Thursday tips round-up: Barratt Developments, Optimal Payments

11th Sep 2014 11:22

Return excess cash to shareholders or re-invest profitably into the business – if you can – that is the question. Housebuilder Barratt Developments is firmly in the former camp.The company announced that it had hit a couple of targets earlier than expected, with return-on-capital nearing 20% for the year to the end of June, versus 11.5% a year ago, and its debt having been eliminated. The firm also jacked up its target for returns going forward. Given the low prices at which it purchased land before the downturn and the smaller sites it is now working on that look entirely doable. Hence, it will now make extra payments to shareholders sooner than expected. Over the next three years a total of £950m will be funnelled back to shareholders, equivalent to about 96p a share or a dividend yield over the period well above 6%. Worth buying for that yield alone, says The Times’s Tempus.Online payment platform provider Optimal Payments revealed a strong showing for its two main units in the first half. Revenues at its “e-wallet” for gamblers business NETELLER were higher by 46% and by another 31% at NETBANX. The former processes transactions for online retailers. Meanwhile, margins improved at both units. Little surprise then that net cash increased by $27.8m to $121.6m, with revenues and profits likely to accelerate next year after the $225m spent on acquisitions in July. Furthermore, California may yet legalise gambling. On a cautionary note, it may be worth remembering how the stock crashed in 2006 after the US government withdrew online gaming licenses. “The shares are up 18% in just over a month and we still like the outlook. Buy”, says The Daily Telegraph’s Questor column.