With year-end financials slated for release on Tuesday, June 18, I reckon now is a great time to buy into Ashtead Group.
The equipment rental business has seen its share price slip 10% during the past six weeks, weakness which now leaves it dealing on a dirt-cheap forward P/E ratio of 9.7 times. This presents a brilliant buying opportunity, in my opinion, and particularly given the strong possibility of yet another rip-roaring trading update.
Shrugging off fears over the health of the US construction market, Ashtead, which generates almost all profit from North America, continues to pick up the pace. Not only is it witnessing “strong end markets,” but efforts to expand the size of the group through targeted M&A is working wonders in driving up its share of the market.
It wasn’t a surprise that the FTSE 100 firm reported a 19% pick-up in underlying revenues during the three months to January, then, when it last reported to the market back in March. This was up from the 17% on-year improvement recorded in the prior quarter.
Now Ashtead has a long record of annual earnings growth behind it, a story which appears as if it has a long way to go before running out of steam. City analysts agree, and are expecting another double-digit, bottom-line rise (by 16%, to be precise) for the 12 months to April 2020.
With this come expectations that Ashtead will keep raising dividends at a healthy rate, too, following the 20% hike for fiscal 2018 to 33p per share and the big increases before then. Another chubby raise is predicted by brokers for the year just passed (to 37.8p), and another to 41.3p for the present fiscal period, resulting in a 2.1% yield.
A Safe Pair Of Hands
There’s clearly bigger yields to be had elsewhere, though if you’re seeking strong dividend expansion long into the future I reckon Ashtead is worthy of serious attention today. What’s more, I would extend this praise to FTSE 250 share Safestore Holdings, too.
Annual payouts at the self-storage provider have also sprinted skywards over the past several years, up 16% in the last year alone (to October 2018) to 16.25p per share. And the number crunchers are anticipating another hike in this fiscal year to 17.4p, a figure which yields an inflation-bashing 2.6%.
Handsome dividend growth isn’t the only similarity between the two stocks, however. Like Ashtead, Safestore is also poised to release next financials on Tuesday, in this case half-year trading details.
And judging from the strength of results last time out — in February it said that revenues were up 6.4% in the three months to January, up from 5.6% in the previous fiscal year — Safestore is in great shape to put out another stunning set of numbers as well. Holding onto our possessions rather than throwing them out is becoming a national pasttime in Britain, too, and this particular business is riding the crest of a wave as a result.
Now the business may change hands on an expensive prospective P/E multiple of 22.8 times but this shouldn’t preclude fresh share price strength when those new trading numbers are released. In fact, fully expect Safestore to hit fresh record highs in the days ahead.