Record year for AIM's dividend king

Not only is online sport betting and gaming company GVC Holdings growing at breakneck speed, it pays one of the best dividends around. Profit before tax tripled in 2014 to €41.3 million and clean cash profit, which strips out any non-operational items, soared by 28% to a record €49.2 million. Crucially, over two-thirds of profit was handed back to shareholders via dividends. This year has started well, too, and management is in bullish mood.

"The board believe the group has never been in a stronger position than now; robust trading; diversified products and markets; highly motivated staff; and technological developments which will allow the group to prosper," said chief executive Kenneth Alexander.

Net gaming revenue jumped by 32% last year to €225 million, in line with forecasts. The World Cup in Brazil was a massive success for GVC, which acquired Sportingbet two years ago, not just during the event, but also in terms of retention and acquisition of customers. It's why the firm returned €1.5 million of the €2 million of World Cup net profits to investors in the form of a special dividend.

Of course, GVC needs to invest to stay ahead. Last year, it spent €3.3 million on products, but will raise that by about 50% in 2015. "We believe that increased investment will not only help maintain GVC's position in its current markets but also be accretive to revenue, as already evidenced by the growth in wagering and gaming revenues," says Alexander.

And trading is at record levels in the first quarter of 2015. Sports wagers are averaging €4.6 million a day, and total revenue in the 77 days of the quarter to 18 March has exceeded €51 million, an average of more than €661,000 per day and up 18% on the start of last year.

In fact, things are going so well, the GVC is paying another special dividend. As well as a regular quarterly dividend of €0.14 per share, it will pay a special worth €0.015. That gives €0.155 for the quarter and €0.555 for the year (payouts are declared in Euros, so the impact of exchange rates needs to be watched).

With no big football event in 2015, Panmure Gordon remains cautious and keeps estimates broadly unchanged. However, it does think GVC will return even more than expected to shareholders - €0.56, rather than its previous forecast of €0.50 - offering a prospective yield of 8.8%. The shares also trade on a modest forward price/earnings (PE) multiple of 8. Even at Panmure's target price of 586p the multiple only creeps into double figures.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.