Harvey Nash(LSE: HVN), the global recruitment and professional services group, is highly optimistic about the prospects for the global employment market.
Even though other recruitment services firms may be fretting about the threat Brexit poses to their business models, Harvey Nash's management is not going to let these concerns slow growth. In a trading update issued today, ahead of the company's annual general meeting, chairman Julie Baddeley said that the company is actively considering a number of acquisitions to help generate growth, especially in the market for technology digital talent.
Management expects to make several purchases before the year is over subject to "stringent financial hurdles".
The pre-AGM statement also notes that the group is performing in line with management expectations for the fiscal year so far despite the geopolitical headwinds including the UK general election. A key measure of contract work in progress is "comfortably ahead of last year". Considering this statement, it looks as if the firm is on track to meet City expectations for the fiscal year ending 31 January 2018.
The City is expecting the company to report earnings per share growth of 3% for the financial year, taking pre-tax profit to £9.1m, up from £8.5m last year and earnings per share to 9.1p giving a P/E ratio of 8.8 at current levels. As well as this low valuation, shares in Harvey Nash also support a highly attractive dividend yield of 5.3%. The per share payout of 4.3p is covered more than twice by EPS and analysts are expecting payout growth of 7% next year, giving a dividend yield of 5.7% at current prices.
Committed to the dividend
Harvey Nash isn't the only cheap dividend stock around at the moment, larger transport business Stagecoach(LSE: SGC) also looks to be an undervalued income play.
Yesterday's results from Stagecoach showed just how committed management is to the company's dividend payout to investors. For the year to 29 April, revenue rose by around 2%, but earnings per share declined from 17.1p to 5.5p thanks to some exceptional charges.
However, management confirmed that the company's dividend payout for the year would rise by 4.4% to 11.9p, which is equal to a yield of 6.4% at the time of writing.
After a tough 2016 financial year, City analysts expect Stagecoach's outlook to improve for the year ending 30 April 2018. As last year's exceptional charges are not supposed to be repeated, analysts have pencilled-in earnings per share for the year of 21.2p. For the period a dividend payout of 12.2p is expected, giving a dividend yield of 6.6% at current prices. These forecasts also indicate that the dividend payout for the next financial year will be covered 1.7 times by earnings per share. Further, after recent declines shares in Stagecoach currently trade at a forward P/E of 9.9. If it's income at a reasonable price that you're after, Stagecoach could be a great buy.
Dividends: The easiest way to a million
Dividends are essential for building wealth over the long term as they have the potential to more than double your returns through the miracle of compounding.
Being able to compound your wealth at a steady rate year after year is crucial if you want to achieve financial independence. To help you achieve this key aim, our analysts have recently put together this Foolish Guide To Financial Independence. The report is entirely free and is packed full of tips and tricks to help you boost your wealth.
Click here to download the report for free today. What have you got to lose?
Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has recommended Stagecoach. 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.