UK Markets open in 5 hrs 38 mins

Forget the Sirius Minerals share price! I’d rather buy these dividend growth stocks for my ISA

Royston Wild
Illustration of bull and bear

The Sirius Minerals (LSE: SXX) share price might be off the near-decade-long lows around 3p struck in late September but in recent sessions it’s started trending lower again.

The market’s paying little attention to news that Sirius inked another monster supply and distribution agreement for its Poly4 product late last week. Under a ten-year agreement with Muntajat, the Qatari company will sell and distribute material into Africa (bar Nigeria and Egypt), Australia, New Zealand, and certain Middle Eastern and Asian territories. Volumes would rise steadily through the period to hit 2m tonnes in year five of the deal and 2.1m in year eight.

Should we be shocked that there’s been no takers for Sirius stock, though? After all, there’s no guarantee that the FTSE 250 firm will even be around in a year’s time given the challenge it has to raise funds by the end of March. The best it seems that investors can hope for is for the battered digger to arrange the sort of refinancing that would dilute existing shareholders’s stakes into oblivion.

A great dividend grower

So you should forget about investing in the frazzled fertiliser producer, I say. If you’re seeking surefire and scintillating earnings growth in the years ahead – and with it the prospect of booming dividends, too – you’d be much better off buying shares in 4Imprint Group (LSE: FOUR).

The FTSE 250 company manufactures a wide range of promotional products for business (think t-shirts, mugs, notepads, etc.) and already has a long history of earnings growth behind it. This has enabled ordinary annual dividends to rise 160% over the past five years alone, a record built upon its heavy exposure to the booming US economy and an ability to tug market share away from its competitors.

And with City brokers expecting more impressive earnings growth (of 21% and 16%) through the next couple of years, it looks like more hefty payout hikes can be expected. The 53.15p per share reward of last year is expected to rise to 64.8p this year and again to 84p in 2020, figures that also yield an inflation-beating 2.1% and 2.7% respectively.

A FTSE 100 pick for your ISA

I’d also be happier to buy Ashtead Group (LSE: AHT) over Sirius Minerals today.

Like 4Imprint Group, profits at the rental equipment supplier are also expected to rise by double-digit percentages over the next couple of years – by 17% and 14% in the fiscal years to April 2020 and 2021 – and this leads to expectations of more dividend growth as well.

Shareholder payouts here have also swelled around 160% over the past half a decade, and the City expects last year’s 40p per share dividend to rise to 44.3p this year and to 48.8p next year, leaving yields of 2.1% and 2.3%. It’s no surprise that brokers are so bullish, either, given the exceptional sales opportunities afforded by its ambitious US expansion plan.

One final thing to note: at current prices the FTSE 100 firm carries an undemanding valuation of 10.2 times forward earnings. I consider this to be a shockingly low rating for a firm of this calibre, and reckon it’s a white-hot buy for your ISA today.

More reading

Royston Wild owns shares of Ashtead Group. The Motley Fool UK has recommended 4IMPRINT GROUP PLC ORD 38 6/13P. 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