Sylvania Platinum (LSE:SLP) is a classic dividend king I’d buy right now in spite of the current over-valued state of the stock market. Here’s why I think this stock can help you get rich.
The FTSE 100, just like the world’s other indexes, has been on the rise since the end of March. In fact, the rally has been wild. The reason for this is the extremely cheap money being pumped into the economy by most countries’ central banks. It even seems to me that this money fuels financial markets more than real economies. Share prices are rising but corporate earnings are not matching the stock markets. This is making me quite cautious right now. In fact, I expect another stock market crash.
How should I invest to retire early
I’d recommend novice investors to start with index funds. The simplest way to produce reasonable gains is to buy the FTSE 100 index, investing a fixed sum of money every month. My Foolish colleagues have estimated that the gains would average 6% per year after inflation. These results can be partly achieved because index funds also pay you dividends. Reinvesting them would allow you to earn a little bit extra cash. But if you invest more during bear markets, you’ll achieve even stronger gains.
But choosing ‘good’ individual shares can help you outperform the Footsie.
Sylvania Platinum, the dividend king
Sylvania Platinum is one of these good companies, in my view. It keeps raising its dividends. According to the company’s investor presentation, Sylvania Platinum paid a maiden dividend of 0.35p per share in the first half of 2019. It then raised the dividend to 0.78p per share in the first half of 2020. It’s logical to think that it will raise its dividends again, so that its yield will average over and above the FTSE 100’s average of around 4%. This would make the small cap to become one of the Footsie’s dividend kings. Although Sylvania Platinum is small, it has enough cash. It was even able to announce a share buyback programme on 1 July. The company will keep buying back some of its own shares until 30 September 2020. It’s trading at a low price-to-earnings (P/E) ratio of about 8.
And how about the earnings drivers? Well, palladium, one of the most important metals it extracts, is very rare. Just imagine: in the world there are 30 times more gold reserves than there are palladium reserves. And of course, tighter supply means higher prices. Palladium is used in producing catalytic converters for cars and electronics. Indeed, during recessions and stagnations, the demand for cars, electronics, and industrial metals like palladium is under pressure. But this too shall pass. It also seems to me that the current palladium price fully reflects negative economic growth.
Should I buy the dividend king?
Buying Sylvania Platinum can, in my view, help you retire early. First, the share price offers great potential for growth. Additionally, the dividends can be reinvested. The power of compounding looks stronger when we buy a company that keeps raising its dividends.
So, although I’m mindful of the macroeconomic and political risks, I am in favour of buying this dividend king. A great portfolio should include a reasonable number of dividend-paying companies to help you achieve great results.
The post A dividend king I’d still buy now to get rich and retire early appeared first on The Motley Fool UK.
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Anna Sokolidou 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 2020