Legal & General Group plc isn't the only big-dividend stock I'd buy right now

Legal & General
Legal & General

Recovering wealth management services firm Charles Stanley Group(LSE: CAY) looks as if it may be tapping into a new seam of sustainable growth.

In today's interim results report, chief executive Paul Abberley tells us that the firm aims "to become the UK's leading wealth manager by 2020," a lofty ambition that would crown the company's status as one of oldest on the London Stock Exchange with origins stretching back as far as 1792.

Good numbers

The numbers look good this morning with core business revenue almost 10% higher than a year ago and profit before tax rising more than 53%. The firm is making progress attracting business and reported funds under management and administration 1.3% higher than last year. But as well as getting business in, Charles Stanley is making more of it and managed to push up its core business operating margin from 6.2% a year ago to 7.3%. The target is to achieve a margin of 15%, which would really ignite profits.

Mr Abberley explains that a focus on core wealth management activities achieved the return to profitability and growth from the top line. Indeed, during the period the disposal of the only remaining non-core activity, EBS Management PLC, was finalised, so the management team will soon be free from the further distraction of non-core activities. In a measure of how well things are going, the directors pushed up the interim dividend by almost 67%.

However, the shares are down around 5% as I write and I reckon the outlook statement might have spooked investors a little. The firm thinks favourable market conditions will persist on a six-to-12-month view but warns that headwinds from major regulatory change look set to drive up IT and process change costs. On top of that, commission income has been lower than the directors expected over recent months and the firm will need a higher level of trading activity or other revenue increases in the second half if it is to meet current market expectations.

A long record of growth

Nevertheless, with the current year dividend yield running around 2.6%, and rising fast, I think Charles Stanley is a tempting recovery and growth proposition that could sit well in a portfolio alongside the likes of Legal & General Group(LSE: LGEN). The FTSE 100 insurance and investment firm has delivered several years of double-digit percentage increases in earnings, although City analysts following it expect that run of increases to break with a 3% decline in earnings during 2018.

So far, investors have shared in Legal & General's success and the dividend is up almost 100% over the past five years. At today's share price around 267p, the forward dividend yield for 2018 runs a little over 6% and forward earnings look set to cover the payment just over one-and-a-half times, which looks tempting.

Back in August with the interim report, chief executive Nigel Wilson told us that the business model has "proven to be resilient to political, economic and regulatory uncertainties." He thinks structural weaknesses remain in the UK economy but expects the company's growth to continue.

Stocks for the longer term

I reckon both Charles Stanley and Legal & General group are worthy of your further research right now. In your portfolio, they could form part of a long-term and focused approach to building wealth. If financial independence is your ambition, the Motley Fool's analysts may be able to help because they've developed this free report called The Foolish Guide To Financial Independence.

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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.