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Forget saving money! Dividend stocks are a better way to get rich

Living within your means in order to save money may appear to be a good idea at first glance. After all, it means that you will have cash available in order to plan for retirement or purchase a property, for example.

However, cash savings are likely to disappoint when it comes to their long-term return potential. Historically, cash has significantly underperformed other assets such as stocks. This could mean that it fails to provide the financial future that many people are aiming for.

By contrast, investing at least some of your savings in dividend stocks could be a sound move. They provide the potential to generate higher returns which, for investors with long-term time horizons, could make them highly desirable.

Return prospects

At the present time, it is possible to obtain a higher return from dividends than it is from cash savings. Over the long run, this could lead to a significant difference in financial performance from the two assets especially since dividends are likely to grow at a faster pace than interest rates rise in many cases.

In fact, the prospects for the world economy remain relatively bright. Certainly, there are risks ahead in the short run, such as Brexit and an ongoing trade war between the US and China. But with many stocks having exposure to emerging economies that could catalyse their earnings growth rates, their dividend growth prospects could be impressive.

Alongside their income potential, stocks could deliver high capital returns. As such, diversifying among a range of dividend-paying stocks could produce total returns that vastly outperform cash holdings in an era where interest rate rises may prove to be somewhat limited.

Risk profile

Of course, deciding to invest in stocks instead of holding cash is dependent on your attitude to risk, as well as your time horizon. Some people may feel that they do not wish to risk losing money, which may lead them to hold cash. However, for someone who has a long-term time horizon, it may be more efficient to have at least some exposure to dividend stocks, since there may be sufficient time available for short-term losses to be recovered.

As such, apportioning at least part of your excess capital to the stock market in the form of dividend stocks could prove to be a shrewd move. With there being a wealth of information available regarding all listed companies, it is possible to unearth companies that have sound strategies, solid finances and improving growth prospects. Selecting the most appealing dividend stocks could not only improve your long-term returns, but also reduce the risk of losing money, or of dividends being reduced.

Takeaway

Cash holdings can serve a useful purpose in terms of providing financial flexibility for unexpected events. However, when it comes to generating wealth over a long time period, dividend stocks may prove to be a more prosperous home for your excess capital.

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Forget Cash ISAs, bonds and Brexit! I’d buy the FTSE 100 for its 5% yield

Ive just taken a look at the Cash ISA best buy tables, and they make grim reading. The best you can get with instant access is 1.46% a year. With inflation currently at 2.7%, that only guarantees the value of your money will fall in real terms.

Cashing out

You can get a higher return by locking your money away for between one and five years, but will still struggle to beat inflation. Two-year fixes typically pay around 1.60%, creeping up to 1.7% if you fix for three years, and 1.85% over five years.

All pay well below the inflation rate. Say you put 10,000 into a five-year fixed-rate Cash ISA paying 1.85% today, at the end of that term youll have 10,968. However, if inflation averaged 2.7% over the period, your money is only worth 9,565 in real terms.

Everybody needs some money in cash that they can get their hands on in an emergency, but your long-term wealth should go into stocks and shares as history shows they typically provide a superior return over the longer run.

Blue-chip return

Next year, for example, the UKs benchmark FTSE 100 index is on course to yield a whopping 4.8%, roughly three times the return from the best instant access Cash ISA. Plus your capital may grow if markets rise (although it will shrink if they fall).

Dividend income thrashes bonds, where yields are tumbling. At time of writing, UK 10-year gilts yield just 0.45%, down from 1.26% at the start of the year, according to AJ Bell.

Investment director Russ Mould says this may may be one reason why the FTSE 100 is confounding the bears with a year-to-date gain of nearly 7% in capital terms, despite the prevailing political and economic uncertainty.

High yields can spell trouble

Brexit uncertainty looks set to drag on after so-called Super Saturday turned out sappy and soggy. However, this could offer a buying opportunity, as the index still looks undervalued.

The yield on a stock or index is calculated by dividing the companys annual payout by its share price. So if the dividend is 1 and the stock trades at 20, the yield is 5%. When share prices fall, yields rise, so if that companys share price falls to 10, the yield jumps to 10%.

As Mould points out, todays generous dividend yields suggests the FTSE 100 is undervalued, because shares are cheap and a lot of bad news may already be priced in. Thats always a good time to buy, as you can benefit from any rebound.

