2 Neil Woodford dividend stocks I’d buy right now

If you’re looking for dividend-growth stocks, check out these Neil Woodford-owned companies.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

sdf

Neil Woodford is having a tough time at the moment. Investors are withdrawing their capital from the portfolio manager’s funds at a dramatic rate, with his flagship Equity Income fund shrinking in value by around £1bn in the first five weeks of the year.

A glance at the holdings across Woodford’s range of funds reveals some names that are out of favour at present. There are plenty of stocks that I personally wouldn’t invest in. Having said that, Woodford does own some stocks that I believe look attractive right now. Here’s a look at two.

ITV

At the end of December, ITV (LSE: ITV) was the 13th largest holding in Woodford’s Income Focus fund, with a weighting of 2.2%. The portfolio manager bought ITV back in September, stating at the time that the broadcaster is a “highly-cash generative business with a good track record of returning excess cash to shareholders through special dividends.” Woodford went on to explain that the stock’s valuation looked attractive, and that the risks surrounding the industry were priced into the share price.

Should you invest £1,000 in ITV right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if ITV made the list?

See the 6 stocks

I agree with Woodford’s stance on ITV, and believe that the risk/return profile of the stock looks attractive right now. For a start, the valuation is low. With analysts expecting earnings of 15.7p per share for FY2017, the P/E ratio is just 10.3. That’s 45% lower than the FTSE 100 average trailing P/E of 18.8.

Furthermore, with the shares having fallen over 20% in the last year, the dividend yield looks very tempting. Analysts expect a payout of 7.8p per share for FY2017, a yield of 4.8% at the current share price.

ITV is a much more diversified business than it used to be, and now generates 50% of its revenues from sources other than spot advertising. An update in November confirmed that its Studios and its Online, Pay and Interactive divisions were performing well. As a result, I believe the stock is a ‘buy’ right now.

Softcat

Another Woodford-owned stock I have my eye on is Softcat (LSE: SCT). The company is an IT specialist, providing organisations with data centre, networking and security solutions. At 31 December, it was the 14th largest holding in Woodford’s Income Focus fund, with a weight of 2.2%.

Softcat appeared on my radar early last year. At the time, the shares were changing hands for around 300p. Today, the share price is around 520p, an increase of nearly 75% in just 13 months. Despite the share price rise, I still like the investment case here.

A trading update released last week confirmed that momentum is strong at present. The company advised that adjusted operating profit for the six months to the end of January rose approximately 19%.

Looking ahead, demand for the company’s expertise in areas such as cybersecurity and data storage solutions is likely to remain robust, in my opinion. Analysts’ projections reinforce my view, with sales expected to rise 12% this year.

Adding weight to the investment thesis are the company’s dividend prospects. Analysts expect the payout to double this year, taking the yield to around 3.5% at the current share price. The stock is not a bargain, on a P/E of 22.7, but I believe that valuation is justified, given the potential growth on offer.


Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in ITV. The Motley Fool UK has recommended ITV. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Man thinking about artificial intelligence investing algorithms
Investing Articles

2 FTSE 250 shares I’ll consider piling into if the stock market crashes!

Discover which cheap UK shares and investment trusts our writer Royston Wild will consider buying if the FTSE 250 slumps.

Read more »

Midnight is celebrated along the River Thames in London with a spectacular and colourful firework display.
Investing Articles

Near $200, might Palantir stock become the next Microsoft?

This writer is wondering if he should buy Palantir stock, just in case the AI firm goes on to become…

Read more »

Rolls-Royce engineer working on an engine
Investing Articles

The hidden risks behind the Rolls-Royce share price rally (and why they may not matter)

The Rolls-Royce share price has soared in recent months but beneath the optimism, several hidden risks could threaten future growth.

Read more »

Road 2025 to 2032 new year direction concept
Investing Articles

Starting with £100k, how long would it take to build a million-pound SIPP?

Harvey Jones shows how long it would take an investor to build a SIPP or ISA worth a cool £1m,…

Read more »

Portrait Of Senior Couple Climbing Hill On Hike Through Countryside In Lake District UK Together
Investing Articles

Prediction: in 12 months Shell and BP shares could turn £10k into…

Harvey Jones says BP shares have had a rotten run but there are signs they are starting to climb. Can…

Read more »

Businessman using pen drawing line for increasing arrow from 2024 to 2025
Investing Articles

£10,000 invested in Aviva shares at the start of 2025 is now worth…

We've been told that 'elephants don't gallop'. But someone forgot to tell Aviva shares! Paul Summers looks at just how…

Read more »

Investing Articles

Rolls-Royce could become the largest company on the London Stock Exchange, according to CEO Tufan Erginbilgiç

Rolls-Royce is currently the sixth-biggest company on the London Stock Exchange. However, CEO Tufan Erginbilgiç believes that one day it…

Read more »

Black woman using smartphone at home, watching stock charts.
US Stock

Here are the latest forecasts for Tesla stock

Jon Smith takes a look at Tesla stock predictions from some of the main banks and brokers and tries to…

Read more »