This year, Santa’s delivered several UK shares with strong underlying businesses and attractive dividend yields.
I don’t have spare cash to invest right now, but Moneysupermarket.com (LSE: MONY) is at the top of my watchlist.
Rising dividends likely ahead
The comparison/finance website has fallen out of favour with investors over the past two or three years and the share price has been in retreat.
My guess is the market no longer sees the business as a fast-growing proposition and has down-rated the valuation. But that’s okay with me because I reckon the company is becoming a stalwart on the London market instead. So the business may be capable of delivering ongoing modest, steady growth. And that may lead to a stream of gradually rising shareholder dividends.
After all, the firm has well-established brands, such as Moneysupermarket.com for comparison and MoneySavingExpert for consumer finance. And the directors reckon the company’s proprietary comparison technologies “provide flexibility as well as a high barrier to competitive entry”. So that suggests competitors may have a hard time gaining market share from the business.
The multi-year financial and trading record looks supportive and suggests the business has a strong position in the market. The company managed to keep paying dividends through the pandemic. And that was a severe test of the strength of any business with many failing and chopping their payments.
But Moneysupermarket’s earnings and cash flow held up quite well. And City analysts predict increases in revenue, earnings and the dividend ahead.
Trading ahead of expectations
In October’s third-quarter trading update, the company announced “growth in the quarter ahead of expectations” and the directors increased their guidance for the year.
Chief executive Peter Duffy said the company’s brands can help support consumers through the current cost-of-living crisis. But I reckon many people, like me, use the company’s comparison sites in good times and bad.
And it can be a good idea to invest in what we know as long as the fundamentals look good. And I know what Moneysupermarket’s service can do for me as a customer. Meanwhile, it’s pleasing to see a strong balance sheet and the dividend yield running just above 6%. I think that’s attractive and could make a useful addition to my diversified long-term stock portfolio.
However, even though I see an appealing situation now with Moneysupermarket I may be wrong. All shares carry risks as well as positive potential. And businesses can run into operational challenges at any time. For example, the firm’s proprietary comparison technologies may prove to be less defensive than the company thinks they are.
Nevertheless, I’d be inclined to embrace the risks and lock in that high yield by buying some of the shares now within my Stocks and Shares ISA.
We’ll find out more about trading progress when the company delivers its full-year results report, due on 15 February 2023.
The post 6% dividend yield! 1 UK share I’d buy in my ISA for 2023 appeared first on The Motley Fool UK.
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Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has recommended Moneysupermarket.com Group Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.