My best stock idea for 2021

Описание: Investment analyst Keith Bowman has his eye on this company which he believes will be one to watch in the year ahead.

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Keith says:

B&M Stores, or B&M European Value Retail to give the stock its full name, was founded in 1978 with its first store in Blackpool. Today, it runs supermarkets and convenience stores in the UK and France.

The company hit the headlines in 2013 when former Tesco boss Sir Terry Leahy joined. He served until early 2018.

B&M also joined the FTSE 100 index earlier this year, and today is almost as big as Sainsbury’s. As well as its B&M chain in the UK, it has almost 300 Heron food stores, mainly in the North of England. And over 100 Babou stores in France.

Sales for the half year to the end of September jumped by a quarter to over £2 billion, helped by bigger than average customer spends during the pandemic as its food stores stayed open.

Its value product offering is also likely to have been attractive to furloughed staff and those whose incomes have been hit by Covid.

Marking it apart from many other retailers – not only did it pay a half-year dividend, but it actually hiked the payout by nearly 60%. And it also paid a special dividend for the second year running.

The shares offer a dividend yield of close to 2% - which increases to over 5% if you include the latest special dividend.

Clearly, the pandemic has already helped B&M, and management expects some slowdown in sales during the company’s second half.

But first-half adjusted profit almost doubled, and there are plans to open hundreds more stores over time.

Brexit and its exact impact on the UK economy are still unknown, and tax increases to pay the pandemic bill are inevitable. Both these issues could force more consumers to seek out value retailers like B&M.

In all, and with the shares sat on an estimated price earnings ratio of around 12 times, comfortably below the three-year average, there looks to be further potential for long-term growth.

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