These dirt-cheap dividend heroes yield as much as 10.8%! I bet you’ve never even heard of them
Reach (LSE: RCH) is a share that rebadged itself last March following the acquisition of Northern and Shell’s Express and Star powerhouse newspaper titles, thus putting the era of Trinity Mirror on the bonfire.
In times gone by I have celebrated the exceptional sales opportunities afforded by this acquisition, and I’m pleased to say that latest trading details released last month vindicated the rationale of the move. Group turnover boomed 23% during the fourth quarter thanks to the contribution of its new blockbuster titles, and as an added bonus, Reach advised that synergy savings from the deal will have clocked in at £3m versus the £2m forecast as recently as October.
Consequently the publisher declared that full-year performance will barge past market expectations.
Reach now has the bit between its teeth and I’m expecting City predictions of a 5% earnings rise, and a 5% dip, in 2019 and 2020 respectively to be upgraded in the weeks and months to come.
Big, big dividends
Another cause for celebration is the rate at which the business is churning out cash, a quality that it estimated would push net debt to £55m as of the close of 2018 from £81m just six months earlier and which underpins predictions of big dividends in the near term and beyond. Reach is anticipated to lift the expected 6.1p per share total dividend for last year to 6.4p this year and to 6.7p in 2020, figures that yield a staggering 10.3% and 10.8% respectively.
It also trades on a forward P/E ratio of 1.6 times. Of course the newspaper market remains under extreme pressure, but I believe that this valuation is much too cheap and suggests that the market remains far too cautious. In fact, I reckon this low rating gives plenty of scope for Reach to extend December’s perky share price performance as we move through 2019 as the top line picks up a head of steam.
Another big yielder
Those seeking brilliant income shares off the beaten path may also want to give Watkin Jones(LSE: WJG) a close look today.
The student accommodation play is in an increasingly robust position to capitalise on the inward flow of university attendees to the UK as it ramps up building activity. In the fiscal year to September 2018, it completed 10 student accommodation developments comprising a total of 3,415 beds. And it has taken steps to reinforce its build pipeline for the next few years with four development sites with a total of 2,189 beds already having been secured.
And Watkin Jones has plenty of financial strength to keep the construction work rolling, as well as to keep paying out above-average dividends.
City analysts agree, at least on the latter point, and predict that the dividend will rise to 8p per share in fiscal 2019 from an anticipated 7.3p for last year, supported by an anticipated 7% earnings rise and yielding a chubby 3.8%. And there’s additional good news for next year, an estimated 9% profits bounce giving rise to an expected 8.7p dividend and a subsequent 4.1% yield.
I believe that Watkin Jones, like Reach is a great share to buy and to squirrel away for the years ahead, and particularly so today given its cheap forward P/E ratio of 13.2 times.
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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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