A Neil Woodford growth and dividend share that could make you rich
Ten Entertainment Group (LSE: TEG) may not be tearing higher following the release of full-year trading numbers, but a 1% advance in Thursday business means that the bowling centre operator is now trading at fresh record highs.
A recent price around 275p per share means that Ten Entertainment’s market value has surged 51% during the past four months. Despite these heady gains, Ten Entertainment can still be picked up for a song, leaving plenty of room for fresh share price advances.
The 10-pin bowling giant, which investment guru Neil Woodford is a very big fan of, advised today that full-year sales rose 8.9% during 2017, to a shade over £71m. The company noted that revenues expansion has continued to pick up steam, with sales in the second half of the year registering at £36m versus £35.1m in the prior six months.
While ongoing expansion has helped turnover to grow, this is by no means the whole story as Ten Entertainment is capitalising on the surging popularity of bowling in Britain. Indeed, the business advised that like-for-like turnover jumped 3.6% last year, underpinned by a 7% surge during the latter six months.
Today’s update gives plenty of credibility to broker estimates that suggest ripping earnings growth in the near term and beyond. In 2018 Ten Entertainment is expected to generate a 16% profits improvement. And next year the bottom line is anticipated to swell an extra 13%.
The prospect of brilliant earnings growth is not the only tantalising reason to buy the leisure star, however. The estimated 9.6p per share dividend for 2017 is expected to jump to 11.5p in the present period, and again to 13p in 2019.
As a consequence, Ten Entertainment carries monster yields of 4.3% and 4.9% for this year and next.
There is clearly plenty for share pickers to get their teeth into, but I do not think this is reflected by Ten Entertainment’s mega-low valuation — it carries a forward P/E ratio of 14 times and corresponding PEG readout of 0.9.
These figures make the bowling behemoth an irresistible buy today, in my opinion.
Investors on the lookout for reliable earnings and dividend growth also need to give Bunzl (LSE: BNZL) a very close look today.
You see, the FTSE 100 company’s broad geographic presence and vast footprint in the US (the company sources more than half of all profits from North America) insulates it from broader economic troubles in one or two territories. In addition, Bunzl’s broad scope of operations also protects it from any slowdowns in certain industries, providing earnings with that little more security.
And assisted by its robust balance sheet, it remains an active player in the M&A arena to keep profits on an upward bent. Just this month it announced the acquisition of California-based safety and personal protection equipment specialist Revco to boost its existing Stateside operations.
City analysts are expecting Bunzl’s long-running growth story to keep rolling, and they have chalked in rises of 6% and 3% for 2017 and 2018 respectively.
The knock-on effect is that dividends are also expected to keep spiralling higher — a predicted payout of 45.5p per share is anticipated to rise to 48.6p this year and to 50.9p in 2019. These figures create yields of 2.4% and 2.5% respectively.
In my opinion Bunzl’s forward P/E ratio of 16.2 times makes the business a steal right now.
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.