James Fisher & Sons (LSE: FSJ) might not be offering the sort of dividend yields to get your pulse racing. Indeed, at 1.9% for 2019, it sits some way below the UK mid-cap average of 3.3%. However, the rate at which it’s raised annual dividends in recent times might put it on the radar of many an income chaser.
In 2018 alone, the business — which provides a variety of engineering services to the marine, oil and gas sectors — raised the annual payout 10% year-on-year to 31.6p per share. And City analysts expect it to boom to 35.2p this time around, supported by predictions of a 5% profits rise. I’m not tempted for even a second to buy shares in James Fisher, though, given the prospect of tough trading conditions that threaten further dividend growth in 2020 and beyond.
The engineer declared in recent days that pre-tax profits of £56.1m are likely this year, missing its previous expectations due to troubles at its Marine Support division. Conditions may have been better at its Offshore Oil and Tankships divisions of late, though the possibility of severe oil price weakness in 2020 (and possibly beyond) is a big worry for me. And with James Fisher dealing on an elevated forward P/E ratio of 20.3 times, some significant share price falls could be just around the corner.
I’d much rather use my hard-earned investment cash to buy shares in Springfield Properties (LSE: SPR). Like James Fisher, this stock also has a history of lifting dividends at a spectacular rate, but in this case, share pickers can also enjoy market-beating yields. And more importantly, trading conditions remain robust enough to suggest that payouts should keep shooting skywards beyond the immediate term.
In the last fiscal year (to May 2019) the Scottish housebuilder, supported by a 69% year-on-year improvement in adjusted pre-tax profits (to £16.5m), decided to raise the annual dividend an astonishing 19% to 4.4p per share.
And it’s no surprise that, with the number crunchers predicting a 9% earnings rise in the current financial period, another meaty payout increase is being tipped. A 5.4p per share reward is currently expected, a reading that yields a mighty 4.6%.
A brilliant ISA buy
The wider housing market might be suffering the impact of Brexit fatigue, though thankfully the strength of first-time-buyer demand continues to boost the new-build providers like Springfield. According to UK Finance, there were 8,810 new first-time-buyer mortgages completed north of the border in the third quarter, up 1.6% year on year.
And this particular housing giant is ramping up build rates to fully capitalise on this favourable trading environment. Last year it built 952 new homes, up 24% from 2017 levels. At current prices, Springfield trades on a forward P/E ratio of 7.7 times, one which sits inside the widely-regarded bargain region of 10 times and below. Combined with that huge dividend yield, I reckon the business, unlike James Fisher, is a top ISA buy today.
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.
Motley Fool UK 2019