Two new IPOs with tremendous income potential
While it has yet to pay a dividend since going public in November, mortgage lender Charter Court Financial Services(LSE: CFSS) interim results released this morning show the company is well on its way to becoming a dividend dynamo. This is because the board has not only decided to pay out an inaugural interim dividend of 2.8p per share, but has also upped its target payout ratio from 15% of full-year earnings to 25%.
And with the group's earnings rising rapidly thanks to strong demand for the specialist mortgages the company provides, there is plenty of income potential. Indeed, in the first six months of the year, the company's loan book increased 29% to £5,693m, while a strong focus on high quality loans and operational efficiencies led to pre-tax profits jumping from £59.3m to £93.1m year-on-year.
Basic earnings per share for the period clocked in at 29.7p during the period, which suggests a substantial increase on the 35p per share earnings generated in the whole of fiscal year 2017. While this half's figures were boosted by securitising and selling off some of its mortgages, which management doesn't expect to repeat in H2, the bank continues to make good progress on improving its cost-to-income and profit ratios even excluding the effects of these sales.
For the full year, the seven analysts covering Charter Court on average expect EPS of 42.83p, which looks to be on the conservative side given the bank's stellar H1. But if we assume this estimate proves accurate, investors would be in line for a full-year 2019 payout in the range of 10p-11p, which would imply a divided yield of 3.1% based on today's share price.
With its CET1 capital buffer at a very healthy 16.6% at period-end and return on equity reaching a whopping 38.4%, Charter Court is a well-funded cash-printing machine. Needless to say, I reckon this bodes very well for its shareholders and those investors seeking income in the years ahead.
Powering ahead with shareholder returns in mind
Another new market entrant with high income potential is utility Contour Global (LSE: GLO). The company owns and operates a slew of renewable and non-renewable energy plants across Europe, Latin America and Africa that are benefiting from fast-rising demand for energy.
In the half year to June, good organic growth from its thermal plants and new acquisitions boosted the group's turnover by 16% to $535.4m. Encouragingly, the company's management team isn't just focused on revenue growth but also has a laser-like focus on improving cash flow - good news for income investors.
During the six months to June, the company's operations generated adjusted EBITDA of $261.8m while funds from operations, which strips out maintenance capex and other charges, increased 8% to $110.8m This allowed management to pay out $26.6m in dividends of 4 US cents per share.
For the full year, management is guiding for $75m-$80m in dividends to shareholders that would work out to roughly a 4% yield based on today's share price. This is a very decent yield and with management proving adept at juicing turnover and profits through operational efficiencies and portfolio changes, I reckon there's further dividend growth to come from Contour Global over the long term.
Ian Pierce 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.