Luxury profit margins from a budget dividend stock
Last week we added a company with a 9% dividend yield to our Income Booster portfolio. This week's income pick this week offers a forecast yield of almost 8% for new investors.
Regular readers may be wondering whether we've abandoned our habitual prudence regarding dividend affordability. We don't think this is the case. Both of the companies concerned offer an unusual combination of high profitability, modest valuation, and strong cash generation.
Why are such profitable businesses trading on modest valuations? The main reason is that the market appears to have lost confidence in their ability to deliver growth. For investors who want to generate capital gains from rising share prices, this is a potential problem. But for income investors, we'd argue that it could be an opportunity.
Income investors do need to worry…
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