With many big players under-performing in the current economic climate, one choice for investors is small-cap stocks – and we’ve used TipRanks’ suite of tools to pick out two promising British choices.
Home furnishing retailer Dunelm Group (GB:DNLM) and wealth management company Quilter Plc (GB:QLT) are the two stocks that fit perfectly.
Investors can use the TipRanks Share Screener tool to list out such companies that are offering higher dividends.
Let’s see what’s working for these two companies.
Dunelm Group
Dunelm is a UK-based retailer in the home improvement market. The company offers more than 50,000 products in around 177 stores across the UK.
The company’s online sales saw huge growth during the pandemic, which has started to fade and has pushed the share prices down by 32% in the last year.
The tighter budgets of consumers could dent the company’s sales. However, Dunelm has an edge with a market-leading position and loyal customer base. That should keep it afloat in the long run.
The company posted a growth of 16% in its revenues of £1.5 billion and a 32.4% increase in pre-tax profits of £209 million. This was mainly driven by its digital sales, which contributed 35% of total sales.
Considering this, the dividend story looks stable. In 2022, the company announced a total dividend of 40p per share, which is 14.3% higher than last year’s. The company also announced a special dividend of 37p per share, sitting on a strong cash flow situation.
Dunelm share price forecast
According to TipRanks’ analyst consensus, Dunelm Group stock has a Moderate Buy rating.
The DNLM target price is 959.43p, which represents a 17.3% change from the current price level. The price has a low and high forecast of 770p and 1,230p, respectively.
Quilter
Quilter is a financial services company that helps in planning and managing investments. The company offers financial advice, wealth management, and investment services.
In its interim results announced in August 2022, the company posted a 9% increase in its pre-tax profits of £61 million. This was mainly supported by stable revenues and tighter cost-control measures.
On the other side, the company’s assets under management and administration (AuMA) were down by 12% to £98.7 billion due to market volatility across the global equity markets.
Looking ahead, the company is well-placed with solid long-term prospects. Soaring inflation will lead to more demand for the company’s financial advice segment.
Stable business operations make the dividends look more attractive as the company will be able to maintain them. The company is targeting a progression on the payout range of 50-70% over the next few years.
Is Quilter a buy?
According to TipRanks’ analyst consensus, Quilter stock has a Hold rating.
The QLT target price is 118.2p, which has an upside potential of 26% on the current level. The price has a low and high forecast of 90p and 151.7p, respectively.
Conclusion
These small-cap companies do come with some risk factors; however, their stable business operations and strong fundamentals could provide investors with a reliable income stream in the form of dividends.
