This month we will be highlighting companies that we like at the moment that we believe are financially very strong and where we expect solid dividend growth.
Four companies that we like are:
Photo-me International (163p)
Photo-Me is a highly cash generative business that has net cash of just under £40 million. In recent times they have been increasing their dividend strongly whilst as the same time investing heavily in their fast growing Laundry business. They have a healthy prospective yield of 5.1%. This is because the dividend is set to increase by a further 20% in 2018 according to their stated dividend policy. They have a good geographic spread and are beneficiaries of the strong Euro and Japanese Yen. The final dividend for 2017 goes ex for 3.94p on 12th October 2017. With the 2017 final dividend of 3.94p and next year’s dividend of 8.43p, that is a total of 12.37p against the current share price of 163p.
They have a net cash position of £39.2 million.
| Year | Revenue | EPS | Growth | Dividend | Growth |
|---|---|---|---|---|---|
| 2013 | £186m | 5.77p | 20.7% | 3.0p | 20% |
| 2014 | £177m | 6.75p | 17% | 3.75p | 25% |
| 2015 | £183m | 7.77p | 15.1% | 4.88p | 30% |
| 2016 | £214m | 9.3p | 19.7% | 5.86p | 20% |
| 2017 (F) | £227m | 10.4p | 11.8% | 7.03p | 20% |
Dignity (2358p)
Dignity is in a very solid business segment and they have a very good track record of increasing their dividend. They increase their dividend by 10% every year and from time to time will pay a special dividend. The solidity of their business, strong cash flows and their high dividend cover of just below 5 times makes the dividend income flow look stable and growing. They always look a little expensive and the dividend yield is quite low, but there could always be a special dividend around the corner.
| Year | Revenue | EPS | Growth | Dividend | Growth |
|---|---|---|---|---|---|
| 2013 | £257m | 72.1p | 15% | 17.72p | 10% |
| 2014 | £269m | 85.8p | 19% | 19.5p | 10% |
| 2015 | £305m | 114.8p | 34% | 21.45p | 10% |
| 2016 | £314m | 119.8p | 4.3% | 23.59p | 10% |
| 2017 (F) | £327m | 125p | 4.3% | 25.95p | 10% |
Rio Tinto (3399p)
Rio Tinto recently declared a record interim dividend and look well on track to continue. They have an above average yield and their interim results recently were strong. They trade on a modest price earnings ratio of 10 and their prospective yield is over 5%.
| Year | Revenue | EPS | Growth | Dividend | Growth |
|---|---|---|---|---|---|
| 2013 | $51,171m | 553c | 10% | 119.6p | 12% |
| 2014 | $47,664m | 503c | (9%) | 134.99p | 12.9% |
| 2015 | $34,829m | 248c | (51%) | 143.11p | 6% |
| 2016 | $33,781m | 283c | 14% | 134.42p | (6.1%) |
| 2017 (F) | $38,862m | 431c | 52% | 193.1p | 43.7% |
Avon Rubber (985p)
Have been increasing their dividends very strongly in recent years backed by very high dividend cover of over 6. They have been growing Earnings at similar rates to the dividend and the shares trade on a price earnings ratio of 13. The strong cash position and high cover means that good dividend increases should continue for some time. The recent interim results were very good and the full year outcome looks positive.
They have a net cash position of £12.6 million.
| Year | Revenue | EPS | Growth | Dividend | Growth |
|---|---|---|---|---|---|
| 2013 | £124m | 33.8p | 26% | 4.32p | 20% |
| 2014 | £124m | 43.7p | 29% | 5.61p | 30% |
| 2015 | £134m | 56.1p | 28% | 7.29p | 30% |
| 2016 | £143m | 74.2p | 32% | 9.48p | 30% |
| 2017 (F) | £167m | 74.2p | 0% | 12.32p | 30% |
Upcoming declared dividend dates
| Company | Amount | Ex-dividend date | Payment Date |
|---|---|---|---|
| Photo-me | 3.94p | 12/10/2017 | 10/11/2017 |
| Dignity | 8.64p | 12/09/2017 | 27/10/2017 |
| Rio Tinto | 83.13p | Ex date has passed | 21/09/2017 |
| Avon Rubber | 4.11p | Ex date has passed | 08/09/2017 |
Broker opinions
| Company | Buy | Hold | Sell |
|---|---|---|---|
| Dignity | 2 | 2 | 0 |
| Photo-Me | 1 | 0 | 0 |
| Avon Rubber | 5 | 1 | 0 |
| Rio Tinto | 18 | 4 | 3 |
