I'd sell this 4% yielder to buy this FTSE 100 dividend star instead

Money printer De La Rue(LSE: DLAR) extended its recent downtrend in Tuesday trade, the share sinking 2% to hit fresh two-month lows.

Today's performance is clearly not reason for investors to tear their hair out. But during the past three weeks the FTSE 250 business has seen its value fall 10%, and I am tipping De La Rue's market value to keep on deteriorating.

The firm advised that revenues rose 29% during the 27 weeks to September 30, to £244.7m, with growth reported across all divisions. At its core Currency arm, sales advanced 36% year-on-year to £185.3m, while at Identity Solutions and Product Authentication & Traceability, turnover increased 3% and 20% respectively, to £39.4m and £20.2m.

As a consequence De La Rue saw adjusted operating profit improve 11% in the six months to £26.6m.

Cash concerns

But scratch a little deeper and the performance does not appear so impressive. Indeed, chief executive Martin Sutherland commented today: "The strong revenue growth in the first half, driven by high volumes of lower margin Banknote Paper and Print orders, reflects the lumpy nature of contracts. Performance in the second half is expected to be broadly in line with the same period last year."

Even though the outlook for De La Rue's fraud-tackling activities remains pretty bright, I remain concerned over future demand at the company's Currency division as the world steadily moves away from cash and technology takes over.

Another cause for concern is the rising stress on the money master's balance sheet (an increase in working capital caused net debt to balloon by £16.5m between March and September to stand at £137.4m). And the vast amounts De La Rue is having to shell out on product development to keep revenues rising threatens to keep it mired in debt and put future dividends in peril. R&D investment increased by 33% in the first six fiscal months, it said today.

City analysts are expecting De La Rue to put recent earnings turbulence to bed with bottom-line rises of 4% and 12% in the years to March 2018 and 2019 respectively.

A cheap forward P/E ratio of 13.2 times is not enough to encourage me to invest, however, given the prospect of sliding sales in future years, nor are predicted dividends of 26.9p and 30.1p per share this year and next (figures that yield a handsome 4.2% and 4.7% respectively).

Dividend hero

Instead, I reckon those seeking jumbo earnings growth and chunky dividend yields need to pay RSA Insurance (LSE: RSA) close attention.

In 2017 the insurance colossus is expected to see profits growth rise just 3%, although expansion is expected to detonate to 25% next year. These predictions make the FTSE 100 star a great value pick as well, the share carrying a forward P/E rating of just 15 times.

Moreover, these bright earnings projections are predicted to keep dividends rising at a terrific pace -- last year's 16p per share reward is anticipated to sprint to 21p in 2017 and to 29.3p in 2018, resulting in mammoth yields of 3.4% and 4.8% for these years.

RSA saw net written premiums rise 8% during July-September, to £5.1bn, it advised in late October. And thanks to its broad geographic footprint (premiums in Scandinavia and Canada jumped 8% and 16% in the third quarter), and strong position in its core UK market (premiums here rose 5% in Q3), I am backing it to deliver brilliant shareholder rewards now and in the future.

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Royston Wild 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.

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