Investors don’t usually work on a two-week time frame, but the early signs for Proactive's dividends-focused Geraldine Weiss-inspired stock filter are promising.
- Read Do dividends still not lie? (A word to the Weiss)
- Read Dividends don’t lie … but which stocks might be fibbing?
If you read the above articles, you’ll see that after applying many of the filters adhered to by stock picker Geraldine Wise, the “Grand-Dame of Dividends”, we unearthed three stocks deemed worthy of backing: Aberdeen Asset Management PLC (LON:ADN); RPS Group PLC (LON:RPS) and UNITE Group PLC (LON:UTG).
All three have done well since we ran the filter on 23 February and, coincidentally, all had news today.
Fund manager Aberdeen Asset has risen from 268.5p to 300p (11%), helped by news that Standard Life is to take it over in an £11bn all-share deal.
In all honesty, the filter is not designed to identify takeover stocks, but it could be argued that it does a decent job of identifying undervalued stocks, and if any company is going to like an undervalued stock, it is a fund manager such as Standard Life.
Standard Life also happens to be a big dividend payer – 19.82p in respect of fiscal 2016, which is a near 5% yield.
We’ll have to wait to see whether the all-share merger goes through to see whether holding Standard Life in lieu of Aberdeen shares fits the bill in terms of Geraldine Weiss’s investment principles.
RPS Group, the environmental consultancy firm, has risen 2.5% since 23 February, helped by a note from house broker Liberum today after last Thursday’s results.
Earnings per share of 16.6p were more or less unchanged year-on-year and the dividend was held at 9.7p, but Liberum has reinstated dividend growth of 3% year-on-year in its forecasts.
Weiss apparently looked for stocks that had raised dividends at a compound annual rate of at least 10% over the previous 12 years, so a return to dividend increases would be a good sign.
The dividend yield of 3.9% is the highest among its UK listed peers, Liberum notes.
Profits from RPS’s consultancy work in the energy sector halved last year from 2015, but the encouraging thing was the division moved back into profit in the second half of the year.
Student accommodation developer UNITE Group had its price target lifted from 760p to 810p by JP Morgan Cazenove today following better-than-expected results a couple of weeks back.
Unite offers a yield of 3.6%, rising to 5.1% in 2019 based on Cazenove’s dividend forecasts.
Caz recommends its clients be overweight in Unite stock.
Before we get too self-congratulatory, the fourth company thrown up by the filter – Mitie Group PLC (LON:MTP) – has risen 7%, but we rejected it on the grounds that a hefty dividend cut is widely expected.