Why I'm in love with these hated growth dividend stocks
Support services play Babcock International Group(LSE: BAB) has seen its share price slump 10% during the past three months, taking the stock to its cheapest since the aftermath of June's EU referendum. However, I reckon this represents a terrific buying opportunity for long-term dividend investors.
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While its UK markets remain strong, Babcock is also witnessing growing demand for its services from overseas customers. This helped the company's order book swell by a further £2bn between April and September, to £20bn, and sets it in good stead to help earnings surge higher in the years ahead.
For the year to March 2017 Babcock is predicted to pay a dividend of 28.1p per share, up 9% from the 25.8p reward shelled out last year and yielding a handy 3.2%. And the payout is expected to step to an even better 30.1p next year, up 7% and nudging the yield to 3.4%.
And strong dividend coverage should underpin investor faith in these forecasts coming to fruition. The forecast dividend for this period is covered 2.8 times by predicted earnings, above the widely-regarded security benchmark of two times. And this remains robust at 2.9 times for fiscal 2018.
Money master
Accounting software specialist Sage Group (LSE: SGE) has also fallen out of favour with stock pickers of late, the business shedding 12% of its share value since the start of November alone. But I believe investors are overlooking Sage's potential to keep doling out monster dividend growth.
The number crunchers expect Sage to ramp up the dividend from 14.15p per share in the period to September 2016 to an improved 16p this year, a 13% year-on-year increase and yielding a decent-if-unspectacular 2.6%.
Predictions of an 18p payout in 2018 -- another 13% increase -- move the yield to 2.9%. And these forecast dividends are also pretty well protected too, with dividend coverage standing at two times and 1.9 times for 2017 and 2018 respectively.
I reckon investors can look forward to increasingly-juicy payouts as Sage's ambitious switch to a subscription-based pricing structure pays off.
Transatlantic titan
Promotional goods powerhouse 4Imprint Group (LSE: FOUR) has also seen its share price slide more recently, the company toppling 10% from record peaks punched just last month.
Investors have kept on selling despite 4Imprint advising that like-for-like sales surged 13% during 2016, a result that is expected to have drive underlying pre-tax profit "towards the top end of market expectations."
With revenues surging across North America and the UK, City brokers believe 4Imprint has what it takes to keep lifting the dividend, and a predicted 42.5p per share payment last year is expected to advance 10% in 2017 to 46.8p, yielding a handy 2.5%. And the payment is forecast to rise 9% next year, to 51.2p, pushing the yield to 2.8%.
Dividend coverage may fall slightly below the benchmark of two times through to next year, though still ringing in at a robust 1.8 times. And I reckon 4Imprint's steadily-rising cash pile should soothe any fears over current projections being met.
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Royston Wild has no position in any shares mentioned. The Motley Fool UK has recommended Sage Group. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
