Today I am looking at two little-known stocks that should be generating serious interest from income investors.


Now SDL might now carry colossal dividend yields, but for those seeking strong dividend growth I consider it to be worthy of some considerable attention.

The business -- which is a specialist in language translation software -- saw revenues and adjusted operating profit leap 13% and 21% respectively, to £323.3 million and £29 million, in 2018, and this encouraged another hefty hike in the annual dividend. This rose to 7p per share, up 13% year-on-year.

SDL is a global leader in translation technology, and helped by the acquisition of rival Donnelley Language Solutions last year as well as increased investment in its product portfolio (up to £25.2 million in 2018 from £21 million previously) the software specialist is well set up to continue delivering brilliant bottom-line growth, in my opinion.

But this is not the only reason to expect annual dividends to keep on rising at the business: indeed, the rate at which SDL is throwing out banknotes should also give it the confidence to keep hiking shareholder payouts -- adjusted cash flow from operations swelled to £45.6 million last year from £14.2 million in 2017.

A 17% earnings increase is estimated by City analysts for 2019, a figure that creates a cheap forward PEG ratio of 1.1 times as well as predictions that the dividend will rise again to 7.3p per share. This figure yields a handy 1.4%.

The Vitec Group

If you’re after big yields right away, though, then The Vitec Group may be more to your liking. It carries an inflation-beating forward dividend yield of 3.4%, whilst it also offers plenty for value chasers to embrace, the firm sporting a prospective P/E multiple of 12.6 times.

In fact, I believe that the number crunchers, who are anticipating a 38.2p per share reward in 2019 may be underestimating the size of the potential payout. I would suggest that this theme stretches from Vitec to include SDL, too.

The manufacturer of broadcast cameras and related broadcast equipment supercharged the dividend 21% last year to 37p, and while some earnings weakness is likely in the offing -- a 3% profits drop is anticipated for 2019 -- the company remains extremely cash generative (free cash flow rose £10 million last year to £33.5 million), and this should help it to compensate for any blips in its strong record of earnings growth.

Indeed, so robust are Vitec’s cash-making qualities that it’s also in great shape to embark on further profits-boosting activity in the M&A arena as well, its quest for acquisitions seeing it acquire wireless video transmission specialist Amimon and audio expert Rycote Microphone last year alone.

Thanks to its broad suite of niche, market-leading products and its vast investment in these technologies means that Vitec’s profits outlook over the medium-term and beyond remains highly attractive, and this should give it the confidence to light a fire under the annual dividend again this year.

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