Sometimes it can be difficult to know why a stock is falling as growth in sales and profits doesn’t always translate into a rising share price. A lot of the time, the reason has to do with rates of change. 

So it is with Amazon (NASDAQ:AMZN). Despite sales in the last three months of 2024 being 10% higher than the previous year, the stock fell in extended trading last night (6 February).

Outlook

There’s nothing intrinsically wrong with a 10% revenue increase. But it’s slower than the growth rate from earlier this year – and the outlook for the first quarter of 2025 is lower again. 

Amazon expects net sales to grow between 5% and 9%. Adjusting for currency fluctuations and the fact that 2024 was a leap year, this translates to between 8.5% and 11.7%. 

Furthermore, operating profits are likely to be largely in line with the previous year. That’s not hugely impressive for a stock trading at around 51 times (net) income.  

Part of this is due to Amazon’s ongoing investment in artificial intelligence (AI) infrastructure. Investors are going to have to hope this brings the kind of returns the company is anticipating.

Long-term

Amazon’s share price might be slipping, but I don’t see any threat to its competitive position. Its two biggest assets – its AWS cloud business and its e-commerce platform – look resilient to me.

The firm’s marketplace provides the fastest, cheapest, and most convenient e-commerce platform around. On top of this, the company is able to add Prime subscriptions and advertising sales.

The latest update reports subscription revenue up 10% and 18% growth in advertising sales. And then there’s AWS, where sales increased 19% during the quarter.

The cloud division is a key part of Amazon’s operations. It makes up 17% of sales, but over 50% of profits and it subsidises other parts of the company, allowing them to keep customer prices down. 

Risks

In my view, the biggest threat to Amazon isn’t the risk of its operations being disrupted by a competitor. It’s the chance of structural changes to its business coming from legal challenges.

Investors should remember that there’s an ongoing case against the firm from the Federal Trade Commission (FTC). The claim is the company operates a monopoly and maintains this status illegally.

There are a couple of ways in which the case might turn out to be unproblematic. It could ultimately come to nothing, or it could result in a fine that isn’t a significant problem for Amazon.

The company could, however, be required to change its business practises or divest some of its operations. This can’t be ruled out and remains the biggest threat to the organisation.

Still a top stock?

The market’s reaction to Amazon’s latest results looks reasonable to me. Sales are slowing and the guidance for the next quarter’s profits isn’t particularly strong.

From a long-term perspective, though, I still think the stock looks very attractive. So if the share price continues to fall, I’m going to look to add to my existing investment in the company.

The GSK (LSE: GSK) share price was causing me a lot of aggro – until Wednesday (5 February). Suddenly it was top of the FTSE 100 leaderboard after jumping 7.61% in just a day!

I bought the pharmaceutical giant’s shares March and May last year, and it’s a novelty for me to see them doing well. I’m not out of the woods yet. On Wednesday morning, my stake in GSK was down almost 20%. When markets close that evening, my paper loss had narrowed to around 12%.

Finally, I’m seeing daylight. A similar thing happened with another portfolio flop Burberry. Just a few months ago I was sitting on a 40% loss. Now I’m 12% to the good. Can GSK shares do the same?

Is this stock a FTSE 100 bargain?

GSK’s full-year results for 2024 beat my personal expectations. Overall, 2024 sales grew 7% to £31bn, with speciality medicines up 19%. This helped offset a 4% drop in vaccine sales.

The board raised its 2031 revenue forecast to more than £40bn, up from the previous £38bn. Its optimism is driven by strong sales in speciality medicines, particularly in the HIV and oncology sectors.

GSK even felt flush enough to announce a mighty £2bn share buyback, its first in over a decade. That’s been a long time coming.

Despite these positive indicators, the shares are still down almost 15% over the last year, and 25% over five years. No doubt they attracted a lot of bargain seekers in that time. Most didn’t get the results they wanted. Is this another false dawn?

The shares still look terrific value and I think they’re worth considering. The trailing price-to-earnings (P/E) ratio’s a very modest 8.9. That’s significantly below the FTSE 100 average P/E of 15 times. 

