2 high-growth dividend shares you might regret not holding

These two income stocks could be top performers in the long run.

| 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.

Companies with the capacity to raise dividends at a fast pace may perform well in the next few years. Uncertainty regarding Brexit and its potential impact on the UK economy remains high, and rising dividends could suggest a business has confidence in its future outlook. A rising dividend may also help investors to overcome an inflation rate which is set to move higher from its current level of 3.1%.

With that in mind, here are two companies with high dividend growth potential. Buying them now could be a shrewd move.

Long-term potential

Reporting on Wednesday was Frenkel Topping (LSE: FEN), a specialist independent financial advisor and asset manager focused on asset protection for vulnerable clients. The company has recently been undertaking a detailed review following changes to its management team. It now believes that the potential addressable market available to the company is broader than that which it has previously targeted. It has therefore made investments in its cost base in order to restructure the business.

Should you invest £1,000 in Frenkel Topping Group Plc 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 Frenkel Topping Group Plc made the list?

See the 6 stocks

This could provide the business with higher sales and profit growth potential in the long run. Certainly, it will lead to reduced profitability in the short run, and that could be why the company’s shares are down 10% following the update. However, with a larger potential market from which to seek new business, the company’s future could be brighter following its strategic review.

In terms of its income prospects, Frenkel Topping currently has a dividend yield of 2.5%. While this may seem relatively low, the shareholder payouts are covered around 2.4 times by profit. This suggests that there could be significant growth in dividends in future years. With the company now having a larger market to target, its financial performance could improve in the long run.

Increasing dividends

Also offering the potential for higher future dividends is wealth management specialist Old Mutual (LSE: OML). It is currently undergoing a major restructuring which will see it split into four separate entities. This is being undertaken in order to improve its efficiencies through the prospect of lower costs. It also means there are asset disposals, the latest one of which was for the company’s Single Strategy division for £600m.

With a dividend yield of 3.2%, Old Mutual offers a real income return at the present time. However, in the long run its dividend growth rate could be relatively high. Its shareholder payouts are currently covered three times by profit, which suggests that they are highly affordable and very sustainable.

The company’s price-to-earnings (P/E) ratio of 10.4 suggests that there is a wide margin of safety on offer for new investors. This means that there could be significant upside potential in the long run. In the near term there could be some weakness as investor sentiment may decline to some degree ahead of what is a major change for the business. But with a low valuation, cost-cutting drive and rising dividend, it could be a strong performer in future years.

Should you buy Frenkel Topping Group Plc now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

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.

Peter Stephens owns shares in Old Mutual. The Motley Fool UK has no position in any of the shares mentioned. 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

Investing Articles

This UK dividend share is currently yielding 8.1%!

Our writer’s been looking at a FTSE 250 dividend share that -- due to its impressive 8%+ yield -- is…

Read more »

Investing Articles

If an investor put £10,000 in Aviva shares, how much income would they get?

Aviva shares have had a solid run, and the FTSE 100 insurer has paid investors bags of dividends too. How…

Read more »

Investing Articles

Here’s why I’m still holding out for a Rolls-Royce share price dip

The Rolls-Royce share price shows no sign of falling yet, but I'm still hoping it's one I can buy on…

Read more »

Investing Articles

Greggs shares became 23% cheaper this week! Is it time for me to take advantage?

On the day the baker released its latest trading update, the price of Greggs shares tanked 15.8%. But could this…

Read more »

Investing Articles

Down 33% in 2024 — can the UK’s 2 worst blue-chips smash the stock market this year?

Harvey Jones takes a look at the two worst-performing shares on the FTSE 100 over the last 12 months. Could…

Read more »

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

Are National Grid shares all they’re cracked up to be?

Investors seem to love National Grid shares but Harvey Jones wonders if they’re making a clear-headed assessment of the risks…

Read more »

Investing For Beginners

Here’s what the crazy moves in the bond market could mean for UK shares

Jon Smith explains what rising UK Government bond yields signify for investors and talks about what could happen for UK…

Read more »

Investing For Beginners

Why it’s hard to build wealth with a Cash ISA (and some other options to explore)

Britons continue to direct money towards Cash ISAs. History shows that this isn't the best way to build wealth over…

Read more »