There’s no shortage of great dividend shares to pick up today. But The Vitec Group (LSE: VTC) is one that’s worth serious attention, in my opinion.
Why? Well I consider it to be far too cheap right now. It’s forward P/E ratio of 12.7 times, falling well below the accepted value watermark of 15 times and below.
As we all know, broadcasting is changing at a rapid pace too. Whether it’s because of the growing army of vloggers communicating to their growing audiences via YouTube, traditional broadcasters looking to bring watchers into the heart of the action, or virtual reality taking over as the next big thing in the viewer experience.
Vitec is a company that’s in great shape to exploit these trends. Its broad range of cameras, lighting, monitors and other technologies, capture the imagination of both independent content creators and broadcasters, paying testament to the vast investment this small-cap dedicates to R&D as well as the expertise of its product design teams.
Tech titan There’s a reason why Vitec’s profits hit record peaks in 2018 and, judging by commentary last week, it remains on course to keep delivering all-time highs. It said its previous forecast for further progress in 2019 “remains unchanged” and that it expects “a strong 2020,” with sales likely to be supported by the Summer Olympics and the US Presidential election.
The camera colossus has proved a hit with income chasers in recent years and, in 2018 alone, hiked the full-year dividend by more than 20% to 37p per share. City analysts are currently predicting a 39.3p reward for 2019, one which yields a chubby 3.4%. But I reckon this is looking a bit light.
I fully expect, given Vitec’s bright profits outlook for the near-term and beyond, not to mention its stunning ability to build cash (free cash generation swelled by £10m to £33.5m last year) for the actual payout to storm past current consensus estimates.
Travel tsar WH Smith (LSE: SMWH) is another top dividend grower where I think payouts may surprise to the upside, a factor which makes it a great income stock despite its modest forward yield of 2.9%.
The retailer raised the full-year dividend 12% in the year to August 2018 to 54.1p, and City forecasts currently suggest a smaller rise, to 57.9p payout, is on the cards for fiscal 2019.
Like Vitec though, a bright profits picture stretching long beyond the near term should give WH Smith the confidence to introduce another hefty dividend hike.
This was laid bare in newest trading details last week in which it advised sales at its Travel business were up 26% in the 11 weeks to mid-May. That reflects the massive investment made in its UK and international operations, and the vast revenues potential here as the number of global travellers booms.
The FTSE 250 firm certainly has the balance sheet strength to effect another meaty change too.
So while WH Smith deals on a not-exactly-cheap forward P/E multiple of 17.4 times, I reckon its sudden price slump over the past six weeks makes it a highly-attractive dip buy today.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Vitec Group and WH Smith. 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