10 Growth Shares Paying Great Dividends

Published in Investing on 12 June 2012

Find fast-growing companies paying large dividends today.

Don't be fooled. When investing in shares, you don't have to choose growth or dividends. There are shares available today that offer both.

I trawled the market looking for companies that are forecast to increase earnings per share (eps) by at least 10% this year, following an increase of at least 10% in the prior year. I then removed any shares yielding less than 4%.

This returns an exclusive list of just 36 shares. I've picked a selection across sectors and markets.

CompanyMarket cap (£m)eps growth last year (%)eps growth forecast (%)Yield (%)
Imperial Tobacco (LSE: IMT)23,67516.911.94.2
Admiral (LSE: ADM)2,91913.110.95.3
ICAP (LSE: IAP)2,15124.429.76.6
Balfour Beatty (LSE: BBY)1,93214.822.64.9
UBM (LSE: UBM)1,34911.426.94.8
De La Rue (LSE: DLR)1,01469.130.84.2
National Express (LSE: NEX)925.536.9455.3
John Menzies (LSE: MNZS)359.423.211.84.0
4imprint (LSE: FOUR)75.523.620.45.1
Renew Holdings (LSE: RNWH)42.590.336.64.3

I've picked out five shares that might be worth researching further.

1) Admiral Group

FTSE 100 (UKX) insurance specialist Admiral is one of the UK's best growth stories. Founded in 1993, the company today has a market capitalisation of nearly £3bn. Admiral employs over 4,500 people and is Wales' most valuable listed company.

Admiral owns the eponymous insurance brand along with others such as elephant.co.uk and confused.com. At the current price, Admiral looks to be a triple-play of blue chip strength, growth and value.

In the last six years, Admiral has increased net profits from £100m to £220m; in that time, eps has increased, on average, 16.7% per annum.

Dividend growth has outstripped this. The 2011 payout of 56.5p is far ahead of the 18p shareholders received for 2006. In that time the dividend has increased, on average, 27.0% every year.

Growth in both profits and dividends are expected to continue. The 2012 consensus forecast is for eps of 90.6p and a dividend of 83.3p. This puts the shares on a forward price-to-earnings (P/E) ratio of 11.9 and a yield of 7.8%.

2) Renew Holdings

Renew Holdings has transformed itself in the last five years as it has moved away from housebuilding. Much of the company's revenue today comes from engineering services to the energy and infrastructure sectors.

This change means the company is now less reliant on the UK housing market. Today, Renew targets long-term non-discretionary work, such as railway tunnel maintenance and nuclear decommissioning.

Renew managed to hold its shareholder dividend throughout the financial crisis. That payout is now increasing again and is expected to hit 3.15p per share for 2012.

The impressive profit growth the company demonstrated for 2011 is expected to continue into 2012. As a result, Renew trades on a just 6.25 times the 2012 consensus eps forecast.

3) ICAP

ICAP occupies an unusual niche in the financial services industry: it is an interdealer broker. This means the company is a middle-man for financial institutions that wish to deal with each other while preserving anonymity.

ICAP's history can be traced back to 1986 and its formation by Michael Spencer. Since then, the company has enjoyed massive growth and now has a market cap of £2.2bn.

With consensus forecasts pointing to a 30% rise in eps this year, the company remains a growth play. The dividend record at ICAP is also impressive. In the last six years the payout to shareholders has been increased year-on-year. Current consensus suggests the dividend will edge ahead again this year to 22.1p per share. That puts ICAP on a forward yield of 6.5%.

ICAP currently trades on forward P/E of 8.6. Given the company's growth record and strong market position, that looks cheap.

4) National Express

National Express runs buses and trains in the UK, US, Spain and Morocco.

The company has disappointed shareholders in recent years. Prior to the financial crisis, the shares traded at around 500p. The company announced a loss and cut its dividend sharply in 2008, and didn't pay out at all for 2009.

Since then, profits and dividends have been recovering. The company managed to report a 36.9% rise in eps for 2011 and a massive 45.0% rise is expected for the current year. For 2013, National Express is forecast to pay a 10.3p dividend, putting the shares on a forward yield of 5.7%.

5) Balfour Beatty

Balfour Beatty is an infrastructure company operating around the world. In 2011, the company made £9.4bn of sales. Today, Balfour Beatty has a market capitalisation of £1.9bn.

The company describes itself as having the expertise and resources to operate at every stage of the infrastructure life-cycle: from financing and design to maintenance and support.

Despite worldwide economic conditions, Balfour Beatty has managed to increase sales, profits and dividends in recent years.

The company grew eps by nearly 15% in 2011 and a massive 22.6% increase is expected for 2012. The shareholder dividend has been rising year-on-year for six years and is expected to reach 14.4p for 2012. At today's price the 2012 yield for Balfour Beatty would be 5.1%.

Finally, let me tell you that more income ideas can be found within this Motley Fool report: "8 Shares Held By Britain's Super Investor". The guide reviews the investing approach and portfolio of City dividend legend Neil Woodford and is free to download today.

Further investment opportunities:

> David does not own shares in any of the above companies.

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

CockneyRebel 13 Jun 2012 , 7:35am

How did you miss GFRD ?

jaizan 13 Jun 2012 , 7:52am

Shouldn't some of these be classified as "recovery situations" rather than growth?
There's a difference between a long term growth story and a company which is recovering from a major setback a couple of years ago (De La Rue).

peep1253 14 Jun 2012 , 4:53pm

Dont get all this dividend hype thing.

If I invest 50k ,I am interested in how much that earns me in say 5 or 10 years ,The earnings will be the dividend earnings plus growth earnings,to just go on about the dividend as some measure of investment worth, is silly.

Take the example of National Express,as you say it was 500p 5yrs ago. Its now 180p,so my £50k investment would have earned me -£34k the last 5 years as I have now only 16k of my investment left out of 50k. ,yet I am supposed to think its a good investment because of the divi. A divi of 2% above inflation ,say 6% will take me about 70years to break even.

performer777 14 Jun 2012 , 5:05pm

I tend to agree with Jaizan & peep. These are not necessarily growth stocks, but mainly recovery stocks, although the markets treatment of Admiral has been weird considering it's tremendous recent growth record. I use the DividendMax risk adjustment filter to find the right balance between growth and yield. It allows you to filter out on Market cap, Consecutive annual dividend increases and forecast dividend increase and then presents you with a yield. Awesome.

AChembi 19 Jun 2012 , 2:25pm

Hi peep1253
I recommend you 3 good counters i.e Tullow Oil [LSE:TLW], Dragon Oil [LSE:DGO] and Pan African Resources [LSE:PAF]. The past 5 years they have achieved the following performance... 203% [Tullow Oil], 179% [Dragon Oil] and 116% [Pan African Resources].

johandesilva 09 Jul 2012 , 9:04am

@AChembi

Ditto your picks. I am in heavily in PAF and follow the two oilies but currently small cap oil money is in IAE for its spectacular fully funded PE growth (typical oil risk apply).

Keep an eye on PAF's low costs as if these rise there is allot of risk as with all miners these days.

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