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Not many UK revenue shares have grown their dividend per share yearly for half a century.
However some have – and one member of that elite group is James Halstead (LSE: JHD), a long-established producer and distributor of flooring coverings.
Not solely is the corporate a longstanding dividend grower, it additionally now provides a yield of seven.1%. I reckon it’s a lovely choice for an income-focused investor to think about proper now. Right here’s why.
A confirmed enterprise in a cyclical trade
One motive the revenue inventory’s dividend yield has been rising is these steady-as-clockwork rises (although in fact previous efficiency just isn’t essentially a assure of what to anticipate in future – no dividend is ever assured to final).
However one other is James Halstead’s dismal share worth efficiency. The previous yr has seen the share worth fall 6%. Over 5 years, the share worth has tumbled 55%. That fall means traders who purchase at this time are yielding greater than double what traders who purchased 5 years in the past are yielding.
Whereas that’s a lovely manner of taking a look at issues, it additionally raises the query: why has the share worth misplaced a lot floor?
Briefly, given its deal with industrial flooring, the agency is on the mercy of a market through which buyer demand is considerably cyclical. Leaner financial instances can eat into demand. Certainly this yr noticed UK rival Headlam enter liquidation, underlining the challenges on this market in the mean time.
So can also region-specific issues given the corporate’s world footprint – one threat I see is instability within the Center East persevering with to harm demand in that market, which has traditionally been a profitable one for James Halstead. Nonetheless, the corporate nonetheless managed to develop gross sales there by at least 45% final yr.
With its lengthy historical past, established buyer base and confirmed enterprise mannequin, I see lots to love about James Halstead.
Out of favour, however would possibly the tide flip?
Admittedly, final yr noticed revenues fall barely. Revenue after tax additionally slid, from £41m the prior yr to £35m.
However the enterprise continues to be solidly worthwhile. It’s sitting on a money pile that final yr grew to £76m. That provides it some flexibility in a troublesome market and likewise helps reassure me, together with sturdy ongoing money era, that this revenue inventory can proceed its stellar stretch of dividend development.
Long term although, is the share worth a priority? May it preserve heading south? In fact, any share worth can transfer down, even when it has already fallen a great distance.
Nevertheless, I’ve added James Halstead to my portfolio as a result of I believe its present share worth doubtlessly provides good worth from a long-term perspective, on prime of the enticing dividend yield.
The market capitalisation of £527m doesn’t look excessive to me given the standard nature of the enterprise, its confirmed profitmaking potential and the money pile.
For the affected person investor, I see this UK revenue inventory as nicely price a glance.
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Christopher Ruane owns shares in James Halstead.