The trailing dividend yield‘s solid but not spectacular at 3.9%.Glaxo’s full-year 2024 dividend will be 61p. The board’s forecasting 64p in 2025, a rise of almost 5%. I’d be happy if that was sustained over the years.

Dividends and share buybacks too

That bumper share buyback, spread over 18 months, suggests management thinks its shares are great value today.

Yet I need to curb my excitement. A number of my portfolio holdings have bounced on upbeat results over the last year. Yet the gains were often whittled away as investors took profits and broader sentiment slipped. UK shares continue to look undervalued. That may take time to turn.

The pharmaceutical industry is fraught with uncertainties, including regulatory challenges and potential legal liabilities. Last year, GSK settled a £1.8bn US class action over Zantac. Whatever its merits, GSK decided it was wiser to pay up and move on. There’ll no doubt be more.

Investors also worry about Donald Trump’s new health secretary, vaccine sceptic Robert F Kennedy, and how he’ll target big pharma. That could bring more volatility.

Yet with a longer-term view, I’m feeling upbeat. I’m pleased by GSK’s improved outlook and strategic initiatives, and thinks it’s worth considering for income and growth over the longer run. I hope to hold my shares for life.

Remember the Covid-19 lockdowns of 2020-21, when we were mostly confined to our homes to avoid spreading the virus? When restrictions finally ended, people partied like it was 1999. And soaring alcohol sales sent the Diageo (LSE: DGE) share price leaping to all-time highs.

The Diageo share price slumps

Alas, Diageo shares have fallen pretty much ever since, with the stock now languishing well below its five-year high. On 31 December 2021, the share price closed at 4,306p. As I write, it stands at 2,269p, down a whopping 43.8% from this closing high.

What’s more, the shares are down 9.4% over one month, 4.2% over six months, and 23.6% over one year. Over five years, they have lost more than a quarter (28.3%) of their value. To sceptical investors, this once-great FTSE 100 firm resembles a ‘value trap’, delivering long-term losses.

That said, as an old-school value investor and contrarian, this blue-chip business is on my watchlist. However, I won’t be buying Diageo stock anytime soon, as my family already owns a chunk. We bought into this alcoholic-beverages giant in January 2023, paying 2,780.8p per share.

Unfortunately, this trade turned out to be rather ill-timed. Ignoring the cash dividends we got in 2024, we have lost almost a fifth (18.4%) of our initial investment. Hardly an ideal start to what I hoped would be a core FTSE 100 holding!

Sales growth is weak

The big problem for the maker of Guinness stout, Smirnoff vodka, and Gordon’s gin (and its shareholders) is that adults are drinking less than they once did. Hence, in its latest results, released on Tuesday (4 February), Diageo withdrew its previous guidance for mid-term organic sales growth of 5% to 7% a year.

While beer sales are rising, demand for spirits — especially high-end brands — is weak. Also, rising use of GLP-1 weight-loss drugs is reducing appetites for alcohol. And proposed US trade tariffs on Canada and Mexico could hit future sales, profits, and cash flow.

Then again, though sales volume is down 0.2% over the past six months, higher prices pushed up sales by 1%. Nevertheless, operating profit has fallen by 1%, while profit margins also declined.

This stock isn’t expensive

Based on the current Diageo share price of 2,269p, this stock trades on 17.6 times earnings, delivering an earnings yield of 5.7% a year. This means that the dividend yield of 3.6% a year is covered under 1.6 times by trailing earnings. These fundamentals look pretty solid to me.

Although its latest results were shaky and future sales growth looks unclear, I can see happier times ahead for Diageo shareholders. Sales growth should be positive in 2025, helping this £50.5bn Goliath to improve its cash flow and reduce net debt of $20.1bn. But I’m not expecting any big leaps in the dividend or the share price until this tanker has turned around!

I’m a huge believer in the long-term power of FTSE 100 dividend income shares, but lately my faith has been shaken.

I’ve got two ultra-high yielders in my self-invested personal pension (SIPP), both of them in the financials sector. Both have given me plenty of income over the last 18 months, but share price growth? That’s been in short supply.

This may be about to change. No guarantees, but I’m seeing hopeful signs.

