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A Cheap Dividend AND Growth Stock You Need To Consider Buying Before March
28th February, 17:14Financial markets remain a sea of red as fears over the coronavirus intensify. It's possible that March could prove another difficult month for share investors if the global infection rate continues to climb.
Should broader market confidence begin to recover, however, there's a number of top stocks that could jump when fresh financials are released. Gambling giant GVC Holdings is one such contender, a company which is slated to release full-year results on Thursday, March 5.
The Online Boom
The owner of popular betting brands like bwin, Ladbrokes and partypoker certainly impressed when it last updated shareholders in January. Then it said that the "strong momentum" it had enjoyed in quarter three had continued into the final quarter of 2019.
Signs that business has remained bubbly in the new year could provide GVC's share price with fresh fuel. There's no reason to expect anything other than another robust release, either, given the galloping popularity of its online gaming and sports betting platforms. Total net gaming revenues (or NGRs) generated via the internet surged 14% at constant currencies last year.
City analysts expect GVC to record a 19% earnings rise in 2020. This projection, allied with recent share price weakness leaves it dealing on a dirt-cheap forward price-to-earnings (P/E) ratio of 9.9 times. The company also carries a jumbo 5% dividend yield right now.
Regulators Tighten Their Grip
Regulatory uncertainty is something that investors in such shares have to accommodate. The introduction of £2 betting limits on Britain's fixed-odds betting terminals -- fixtures of the modern high street betting shop -- last April caused NGRs across GVC's retail sites to sink 12% in 2019.
The threat of more regulation this month has taken another bite out of the share prices of GVC and its London-quoted rivals, too. In a fresh attack the Gambling Commission said that it was considering imposing a £2 maximum stake for online bets as well in a bid to combat the growing problem of gamer addiction.
A commission spokesperson commented that "we said last October that we would be looking at online stake limits as part of our ongoing work to reduce the risks of gambling-related harm." Other steps the body will be taking include "focusing on VIP practices, advertising technology and game design," with an assessment on the market, and suggestions for stake limits and other protections, due later this year.
Risk < Reward
In my opinion, though, I consider these risks to be baked into GVC's rock-bottom, sub-10 earnings multiple. Regulatory roadbumps are part and parcel of investing in these companies. And irrespective of this, I reckon GVC's long-term profits outlook remains robust.
The online gambling industry continues to grow at a terrific rate. A recent report distributed by Industry Research suggests this is a market that is growing at a compound annual growth rate of 8.77% through to 2024. And the industry is growing fastest in North America, a region which GVC recently expanded into with through its joint venture with MGM Resorts International. This is a share I consider worthy of serious attention today.