Choose your stocks carefully

One word of warning. A super-high yield may be a sign of a company in trouble, as its share price has fallen sharply.For example, troubled BT Group currently yields 8.5%, but Royston Wild quickly found four reasons not to buy it.

That said, many high-yielders can also be attractive buys. Roland Head has picked out three FTSE 100 dividend stocks with 8%+ yields that hed buy this month. Alternatively, you could spread your risk with an index tracker fund such as the iShares Core FTSE 100 ETF.

Provided you are investing for the longer term, shares look far more tempting than leaving your money to die a slow death in cash or bonds.

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This Warren Buffett investing tip could help you to make a million

There are various pieces of advice from Warren Buffett that could help investors to maximise their return potential. However, theres one simple tip that could make a vast amount of difference to all investors without requiring any extra effort.

Buffett has only ever invested in companies and sectors that he understands. This has allowed him to leverage the knowledge he has on specific areas in order to improve his overall returns.

Certainly, Buffett has missed out on a number of investing opportunities during his lifetime that could have increased his net worth to an even larger figure. However, by investing only in areas he fully understands, he has undoubtedly avoided losses that have allowed him to generate high returns over the long run.

Avoiding risks

With the cost of buying and selling shares having fallen significantly over recent decades, its now cheaper than ever to build a portfolio of varied companies. While this makes it easier to obtain a high degree of diversification in order to reduce risk, it also means its less costly to dabble in a wide range of stocks, in terms of commission costs. In other words, many investors will buy companies without undertaking comprehensive research into their operations and future growth prospects.

This could be a dangerous move, since it may mean an investor has failed to ascertain the potential risks a specific stock may present. For example, its business model may be unfavourable, or it could face risks that havent been factored into its share price. As such, undertaking research into the company and its industry could avoid potential losses that would harm overall returns.

Competitive advantage

As well as avoiding risks, investing in companies you understand can lead to improved returns. For example, if an investor determines they will focus on a particular industry and will gain a significant amount of knowledge on how it operates, they may have a competitive advantage over other investors that enables them to select the most attractive companies within the sector. Over time, this may mean theyre able to outperform their peers, as well as the wider stock market.

Clearly, its very difficult to be an expert in every industry. Therefore, it may be worth initially utilising tracker funds for the majority of your capital, since they offer exposure to a diverse range of companies. Then, investing a modest proportion of your capital in industries and companies within your sphere of knowledge could provide the opportunity to outperform the index. Over time, your portfolio may gradually become increasingly weighted to direct equities, rather than being invested in a tracker fund.

Takeaway

Diversification is crucial to reduce risk. However, it can lead to investors buying all sorts of companies they dont fully understand. As such, following Buffetts advice on only investing in companies that are within your sphere of knowledge could reduce risk and improve your chances of making a million.

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Why the FTSE 100 is down despite Brexit optimism – and what I would do now

Last week was a turbulent one for the financial markets, as it tried to stay one step ahead of political developments around Brexit. From early in the week, there were headlines coming out regarding a possible new agreement, which was confirmed by the UK and the EU on Wednesday.

However, in a showdown in the House of Commons on Saturday, an intriguing amendment was voted through (322 votes to 306), which meant the Prime Minister unexpectedly pulled the vote on the new deal.

Yet when the markets closed on Friday (before the action in Westminster on Saturday), optimism was still fairly high. The pound (GBP) was up over 4% against the US Dollar that week, and UK bonds were up, yielding over 0.7%. The FTSE 100, unfortunately, was down 100 points from the Monday open. If you were left scratching your head, you were not alone.

Why the FTSE 100 index fell

Simply put, the FTSE 100 fell in large part due to the rally seen in the currency and bond markets. This is because historically when the currency rises in value, and when the bond market rallies, the stock market falls. City analysts call this a historical negative correlation. I prefer to call it an unavoidable annoyance.

Lets look at the currency for example. Over 70% of FTSE 100 companies are net exporters, meaning the increased value of the pound is bad for business. Why?

Imagine you are the CEO of a large clothing firm that manufactures in the UK and sells in France. You receive your revenue in euros but have costs here in Britain. Therefore, you sell your euros into pounds when needed. Now, because the pound has risen in value, this makes the euro weaker. So when you sell your euros back into pounds, you get less oft them than you did previously. Not great.

In the bond markets, the expected future interest rate increased as traders smelt Brexit optimism. As most of the FTSE 100 companies have some form of debt, an increase in anticipated interest rates (or no chance of a rate cut) means the cost of financing debt will not get cheaper.