My dividend stocks have huge potential

The two stocks are insurer Legal & General Group and fund manager M&G (LSE: MNG). Both are down around 5% over the last 12 months. Over five years, they’re down 24% and 14%, respectively. Now they’re sparking into life.

I’ve been waiting for this moment. My theory is that when interest rates finally slide, ultra-high yield dividend stocks like these two will look even more attractive. 

Why? Because yields on safe haven asset classes such as cash and bonds will fall with interest rates, but dividends shouldn’t. This may encourage investors to take a little more risk with their capital, to grab that higher income. Legal & General currently has a trailing yield of 8.5%. M&G’s yield is even higher at 9.25%.

Cash and bonds will never compete with that. As the yield gap widens, more investors will be tempted to make the leap. That could drive up their share prices.

Yesterday (6 February), the Bank of England cut base rates for the third time since August, to 4.75%. Legal & General and M&G jumped around 2% in the aftermath. This continues a trend. Both are now up 7% in the last three months.

I’ll use M&G as my example (but could just have easily chosen Legal & General). I bought its shares in July, September, and November 2023, investing £6,000 in total. My average entry price was 199p. As I write, they trade at around 215p. My stake is up 8%. Or £480 in cash terms. And yes, I know, that isn’t exactly Nvidia. 

The FTSE 100 is back!

However… I’ve also received a staggering £791 worth of dividends. Already. My total return is 21%. My £6k is now worth £7,271.

Some won’t be impressed, but I am. I’m due two more dividends this year, in May and October. Rough maths suggest I’ll get around £500. That’ll push my total return towards 30%. In just over two years. If the shares rise further this year, that will be on top.

I plan to hold M&G stock for five, 10, 15 years… longer if I’m lucky. At today’s pace, my stake could pile up nicely.

None of this is guaranteed. Sky-high yields like this one can be vulnerable. Volatile markets and a slowing global economy could hit take their toll. A potential trade war adds another layer of threat. If M&G’s profits fall, shareholders payouts could be slashed.

And if inflation continues to prove sticky, interest rates could stay higher for longer. Along with yields on cash and bonds.

As a buy-and-hold investor, I can afford to overlook those short-term risks. Instead I can sit back and enjoy watching my capital and dividends grow. Roll on the next base rate cut.

FTSE stocks have undoubtedly been overlooked in recent years. And it makes perfect sense. Most of the exciting innovations and share price appreciation has been happening stateside, sucking capital away from other markets.

That does mean that there are some absolute gems to be found, if we look carefully. One such gem appears to be Jet2 plc (LSE:JET2), and it’s a stock I think investors should consider very closely.

I can’t remember a more attractive valuation

Jet2’s net cash position stands out as a real strength. It’s projected to balloon from £1.7bn in 2024 to £2.8bn by 2027 — an impressive feat in the capital-intensive airline industry. This liquidity cushion not only insulates Jet2 from macroeconomic shocks but also funds strategic expansions, including a 9% seat capacity increase for summer 2025.

Valuation multiples suggest significant potential for the share price to balloon, especially when we look at the EV-to-EBITDA ratio, which takes net cash into account. Jet2’s forward EV-to-EBITDA ratio of 2.01 times for 2024 is expected to plummet to 0.53 times by 2027 — far below typical industry peers like IAG, which trades at around 4.7 times. This disconnect implies the market underestimates Jet2’s earnings power and is failing to take note of its huge cash position.

Even on a price-to-earnings (P/E) basis — which doesn’t take into account net cash or debt — the stock is very competitive. It’s currently trading at 8.1 times forward earnings, while earnings per share (EPS) are expected to grow by 9.6% annually. This leads us to a price-to-earnings-to-growth (PEG) ratio of 0.77 — a classic sign of undervaluation even when we omit the fact that half the market cap is covered by cash.

Analysts reinforce this view, with a consensus price target of £20.85 representing 37% potential appreciation from current levels. Tellingly, there are no Sell ratings among the 13 analysts covering the stock.

Reasons not to buy

I’ve been searching high and low for reasons not to buy this stock. And while I see risks, I don’t see compelling reasons to avoid it. For example, the airline sector remains hypersensitive to fuel prices (30%-40% of operating costs) and demand shocks. Recent events like UK air traffic control failures and Greek wildfires highlight operational vulnerabilities.

