One 5% yielder I'd buy today and one I'd avoid
Bonmarche Holdings(LSE: BON) has provided the market with an end-of-week spook, the share sinking 23% in Friday trade after the release of a frankly shocking market update.
The FTSE 250 retailer said that sales tanked 5.5% during the 13 weeks to December 30, marking a significant decline in customer demand in recent months (by comparison revenues actually rose 0.9% during the 39 weeks to December 30).
In its stores, like-for-like (LFL) revenues dropped 9.7% during the last 13 weeks, it said, while online sales improved 28.5% in the period. Both of these also represented a decline more recently.
Commenting on the results chief executive Helen Connolly said: "The clothing market became more challenging during this quarter, especially on the high street; consequently our store LFL was disappointing."
And she added: "There remains uncertainty as to how trading conditions will evolve as we enter our final quarter. We do not anticipate material changes in the underlying market conditions, and in this short-term outlook, the weather represents the most significant uncertainty due to its effect on consumer shopping behaviour."
The latest batch of UK retail sales data released today has added doubt to Bonmarche's ability to bounce back, too. Office for National Statistics numbers showed sales volumes dropped 1.5% during December, the biggest month-on-month drop since June 2016. And conditions are likely to remain tough as inflationary pressures crimp consumer spending power.
Square Mile consensus had been predicting earnings to boom 26% in the 12 months ending March 2018, and an additional 20% was forecast in fiscal 2019. However, in the wake of today's disastrous update these numbers are set for swingeing downgrades, of course. And thus investors should pay little attention to a dirt-cheap paper valuation, Bonmarche carrying a forward P/E ratio of 7.9 times.
I confess that I was previously confident that the clothes giant would be able to overcome current difficulties for the retail sector thanks to its emphasis on the value end of the market. But with conditions having worsened since then, investors should maybe give Bonmarche a wide berth today, even in spite of its monster dividend yields of 7.6% and 7.8% for this year and next.
Unlike Bonmarche I would have no crushing concerns over the gold digger Polymetal International's (LSE: POLY) earnings potential right now.
Bullion values hit a four-month peak around $1,340 per ounce earlier this week as a slew of disappointing economic data from across the Atlantic heaped fresh pressure on the US dollar.
There is plenty of reason to expect demand for the safe-haven asset to continue bubbling higher too, as Brexit-related fears continue, the intrigue surrounding the Trump presidency looks likely to persist, and fears of lumpy economic growth and massive debt in China drag on.
And surging production levels are putting Polymetal in great shape to capitalise on this situation. Total gold equivalent output at the Russian business leapt by more than a quarter during Q3, to 470,000 ounces.
Given these factors, the City is expecting earnings at the FTSE 250 firm to jump 16% and 18% in 2018 and 2019 respectively, and thus keep dividends marching higher too. Consequently the gold colossus sports massive forward yields of 4.9% and 5.8% respectively.
An ultra-low P/E ratio of 10.6 times confirms Polymetal as a dividend great worth checking out today, in my opinion.
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.