A mixture of brilliant profits potential and an ultra-progressive dividend policy convinces me that Ashtead Group(LSE: AHT) could prove a lucrative stock selection in the years to come.
Investor appetite for the rental equipment provider remains white hot, and it strode to fresh record peaks just shy of £18.50p per share late last week as latest trading numbers from mid-September continued to fuel sentiment.
Ashtead announced then that rental revenues boomed 17% between May and July, to £828.8m, while pre-tax profit boomed 21% to £238.5m.
Revenues at its core Sunbelt division in the US detonated 15% in the period thanks to positive trading conditions across the Pond. And latest construction market data suggests that sales should continue to surge -- spending on construction projects rose 2.5% year-on-year in August, the Commerce Department said, taking growth during the first eight months of 2017 to 4.7%.
And Ashtead is splashing the cash to keep sales roaring higher, the FTSE 100 company having shelled out £377m on capital expenditure and £116m on five bolt-on acquisitions in the past quarter alone.
Start it up
In light of these factors, City analysts are expecting the rentals giant's long-running growth story to continue. And a 14% earnings rise is forecast for the year ending April 2018, which would see the bottom line expanding by double-digit percentages. And an extra 11% increase is anticipated for fiscal 2019.
Such stunning projections make Ashtead very decent value too. Not only does it sport a forward P/E ratio of 15.5 times, but also a PEG roughly in line with the bargain watermark of 1, at just 1.1.
These sunny earnings projections also give plenty of reason for dividend chasers to jump around too. Ashtead hiked the dividend 22% in the last fiscal year to 27.5p per share, and further hefty rises are expected for 2018 and 2019, to 31.4p and 35.2p.
Subsequent yields of 1.7% and 1.9% may not be too much to get excited about right now, but I believe those looking for hot dividend growth need to give Ashtead more than a cursory glance.
I believe that Reckitt Benckiser Group (LSE: RB) is also one of the best bets out there for those seeking chunky earnings and dividend expansion long into the future.
Brands like Nurofen painkillers, Durex condoms and Dettol disinfectant -- or 'Powerbrands' as Reckitt Benckiser likes to call them -- are simply without peer. They're goods that command intense customer loyalty regardless of broader pressure on consumers' wallets.
And with the Footsie company investing vast sums in the development and marketing of these brands across the globe, I am confident sales should continue shooting to the stars.
My positive outlook is underlined by City forecasts which suggest that profits should keep on booming (rises of 9% and 13% are anticipated for 2017 and 2018 respectively).
And these projections are expected to feed into increasingly-pretty dividends, too -- last year's 153.2p per share payment is expected to rise to 167.4p this year and to 188.1p in 2018, estimates that carry chunky yields of 2.5% and 2.8%.
I reckon a forward P/E ratio of 20.4 times is terrific value given Reckitt Benckiser's unbelievable defensive qualities, and expect the business to break out of its current share price downtrend sooner rather than later.
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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Reckitt Benckiser. 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.