Lets go back to our clothing firm imagine you wanted to issue some new debt to buy a bigger factory. The move in the bond markets this week would mean you have to offer investors a higher rate of interest than previously thought, costing you more money in interest payments.

Seeking opportunities

I would play this move in two ways. Firstly, I would buy domestic-driven companies that will benefit from a stronger pound. Secondly, I would buy companies with limited debt, that wont suffer from rising rates.

Do not be put off by the fact that the index by itself is down, this is merely the sum of all the companies derived from the index. You are still able to find good value by applying the two parameters I mention above.

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How should you invest when you have retired?

If you are getting close to retirement, you may have started to think about how you should invest when you have actually retired and need to be drawing an income from your investment pot.

The traditional advice is to dial down the risk and switch to bonds and cash savings, but there is a problem with that. Over the past couple of decades, weve seen the collapse of interest rates for cash savings accounts and government-backed bonds, known as gilts.

A changing financial landscape

The situation really is quite grim for those traditional safe-as-houses-type investments. Average gilt yields, for example, have plunged from around 5.6% in 1998 to just below 1.3% last year. And its been a similar story with Cash ISA interest rates. Flowing from that, annuity rates have also recently hit an all-time low. Indeed, it really does seem that todays retirees need to think in different ways compared with previous generations.

And one major consideration is the extended life expectancy we enjoy these days. Because of that, theres a need to keep your pension pot growing so that it lasts as long as you are likely to. I think theres a good case for investing in retirement in the same way that you probably invested while building your investment pot, and for me, that means targeting shares backed by good-quality businesses.

The dividend yields available from many shares on the stock market run much higher than gilt yields and cash interest rates 3%, 4% and 5%-plus are not uncommon from shares. But in retirement you may be tempted to target the highest yields you can find so that you can withdraw the dividend income to live on. Id caution against that approach because the highest dividend yields can often occur because of problems in the underlying business.

If there is a problem, you will be at risk of falling share prices and dividend cuts down the line. Instead, Id focus on smaller dividend yields, which have a strong record of growth. If a dividend is growing a bit each year, you could also see an elevating share price boosting your retirement pot. A growing dividend suggests the possibility of a healthy, growing underlying business.

Invest without stress!

But dont lose sight of the potential joys of retirement by spending all your time hunched over a computer screen investing. I reckon a neat solution could be to put your investment pot into index tracker funds. That way youll be able to harvest the dividend yield for your retirement income while maintaining exposure to the long-term growth tendency of the stock market. Id probably spread my funds between the FTSE 100 and FTSE 250 indices, for example.

And in one final consideration, as well as harvesting the dividends, its not a sin to run down your pension pot by cashing in your investments altogether along the way if you want to. I reckon the main goal is to ensure you have enough money to last, wherever it comes from.

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3 FTSE 100 stocks I’d buy in an ISA and hold forever

I wouldnt recommend owning a portfolio of just three stocks. But if someone put a gun to my head and told me I had to buy a trio of FTSE 100 companies in an ISA and hold them forever, which three would I pick, and why?

Id be looking for a few key things. First, diversification across different industries (more specifically, industries that are likely to be around for decades to come). Second, geographical diversification. And third, a culture and history of prudent, long-term management.

With these things in mind, the blue-chip stocks Id buy are Associated British Foods (LSE: ABF), Hikma Pharmaceuticals (LSE: HIK) and Schroders (LSE: SDR). Let me tell you more about these businesses and my thinking.

Industry diversification

ABFs revenues are split approximately 50/50 between consumer goods (grocery, ingredients, sugar and animal feeds) and consumer services (clothing retail, namely Primark). Healthcare firm Hikmas revenue comes entirely from pharmaceuticals, but is diversified across three segments (injectables, generics and branded). Schroders is in the financial industry, and the majority of its revenue comes from asset management, but some from private banking and associated wealth management services.

Will there ever come a time when the world no longer needs food or clothes? I cant see it, and I reckon ABF owns attractive businesses in these areas.

Meanwhile, its widely believed ageing populations in the western world and rising wealth in emerging markets will fuel demand for healthcare in the coming decades. I think Hikmas pharmaceuticals businesses should benefit from this long-term tailwind.

Finally, Schroders, as an asset manager, is essentially a geared play on stock markets, which we know tend to rise over the long run. As such, provided the company is well managed, the stock should outperform a market like the FTSE 100 over a long holding period.

