Aggreko (LON:AGGK) (LSE: AGK) is a share that I’ve long championed, and latest trading details released this month reinforced my positive take on the business.
The broader market has sought to disagree, however, and the FTSE 250 firm’s share price has plummeted in the wake of the third-quarter update. It’s now trading at its cheapest for four months.
Much of this summer’s gains may have been wiped out, but I’m not worried. Indeed, I believe Aggreko’s subsequent forward P/E ratio of 15.1 times, in line with the widely-accepted value benchmark of 15 times (or below), makes it a hot buy right now.
Sales surging In that aforementioned market update, the business — which rents out power generation equipment for a broad range of sectors, from agriculture and energy to shipping and telecoms — declared that underlying revenues galloped 11% higher in the nine months to September.
Growth may have slowed in recent months (comparable sales were up 14% in the first half of 2018), but this result is still not to be sniffed at. That broad operational base protects it from weakness in one or two areas, as does its broad geographic footprint.
Indeed, at its Rental Solutions arm, a division worth more than half of group revenues, underlying turnover soared 26% year-on-year from January to September thanks to soaring sales in North America (up 32%), as well as solid growth in Europe.
Those hoping that Aggreko can break out of its long-running cycle of earnings dips in 2018 are set to be disappointed, or so say City analysts who are forecasting an 8% drop. They are, though, predicting that it will bounce in 2019 with a 6% profits improvement.
And with the profits picture brightening, the number crunchers feel that Aggreko will have the confidence to start lifting dividends again. Last year’s 27.12p per share dividend is expected to rise to 27.5p in 2018 and again to 28p in 2019, figures that yield a chubby 3.7% and 3.8% respectively.
Even bigger yields! Vesuvius (LSE: VSVS) is another FTSE 250 share offering inflation-busting dividend yields that I’d be happy to buy for 2019 and beyond.
Unlike Aggreko, though, Vesuvius, which manufactures equipment used in the steel and foundry industries, has had no problems lifting dividends in recent times. And thanks to City predictions of further bottom-line growth — earnings rises of 18% for 2018 and 8% for 2019 are currently predicted — shareholder payouts are tipped to keep swelling too.
A 19.5p per share reward is predicted for this year, up from 18p in 2017 and yielding 3.8%. Next year a 20.5p dividend is anticipated, nudging the yield to a tremendous 4%. And I’m tipping payouts to keep striding on along with profits as global steel demand goes from strength to strength.
Right now, Vesuvius trades on a prospective P/E ratio of 10.8 times. This provides a brilliant base for its share price to spring higher in the near-term and beyond, whilst those bulky dividend yields provide a great little bonus. I reckon the engineer is a hot 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.