Several dividend stocks look dirt-cheap to me right now. And if I had some spare cash to invest I’d be tempted to buy some of them now to hold for the long term.
For example, IG Group (LSE: IGG) has a robust multi-year record of financial figures. The trading platform provider has generally delivered rising operating cashflow, earnings and shareholder dividends. And those trends look set to continue.
An underlying agenda for growth
City analysts expect modest single-digit percentage increases in earnings and dividends for the current trading year to May 2023. And they anticipate yet more again the following year.
I used to view IG as a fast-growing enterprise. However, these days I see it as more of a stalwart dividend-payer. And like all the best income shares, growth remains on the agenda in the underlying business. Although the rate of increase anticipated in the figures is modest.
But growth is still important. And that’s because I want all my dividend-paying companies to increase their shareholder payments a little each year.
And the signs look promising. The company has a growth agenda and it’s committed to delivering shareholder returns via its progressive dividend policy. There’s also a share buyback operation in full swing.
My assumption is that demand for the company’s products and services will not deteriorate any time soon. However, I could be wrong. And if speculation becomes less attractive for the firm’s customers — perhaps because of hard economic times — I could lose money on the shares.
However, with the share price near 820p, the forward-looking dividend yield is running just below 6% for the trading year to May 2024. And I reckon that’s attractive. But estimates for the dividend could prove to be incorrect. Nevertheless, I’m attracted to the stock now for my long-term, dividend-led portfolio.
Small but growing
But I also like the look of Spectra Systems (LSE: SPSY). The business is a leader in machine-readable high-speed banknote authentication, brand protection technologies, and gaming security software.
And with the share price near 153p, the forward-looking dividend yield is just above 6% for 2023. The dividend record shows a rising trajectory since 2017. And solid growth in revenue, earnings and cash flow has backed the trend. So, at first glance, the figures suggest Spectra Systems could make a promising dividend investment in my portfolio.
Looking ahead, City analysts predict robust single-digit percentage increases in earnings and the dividend for this year and next. And the company delivered a strong set of half-year results in September with an optimistic outlook statement.
As with all businesses, operational setbacks may arrive at any time. And the risks are perhaps higher for Spectra shareholders because it’s a small listed company. The market capitalisation is just around £67m.
However, the stock still tempts me now. And I’d be inclined to add it to my long-term portfolio.
Kevin Godbold 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.
Motley Fool UK 2022