If I had to use my ISA allowance to buy these three companies, Id put 10,000 in ABF and 5,000 in each of the other two. This would give me an equal 25% exposure to 4 of the 10 broad industry categories. Namely, consumer goods, consumer services, healthcare and financials.

Geographical diversification

As well as being happy with the business diversification, Id also be happy with the geographical diversification. ABF, Hikma and Schroders all generate international revenues, and I calculate the aggregate exposure as: Europe, Middle East & Africa (37%), UK (27%), Americas (23%) and Asia-Pacific (13%).

Prudent long-term management

Management change at companies is inevitable over time, but I think the cultures and histories of Hikma, ABF and Schroders put them at an advantage in terms of maintaining continuity. They were founded in 1978, 1935 and 1804, respectively, and at all three companies, descendants of the founding families maintain a significant presence both on the shareholder register and in the boardroom.

At such companies, a strong balance sheet and prudent stewardship of the business ensure future security to the family, so longer-term planning takes priority over short-term results. I think this philosophy is well-aligned with the interests of an investor who is looking to buy a stock and never sell it.

Finally, Im not too worried about near-term earnings multiples and dividend yields. All three stocks are currently trading at discounts to previous highs, and thats good enough for me for a holding period of forever.

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Can the BP share price double your money?

You probably think that it would be difficult to double your money with a 100bn blue-chip stock such as BP (LSE: BP).

Investors have certainly shown little enthusiasm for the oil and gas giant in recent months the BP share price has fallen by about 17% since peaking at 583p in April.

However, focusing on the share price alone could be a mistake. As Ill explain in this article, I think is could be quite easy to double your money with BP shares.

Double your money in 11 years

Mature FTSE 100 companies like BP tend to deliver their shareholder returns in several different ways.

Rather than relying on rapid profit growth and a rising share price, they pay generous dividends. They may also buy back and cancel their own shares, to increase earnings per share. This tends to support a higher share price.

At the time of writing, BP shares offer a dividend yield of about 6.5%.

If we assume that the share price and dividend remain unchanged, I estimate that by using each years dividends to buy more shares, you could double your original investment in 11 years.

Will things improve for BP?

In reality, share prices and dividends rarely stay the same for 11 years. A more likely scenario is that the shares will go up and down, while dividends will hopefully increase.

Valuing BP shares is made more complicated by fears that the company will never be able to produce all of its reserves. Some investors argue that oil demand could slump over the next 20 years or that new environmental regulations will make oil production unviable.

I dont know whats going to happen. But I think the current pessimism about BP is overdone. Indeed, I think now could be a good time to be buying the groups stock, for several reasons.

New boss: Incoming chief executive Bernard Looney is 15 years younger than his predecessor Bob Dudley. According to chairman Helge Lund, Mr Looneys brief is to help BP chart its course through the energy transition.

I believe that senior oil industry execs like Mr Looney understand that major changes will be needed. They also have far more visibility than we do of current and future demand trends for oil and gas.

To start with, I expect Mr Looney to chart a course that will prioritise cash generation from oil, while putting in place longer-term plans to increase gas production and invest in more sustainable methods of energy supply. Bigger changes may follow in the future.

Debt reduction: BPs debt levels are currently higher than Id like to see. Indeed, I think its fair to say that the groups borrowings have become an obstacle to dividend growth.

However, outgoing CEO Mr Dudley has already started the process of reshaping the groups operations and expects to see improved cash generation from next year.

This should help to cut debt and improve the level of free cash flow available for shareholder returns.

Id buy BP today

At current levels, BP shares trade on 11 times 2020 forecast earnings and, as mentioned, offer a dividend yield of 6.5%.

Id be happy to buy at this level, and believe that investors have a good chance of doubling their cash over the next decade or so.

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Five lessons from five great investors

You often hear private investors describe themselves as followers of this or that famous investor.

(Often its whatever investor has been doing well most recently, but thats a topic or rant for another day.)

Some pundits warn against us having models. Develop your own method, they say. Adopt a good investing process, and focus on the numbers. Keep personality out of it.

Not me though.

After nearly two decades at the task, Ive come to believe investing is as much art as science and very possibly more so.

Ive also observed that its the investors who know more than a modicum of market history and whove read at least a few of the greats that tend to do better.

Few things get messy quickly like a newbie stock picker with a share screen and some target ratios. If investing were that simple, wed all be chatting in a bar in the Caribbean.

