While Low & Bonar’s (LSE: LWB) share price may have steadied in recent months, investors are still not compelled enough to buy back into the business en masse just yet.
You cannot blame them, in some respects. After all, the firm shocked the market with not one but two scary updates at the back end of last year, the shares first dropping on it warning of “challenging” market conditions for its Civil Engineering division in October. It plunged again in December after warning that profits would be “weaker than expected” for the final quarter due to an adverse product mix and the impact of sales timings at its Coated Technical Textile unit.
News that chief executive Brett Simpson had defected to Fenner in the run-up to the Christmas period added to jitters as to how the company can reverse its troubles. Consequently it saw its market value shrink by almost half in the final three-and-a-half months of 2017.
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I reckon it’s about time share selectors took a close look at the business again, however, as there remains plenty to be optimistic about. Low & Bonar managed to keep growing revenues in the first quarter despite difficult market conditions persisting. And with the company undertaking a number of self-help measures, from solving production problems at Coated Technical Textile to introducing fresh cost saving initiatives, the news flow is likely to become more positive during the second half of the year.
Yield charges to 6%
City analysts certainly remain largely upbeat over Low & Bonar’s profits outlook and they are estimating earnings growth of 4% in 2017 and 8% next year.
These readings may be reassuring if not exactly spectacular. The same cannot be said for the London firm’s dividend prospects, however, due to the colossal dividend yields it currently packs.
This year a 3.1p per share reward is being predicted, up from the 3.05p dividend of 2017. This yields an eye-watering 5.8%. Moreover, the anticipated 3.3p payout estimated for next year moves the dial to 6.2%.
Investors concerned about Low & Bonar’s ability to meet these projections should revenues worsen again can take heart from the fact that anticipated dividends are covered 2.2 times by predicted earnings, comfortably above the accepted safety terrain of 2 times.
With it also sporting a dirt-cheap forward P/E ratio of 8 times, I think it’s well worth checking out today.
Dividends rocketing higher
Tatton Asset Management (LSE: TAM) is another big yielder that can be picked up for almost nothing right now.
I noted in October the electric fund inflows that the AIM-quoted business is enjoying, and latest trading details released last week confirmed that it continues to make terrific progress — assets under management leapt by £1bn year-on-year in the 12 months to March 2018, it said, to £4.9bn.
City analysts believe Tatton should deliver earnings growth of 22% and 21% for fiscal 2019 and 2020 respectively, leaving the business dealing on a forward PEG reading of just 0.9 and also leading to predictions of chunky dividend improvements. A predicted 6.5p per share reward for last year is expected to chug to 7.8p this year and to 9.2p for next year, resulting in meaty yields of 3.5% and 4.1% for these respective years. I reckon Tatton is a top stock for those seeking brilliant income flows on a tight budget.
