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We regularly discuss how the very best UK dividend shares are highly-established FTSE 100 blue-chips.
That is true to an extent — but it surely doesn’t imply there aren’t any respectable earnings alternatives elsewhere.
On the finish of the day, the very best dividend-paying firms all share comparable traits, whether or not they’re family names or not. These traits are:
- An extended historical past of funds (20+ years).
- Adequate money protection.
- A wholesome steadiness sheet (manageable debt).
Whereas researching motor finance information this week, an unknown small-cap inventory caught my eye: S&U (LSE:SUS). I used to be significantly impressed by its dividend credentials contemplating its comparatively small £237m valuation. Nevertheless it’s not a brand new firm — it was listed on the London Inventory Trade (LSE) within the early 1990’s however was based approach again in 1938.
So I made a decision to take a better look.
What it does
S&U is a UK-listed specialist finance firm working in two distinct niches: non‑prime motor finance and brief‑time period property bridging loans. By subsidiaries it affords rent‑buy (HP) loans as much as round £15,000 and has served 275,000+ prospects in its time.
At round £19 a share, it’s not a very ‘low-cost’ inventory however its valuation suggests good worth. With a price-to-earnings (P/E) ratio of simply 10, it’s effectively beneath the FTSE common.
However as talked about, the true attraction is the dividend profile. With a yield close to 6%, it’s on the excessive finish of the dimensions on the subject of earnings potential. Moreso, it’s well-covered with a 58.9% payout ratio and has reportedly been paying dividends with out pause for 37 years.
That type of monitor file is often reserved for the preferred UK earnings shares — not an under-the-radar small-cap. So what’s the catch?
Dangers to observe
S&U isn’t like many different small-caps. It’s been round for ages, has a reliable monitor file, and has confirmed resilience. These information alone make it a inventory price contemplating for earnings. However like several firm, it isn’t risk-free.
I’ve recognized 4 key areas the place S&U may face difficulties:
- Credit score high quality in non‑prime motor: rising value of dwelling, larger charges, or used‑automotive value falls can push arrears and impairments up shortly.
- Bridging exit danger: if property values soften or refinancing markets tighten, brief‑time period loans can prolong or default, hitting provisions.
- Funding & liquidity: as a small lender, entry to wholesale funding and securitisation markets issues for progress and margins.
- Regulatory surroundings: client credit score conduct guidelines and FCA scrutiny on affordability and collections can influence pricing and progress.
Turnaround potential
One key issue that would tip the scales in S&U’s favour is a restoration within the motor finance sector. Current outcomes (FY2026) point out how credit score efficiency and earnings are bettering after the 2025 motor-finance scandal.
Revenue earlier than tax elevated 32% to £31.8m whereas impairment prices halved to £13m. Extra prospects are paying on time and new motor offers elevated from 12,703 to 18,279.
That helps quell lots of the danger fears, making S&U seem like a gorgeous small-cap earnings play. For buyers searching for new high-yielders to bolster their earnings portfolio, it deserves consideration as a small allocation.
Nevertheless, for those who’d want a extra secure FTSE 100 high-yielder, you would possibly discover this subsequent alternative extra interesting…
What earnings inventory can we like higher than S & U proper now?
Considered one of our Share Advisor analysts has simply launched a model new inventory report that we predict is a must-read for any investor seeking to attempt to generate potential earnings.
And the very best bit is which you could see if for your self, proper now, completely freed from cost!
No jargon. No arduous promote. Only a clear take a look at an earnings share we predict is price your time.
Mark Hartley doesn’t maintain any positions within the firms talked about.