Five go investing

No, just like painters and composers first become thoroughly au fait with the efforts of those who went before them, I think its wise to study how some of the best investors ever approached and beat the markets.

Where I do draw the line is when people become devoted to only one famous stock picker more like cult followers than curious minds.

Im a Warren Buffett disciple through and through! theyll tell you. Thats why I would never buy shares in a technology company.

Meanwhile Warren Buffett himself is still reading everything he can, developing his craft, and has recently been buying shares in technology companies!

We too should keep learning and evolving,just like Buffett. And when it comes to the Old Masters of investing, I believe this means looking for tips from all of them. This way we can develop a toolbox of investing techniques.

So here are five lessons out of the mouths of the best, with a few comments from me.

Benjamin Graham: In the short run, the market is a voting machine but in the long run, it is a weighing machine.

If I was asked to put a single investing quote into a space probe to send to faraway civilizations to explain the madcap business we call the stock market, Id choose this aphorism from the father of value investing. All kinds of things move share prices from day-to-day or even year-to-year. But over the long-term, hype fades, bogus companies are found out, and share prices follow earnings.

Peter Lynch: Twenty years in this business convinces me that any normal person using the customary three percent of the brain can pick stocks as well as, if not better, than the average Wall Street expert.

A superb author as well as a market-trouncing fund manager, the biggest lesson I took from Peter Lynch as a young investor was not to be scared off attempting to pick stocks. Its true a professional fund manager has more time, resources, and possibly brainpower than you or me. But they also have constraints careers to keep hold of, and billions to invest and they may miss things you see at your own work or shopping for your kids.

Nick Train: I had to teach myself to be bullish. But I promise you, as soon as I started looking on the bright side not only did my investment performance begin to improve, but I felt and looked younger too.

The UK fund manager behind the success of the Finsbury Growth & Income Trust and most of the funds run by his own Lindsell Train house has emerged as one of the great talents of his generation. Yet his investing style is incredibly simple: buy the best companies, presume theyll exploit growing markets, and hold them. You never hear train fretting about trade wars, Brexit politics, or over-valued companies. While the media and bulletin boards are full of noise, he urges us to remember those long-term stock market graphs that go up and to the right. Thats why were investing, after all.

Anthony Bolton: Another type of situation I like are companies with asymmetric pay-offs stocks where you might make a lot of money but you can be confident you wont lose a lot.

Bolton was the Nick Train or Neil Woodford of his day a brilliant manager who won a legion of fans through many years of multiplying their money. What I most admire in Boltons style is how nimble he was, and how free of dogma. Read his underrated book Against The Tide, and youll get an insight into how properly managing a portfolio isnt about a single brilliant flash of insight or a heroic contrarian trade but rather a steady accumulation of decisions, adjustments, and risk-versus-reward judgements.

David Gardner: Let your winners run. High.

Lets end with a career-defining statement of intent from one of the founders of The Motley Fool. David has racked up a brilliant record with his unique way of looking at companies and their stocks, but his urging that we aim to keep hold of our best performing shares is something investors of most stripes would benefit from. Hanging on to a losing share that then falls 50% is one thing, but selling a share that goes on to quintuple or more is another level of pain. If Foolish investing is about finding the greatest companies, it surely makes sense to own them for as long as they stay that way.

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3 FTSE 250 stocks I’d buy for 2020

By the time you read this, Parliament might have agreed a Brexit deal. Or it might not.

But I think that the three stocks Im considering today should be attractive buys regardless of the political landscape.

Between them, they offer a mix of international and UK exposure. They also combine defensive qualities with cyclical opportunities.

Compare this

Price comparison websites are no longer just the middleman. Increasingly, theyre a destination in themselves. Thats no accident.

Moneysupermarket.com Group (LSE: MONY) and its main rivals have all been investing heavily in technology and marketing to build direct relationships with their users. Two areas of growth being targeted by Moneysupermarket are mortgage price comparison and automated utility switching.

However, the Moneysupermarket share price hit a stumbling block last week, after reporting a marked slowdown in growth during the third quarter.

My view: Moneysupermarkets evolution from comparison website to finance business wont be seamless. Personally, I see this slump as a decent buying opportunity. The company remains incredibly profitable, with an operating margin of 30% and a big share of the UK market.

Last weeks dip has left the shares trading on 19 times forecast earnings, with a forecast yield of 4%. I believe this remains a long-term growth story. Id be a buyer at this level.

