Each month, we ask our freelance author traders to share their prime concepts for dividend inventory picks with you — right here’s what they mentioned for August!
[Just beginning your investing journey? Check out our guide on how to start investing in the UK.]
DS Smith
What it does: A supplier of sustainable packaging options, paper merchandise and recycling companies.
By Paul Summers: Down a 3rd in worth within the final yr. DS Smith (LSE: SMDS) has given up many of the share worth positive aspects it made within the post-pandemic restoration.
However I ponder if the market has develop into too bearish. The brand new monetary yr has “began effectively” in response to the corporate and administration expects “additional substantial enchancment in efficiency” in FY23.
A rise in capital expenditure was by no means prone to be celebrated however, on a extra constructive word, the shares now commerce at simply eight instances forecast earnings.
The dividends look fairly strong, too. DS Smith is forecast to yield 5.7% within the present monetary yr. This payout ought to be lined by anticipated revenue if analyst predictions are hit.
As a supply of passive earnings as a part of a diversified portfolio, I believe the shares are price a better look.
Paul Summers has no place in DS Smith
Clarkson
What it does: Clarkson supplies an array of transport companies reminiscent of shipbroking.
By Royston Wild. Resilient buying and selling at shipbroking big Clarkson (LSE: CKN) suggests (to me no less than) that this stays a prime dividend development inventory to purchase.
Cyclical companies like this face the chance of cooling income as international development stalls. However buying and selling circumstances at Clarkson stay white sizzling (it mentioned final month that it expects income in 2022 to return in “materially forward of its earlier expectations.”).
Transport charges stay strong as vessel shortages of all lessons roll on. In the meantime, the conflict in Jap Europe has pushed up charges, too, as ships certain for Russian and Ukrainian ports are diverted to already-packed ports elsewhere. That is eradicating much more capability as vessels sit ready to unload their cargoes.
Metropolis analysts suppose Clarkson’s earnings will soar 22% year-on-year in 2022. And so they’re tipping distinctive dividend development as effectively, to 92.2p per share. That might symbolize a ten% year-on-year improve.
This projection creates a wholesome 2.7% dividend yield. And the expected dividend cost is roofed 2.3 instances by anticipated earnings, too.
Royston Wild doesn’t personal shares in Clarkson.
Hargreaves Lansdown
What it does: Hargreaves Lansdown is the biggest supplier of retail-focused funding companies within the UK.
By Edward Sheldon, CFA. Hargreaves Lansdown (LSE: HL) shares have skilled weak spot in 2022 and this has pushed the dividend yield as much as a really engaging stage. With analysts anticipating the group to pay out about 40p in dividends for the yr ended 30 June 2022, the possible yield on supply right here is presently round 4.6% – significantly increased than the typical FTSE 100 yield.
However this inventory isn’t nearly dividends. For my part, it has the potential to reward traders with wholesome long-term capital positive aspects as effectively. The rationale I’m bullish right here is that Hargreaves Lansdown is basically a play on the world’s inventory markets. And markets are likely to rise over time.
One threat to think about right here is that new rivals are rising. These corporations may probably steal market share from Hargreaves. Nevertheless, with the inventory presently buying and selling on a P/E ratio of lower than 20, I believe lots of this threat is already priced into the inventory.
Edward Sheldon owns shares in Hargreaves Lansdown
DS Smith
What it does: DS Smith is the UK’s main producer of recycled paperboard and corrugated packaging.
By Zaven Boyrazian. With client spending declining, e-commerce companies haven’t had one of the best time in 2022. But, trying on the greater image, our present financial surroundings is finally a short-term downside. And on-line spending continues to develop as a proportion of whole retail spending.
That’s why DS Smith (LSE:SMDS) has caught my consideration. The cardboard producer doesn’t have an thrilling enterprise mannequin. But it surely does present a essential product for the e-commerce sector.
With investor confidence at file lows, the inventory has dropped by over 37% within the final 12 months. But trying on the newest outcomes, gross sales and income are up by double digits. However extra excitingly, its return on capital employed has jumped from 8.2% to 10.8%, on observe to hitting administration’s long-term goal of 20%.
In different phrases, regardless of headwinds, DS Smith is producing spectacular development and worth for shareholders. Paring that with a reduced share worth spells a shopping for alternative for my portfolio, in my view.
Zaven Boyrazian doesn’t personal shares in DS Smith.
M&G
What it does: M&G is an funding supervisor that provides financial savings and funding merchandise throughout numerous international locations.
By Christopher Ruane. For M&G (LSE: MNG), may August be a giant month?
I believe the reply could also be sure. Interim outcomes are attributable to be launched on 11 August. The corporate’s coverage of sustaining or rising its dividend yearly appears to make the shares engaging – if the agency can maintain delivering on it.
Final yr, the interim dividend rose by 1.7%. However the full yr dividend improve was a meagre 0.4%. With a robust model, lengthy expertise and a considerable buyer base, the agency has a recipe for profitability. I see the chance of shoppers withdrawing funds as a menace to income in coming years. The corporate reported web inflows of consumer funds final yr. Hopefully that constructive development has continued.
In the meantime, the dividend yield is 8.4%. So I don’t thoughts if M&G delivers one other modest rise or none in any respect. So long as the agency doesn’t minimize its dividend, I believe the earnings alternative right here is engaging.
Christopher Ruane owns shares in M&G.
Ashmore
What it does: Ashmore is an asset administration agency that has a presence throughout the globe and specialises in rising market investing.
By Andrew Woods. Ashmore (LSE:ASHM) has been in line with its dividend coverage over the previous 5 years. Throughout this time, it has paid effectively above 16p per share yearly. For the yr ended June 2021, the agency paid a complete dividend of 16.9p per share. At present ranges, this equates to a dividend yield of seven.99%. For me, that is interesting.
Within the present financial local weather, nonetheless, clients have usually been extra risk-averse, that means that rising market investments have suffered. This has been brought on by a mess of things, together with inflation and rate of interest hikes. To that finish, in June the corporate’s belongings underneath administration declined by 18.3%, quarter on quarter.
Nevertheless, for the six months to 31 December, the enterprise beat earnings expectations of £89m, as a substitute posting £92m. Moreover, over the long run the corporate continues to report constant development. Between 2017 and 2021, as an example, pre-tax revenue and income proceed to extend markedly.
Andrew Woods owns shares in Ashmore.
Vesuvius
What it does: Vesuvius makes tools utilized in foundries to deal with molten steel and management its circulation.
By Roland Head. Vesuvius (LSE: VSVS) can hint its historical past again over 100 years, to the fast-growing US metal business of the early twentieth century.
Right now, the corporate’s product vary is broader and extra refined. However its core specialism of dealing with molten steel is unchanged. I believe that’s engaging — this enterprise is a market chief in a really specialised market.
One other large attraction for me is that greater than 95% of the elements Vesuvius sells are consumables. These want common substitute.
The one actual threat I can see is that buyer demand may sluggish throughout a extreme recession.
I see that as an appropriate threat, particularly as Vesuvius is tapping into new development markets like wind power.
Administration not too long ago reported robust buying and selling and a constructive outlook for the remainder of the yr. Vesuvius shares presently supply a well-supported 6.5% dividend yield. I see this dividend inventory as a very good purchase in August.
Roland Head doesn’t personal shares in Vesuvius.
