipment manufacturer Somero Enterprises and kettle safety control supplier Strix. Sexy? No. Profitable? Oh yes!

Both of the above also return dividends to their owners that I always reinvest back into the market, allowing me to take greater advantage of compound interest.

3: Know what I can control

I used to curse the market for daring to go against my wishes. My Foolish training taught me to react differently.

The fact is, the market simply doesn’t care what I think. Nor do the shares I own know that I own them. This might seem obvious but it’s very easy to become too attached to an outcome rather than striving to improve the process of stock selection. While the latter still can’t guarantee success, how I choose stocks definitely is within my control!

What’s far more important to me is owning slices of quality companies – just like star UK fund manager Terry Smith. Thankfully, there’s no shortage of good businesses out there, unlike the number of days left before the ISA deadline elapses.

4: Time matters more than timing

Like most investors, I’d love to be able to predict exactly where markets (or the share prices of individual stocks) will go next. Knowing I can’t ever do this, at least consistently, is actually one of the most important learning points for me over the years. It also makes a huge difference to how I assess the performance of my Stocks and Shares ISA.

This is why I never ruminate over my timing or how my account is doing from annual deadline to annual deadline. Whether I buy stocks before or after 5 April, the only number that truly matters is the one showing when I close the account for good.

5: Learn to walk away

Cards firmly on the table: I used to be a compulsive portfolio-checker. Thankfully, I’ve realised that this habit doesn’t serve me in any way. Rather, it increases the risk that I’ll do something impulsive/stupid.

Understanding when to close the laptop and physically step away from the market, while remaining invested, is fundamental. This is especially the case when operating an ISA since any money I withdraw but then reinvest will count towards that £20,000 allowance.

The financial objectives between different investors vary drastically. But in my case, I like to focus on long-term high-growth opportunities. So let’s take a look at two businesses I’m keen to add to my portfolio before the ISA deadline.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Investing in construction automation

The construction industry may seem like an odd place to find high-growth opportunities. But with surging demand for prime warehousing space, courtesy of rapid e-commerce adoption, Somero Enterprises (LSE:SOM) is on fire.

This company design and sells concrete laying screed machines. As dull as that sounds, these devices enable construction crews to become smaller, work faster, and deliver better results.

With labour costs on the rise, the technology is becoming an increasingly popular option. And with the majority of its operations based in the US, Somero is enjoying a pretty substantial tailwind from President Biden’s $1trn infrastructure bill. So it’s no surprise the share price is up over 30% in the last 12 months.

There are, of course, risks. Laying concrete is highly dependent on the weather. If it’s raining, this process isn’t possible as the water compromises the strength of the material. 2019 was a record-breaking year for bad weather, which delayed many construction projects, leading to flat revenue growth. With global warming continuing to worsen, I think it’s likely that weather-related disruptions will occur again in the future.

But with the demand for construction continuing to climb, I feel this is a risk worth taking. That’s why I’m tempted to buy some shares in this business before the ISA deadline next month.

A top growth stock for the ISA deadline

The video game industry continues to grow at a rapid pace. In fact, a report by Fortune Business Insights predicts that the market will grow by 13.2% annually between now and 2028, reaching $546bn (£415bn). Needless to say, that’s a big opportunity for investors. And even more so for Keywords Studios (LSE:KWS).

This company isn’t as well known as development houses such as Activision Blizzard and Electronic Arts. And yet it’s been involved with large quantity of AAA titles released in the last decade. That’s because Keywords is a services business that supplies talent for the entire development pipeline of a game, including programming, 3D & 2D art, player testing, audio design, and even quality assurance.

This approach to doing business has a pretty major advantage. If a newly released title fails to achieve the desired financial performance, the company’s revenue stream is not compromised since its paid either way for its services. But that doesn’t mean it’s completely risk-free.

Becoming the leading support studio in the industry involved a lot of acquisitions over the years. And this aggressive, acquisitive growth strategy continues to be employed today. However, if management starts buying up smaller studios that fail to meet expectations, it could compromise the balance sheet.

So far, Keywords has been prudent in its acquisition targets. That’s why I believe it’s a risk worth taking for my portfolio before the ISA deadline arrives shortly.

Boring but beautiful?

Somero Enterprises (LSE:SOM) is a share I already hold. It’s certainly not an exciting new tech start-up. It doesn’t have lofty ambitions to disrupt industries and change the world. The company specialises in a very niche business producing concrete levelling equipment for the construction industry. While this may not get anyone’s heart racing, Buffett would acknowledge that the company sticks at what it knows and avoids the volatility of more stimulating sectors.

In its recent annual report, it revealed a 51% increase in revenues alongside an 85% increase in net income. The company has streamlined business operations and increased net income at a greater rate than revenue, which is good news. However, 2020’s poor year most likely influenced some of this data.

Somero also had record cash at the end of 2021 and no long-term debt. This gives it liquidity and mobility to seize new investment opportunities and continue to grow over the next few years. I feel the company’s recent share buyback campaign would also be of interest to Warren Buffett who has applauded the use of share buybacks in the past.

While the business is subject to inflation-linked and future growth uncertainty, I still believe it has many of the attributes that Buffett looks for in an investment. Its 7.2% dividend yield makes me even more confident about this cheap UK listed share.

A construction company with strong foundations

Morgan Sindall (LSE:MGNS) is a leading construction and regeneration company. It operates within the national infrastructure, housing and urban regeneration sectors. And it has the strong financial fundamentals that Buffett looks for with cash of £460m comfortably exceeding debt of £110m.

Once again, Morgan Sindall is unlikely to deliver stunning returns year after year and shake up the construction industry. But it isn’t promising to. What the stock does offer is a fair return on equity of 20%, a strong balance sheet and a competent management team that has investors’ needs as a priority.

The stock is currently trading at a price-to-earnings (P/E) ratio of 11.3 and offers a 4% dividend yield, which suggests relatively good value. The business has also seen strong growth in the regeneration and housing sectors. This is expected to grow as the UK government pushes to build more houses and tackle the undersupply of housing.

Morgan Sindall does have exposure to inflationary risks. There’s an expected increase in the price of materials and lower future construction demand to deal with. However, it has adequate cash to deal with future risks.

Nobody can truly predict what Warren Buffett would invest in. However, these two stocks hold many of the same attributes as his previous successful investments. I’m considering adding to my Somero holding and opening a new position in Morgan Sindall to try and emulate Buffett’s incredible performance.