An international growth engine

Another FTSE 250 company thats hit a speedbump in recent years is temporary power supplier Aggreko (LSE: AGK). This global business provides equipment and complete power solutions for events, remote sites, and utility customers in emerging markets.

After a difficult spell, performance has been improving steadily. I believe this is likely to continue. The group has an approximately $200m deal to provide power for the Tokyo Olympics next year and boss Chris Weston is confident that profitability should continue to improve.

My view: Analysts forecasts suggest that earnings will rise by a chunky 25% in 2020, valuing the stock at just 12 times forecast earnings, with a dividend yield of 3.6%.

I think that looks decent value, especially as the groups operating profit margins are now heading further into the mid-teens. Aggreko has been on my watch list for a while Im considering a purchase over the coming weeks.

A defensive earner

My final pick is ingredients firm Tate & Lyle (LSE: TATE). This FTSE 250 company has not cut its dividend for more than 20 years.

Tates defensive mix of products which includes sweeteners and specialist ingredients used by food manufacturers suggests to me that its profits should be fairly stable, even in a recession.

Although this isnt the most exciting of growth stocks, I see this as a stock you could buy and tuck away for a few years, while collecting a useful 4%+ dividend income.

The groups results from last year show that adjusted pre-tax profit rose by 4% to 309m, while net debt fell to 337m. That level of borrowing looks reassuringly low to me, which should provide a further layer of safety if the economy hits tough times.

My view: At the time of writing, the shares are trading at about 670p, giving the stock a forecast price-to-earnings ratio of 13 and a dividend yield of 4.4%. TATE stock has been as high as 800p over the last year, but Id view the current price as a much better entry point. Id be happy to buy current levels.

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Forget the Sirius Minerals share price! I’d rather buy these dividend growth stocks for my ISA

The Sirius Minerals (LSE: SXX) share price might be off the near-decade-long lows around 3p struck in late September but in recent sessions its started trending lower again.

The markets paying little attention to news that Sirius inked another monster supply and distribution agreement for its Poly4 product late last week. Under a ten-year agreement with Muntajat, the Qatari company will sell and distribute material into Africa (bar Nigeria and Egypt), Australia, New Zealand, and certain Middle Eastern and Asian territories. Volumes would rise steadily through the period to hit 2m tonnes in year five of the deal and 2.1m in year eight.

Should we be shocked that theres been no takers for Sirius stock, though? After all, theres no guarantee that the FTSE 250 firm will even be around in a years time given the challenge it has to raise funds by the end of March. The best it seems that investors can hope for is for the battered digger to arrange the sort of refinancing that would dilute existing shareholderss stakes into oblivion.

A great dividend grower

So you should forget about investing in the frazzled fertiliser producer, I say. If youre seeking surefire and scintillating earnings growth in the years ahead and with it the prospect of booming dividends, too youd be much better off buying shares in 4Imprint Group (LSE: FOUR).

The FTSE 250 company manufactures a wide range of promotional products for business (think t-shirts, mugs, notepads, etc.) and already has a long history of earnings growth behind it. This has enabled ordinary annual dividends to rise 160% over the past five years alone, a record built upon its heavy exposure to the booming US economy and an ability to tug market share away from its competitors.

And with City brokers expecting more impressive earnings growth (of 21% and 16%) through the next couple of years, it looks like more hefty payout hikes can be expected. The 53.15p per share reward of last year is expected to rise to 64.8p this year and again to 84p in 2020, figures that also yield an inflation-beating 2.1% and 2.7% respectively.

A FTSE 100 pick for your ISA

Id also be happier to buy Ashtead Group (LSE: AHT) over Sirius Minerals today.

Like 4Imprint Group, profits at the rental equipment supplier are also expected to rise by double-digit percentages over the next couple of years by 17% and 14% in the fiscal years to April 2020 and 2021 and this leads to expectations of more dividend growth as well.

Shareholder payouts here have also swelled around 160% over the past half a decade, and the City expects last years 40p per share dividend to rise to 44.3p this year and to 48.8p next year, leaving yields of 2.1% and 2.3%. Its no surprise that brokers are so bullish, either, given the exceptional sales opportunities afforded by its ambitious US expansion plan.

One final thing to note: at current prices the FTSE 100 firm carries an undemanding valuation of 10.2 times forward earnings. I consider this to be a shockingly low rating for a firm of this calibre, and reckon its a white-hot buy for your ISA today.

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Femi Ogunshakin Managing Director
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