I believe beverages company Britvic (LSE:BVIC) is something of a hidden gem at the moment. As well as being much cheaper than its drinks industry rivals such as Diageo (LON:DGE) and AG Barr, it offers a sustainable growing dividend and good growth.
The FTSE 250 group owns brands such as Robinsons, J2O, Tango and Fruit Shoot. In the 28 weeks ended 14 April, the soft drinks producer achieved profit before tax of £45.2m, an increase of 8% over the comparable period the year before, as revenue jumped by 5% to £769.2m.
Despite the shares doing well in 2019 so far – the share price is up by over 13% – it is cheap compared to rivals as its P/E is 16, a little higher than the widely-accepted value benchmark of 15, but AG Barr has a P/E of near 30 and Diageo’s is around 28. I think that Britvic is clearly underrated and despite the fairly recent introduction in the UK of the sugar tax, it is still growing and increasing its payouts to shareholders. That is something that is to be valued in the current climate of big companies taking an axe to their dividends (cough cough Vodafone (LON:VOD)).
Rising dividend From 2014 to the last full year, 2018, the group managed to increase its total dividend by 35%. This is good news for shareholders who understandably want a dividend that is going up reliably year after year. The latest update from the company showed investors can expect more of the same, as it upped the interim dividend by 5% to 8.3p per share. I think this shows that Britvic can offer investors a combination of income – the dividend yield is 3.1% – and growth and for me that makes it very worthy of consideration for any portfolio.
Cheap as chips Real estate investment trust (REIT), Segro (LSE: SGRO) owns, develops and manages warehouse properties in the UK and Continental Europe valued at over £9bn in 2018. Despite the share price rising by 20% so far in 2019, the P/E is a very low 7, which seems to be reflective of negativity around property companies rather than anything Segro is doing wrong itself. That means I believe the shares are looking very cheap right now putting the REIT firmly into the hidden gem basket.
Delivering well The company says it is continuing to perform well, which really is no surprise as e-commerce drives strong demand for warehousing. While the first quarter did show a slight weakening in growth, with rent growth down versus the year before, year-on-year the REIT has been very strong. Earnings per share have gone from 16.4p in 2014 to 23.4p in 2018 while the rent roll growth has gone up over the same period from £15m to £53.5m.
The combination of operating in a growing market, the shares being very cheap and the fact that REITs have to pay out large amounts of their profits to investors, all combine to make me think Segro is a hidden gem that could boost an investor’s portfolio.
Andy Ross has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. 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.
Motley Fool UK 2019