There’s a variety of pressures that could see many a Stocks and Shares ISA plummet in value next year. Whether it’s Brexit; US trade wars with, well, the whole of the emerging and developed world; Germany moving closer to recession; or growing tension with Iran, there are so many factors that could significantly smack risk appetite across financial markets in 2020.
It’s clear, then, that share pickers need to take steps to protect themselves in what could prove a highly volatile next 12 months. I reckon the following dirt-cheap dividend share could actually thrive in this tense geopolitical and macroeconomic environment. And so do City brokers.
We all know how badly the UK economy is struggling right now. Latest data from the Office for National Statistics shows GDP growth running at its weakest rate since 2010. And if current forecasts are anything to go by, things threaten to get even more difficult in 2020.
The boffins at the Confederation of British Industry expect the domestic economy to grow 1.2% in 2020, down from 1.3% in the current year. It’s critical to note that this estimate is based on the UK exiting the European Union in the next few months and successfully creating a trade deal with our continental neighbours by the end of December 2020, a scenario which, as I have explained before, will likely prove to be no mean feat.
On the march
So who can stand to benefit from these weak economic conditions? Well Begbies Traynor Group (LSE: BEG) for one, a provider of insolvency services to business. In the 12 months to April 2019, it saw organic revenues leap 9% year on year, helped by a 10% rise in the number of insolvencies in the period.
The AIM-quoted business is embarking on an ambitious acquisition drive to capitalise on this fertile trading environment, and helped by the four acquisitions it made in the last financial period, revenues at headline level rose 15%, a result that propelled pre-tax profit 52% higher.
British companies are struggling alarmingly as Brexit uncertainty persists, with recent Insolvency Service data showing the number of corporate insolvencies in the third quarter up 0.4% from the previous three-month period and up 1.6% year on year. These were levels not seen since 2014.
No wonder, then, that City forecasters expect earnings at Begbies Traynor to rise 18% in fiscal 2020 and by an extra 17% in the following financial period. And these estimates support expectations that the annual dividend will keep growing following last year’s 8% rise to 2.6p per share. Rewards of 2.8p and 3p are anticipated for this year and next, readings that yield a chubby 3.2% and 3.5% respectively.
I’d happily buy Begbies Traynor in the realistic hope of big profit and dividend growth, and particularly at current prices (which leaves the firm trading on a rock-bottom, sub-1 forward PEG ratio of 0.8).
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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.
Motley Fool UK 2019