Moreover, its gross profit margin of 17.7% is some distance below industry-leader IAG’s 27%. I’ve also noticed that Jet2’s average fleet age of 13.9 years is a little older than average — in the Western world at least. This suggests that it may need to spend more cash on fleet updates than its peers. It does have around £5bn of aircraft on order, but these will be delivered over the next six years or so, and shouldn’t materially damage the financial position.

The next IAG?

This time last year, I highlighted IAG as the best stock in the aviation sector. It has since doubled in value. Now, I’m looking carefully at Jet2, a stock I haven’t covered before. I can’t help but think this is now the most undervalued stock in the industry. Unless I spot any glaring mistakes to my thesis, I’ll add this one to my portfolio.

Lloyds Banking Group‘s (LSE:LLOY) share price see-sawed following the Bank of England’s (BoE) meeting yesterday (6 February).

The FTSE 100 bank surged following the midday rate announcement but sharply retraced shortly afterwards. In the end, it rose on the day but market sentiment is clearly fragile.

I can’t say I’m surprised. There’s plenty in the BoE’s rate decision and accompanying commentary that I feel could spook investors.

Economic gloom

Before we get to the interest rate cut and its implications for Lloyds, let’s look at the central bank’s latest growth forecasts.

There’s no way to paint this in a good way. The BoE’s latest estimates for Britain’s economy are pretty grim.

The central bank now expects UK GDP to expand just 0.75% in 2025. That’s HALF the rate of growth that had been predicted as recently as November.

That wasn’t the BoE’s only worrying prediction either. Raising fears of dreaded ‘stagflation’, it estimated Consumer Price Inflation (CPI) will spike again to 3.7% in quarter three.

That’s up from 2.5% in December, and approaching double the BoE’s 2% target.

A combination of weak economic growth and resurgent inflation could wreak havoc on Lloyds. As well as impacting credit demand, the Black Horse Bank could also face a significant rise in loan impairments.

Lloyds’ is already struggling to generate sales growth — indeed, net income actually dropped 4% in quarter three, to £4.3bn. Things could get much worse if the economy cools again.

Slashed interest rates

There’s also the possibility that interest rates could plummet in the short-to-medium term as the BoE tries to stimulate growth.

Falling rates are a double-edged sword for banks. On the one hand, their economic benefits can boost consumer demand. In particular, they can lead to a resurgence in the mortgage market, an area in which Lloyds is the clear market leader.

However, reduced rates can also pull net interest margins (NIMs) — the difference between the interest banks charge borrowers and what they pay savers — through the floor.

This key level of profitability is already alarmingly thin over at Lloyds. In the third quarter its NIM was 2.94% and falling, down 19 basis points year on year.

Judging from this week’s meeting, BoE ratesetters are becoming much more eager to cut rates than just a few months ago.

To the market’s surprise, two members of the Monetary Policy Committee (MPC) voted for a half-a-percent rate cut, including the previously hawkish Catherine Mann.

The other seven voted for a 0.25% reduction, resulting in that eventual cut to 4.5%.

As I say, lower interest rates can have benefits as well as drawbacks for Lloyds. But they clearly add another layer of danger.

A risk too far?

Some could argue that these hazards are baked into the low valuation Lloyds shares command. At 63p, they trade on a forward price-to-earnings (P/E) ratio of 9.1 times.

I’m not so sure, though. The risks to the bank’s profits are severe. And especially when one also considers other dangers, like growing market competition and a Financial Conduct Authority (FCA) probe into car finance that may trigger huge financial penalties.

Right now, I’d rather search for other cheap UK shares to buy.

At its latest meeting on Thursday (6 February), the Bank of England’s (BoE) rate-setting unit cut its benchmark interest rate to 4.5%. The expected move allowed UK shares to cling on to some solid daily gains.

While a 25-basis-point reduction was expected, the split across the Monetary Policy Committee (MPC) raised eyebrows. Seven of the nine members voted for the 0.25% cut. But two — including ‘super hawk’ Catherine Mann — wanted an even-larger cut, to 4.25%.

Why is this significant? Well Mann has regularly voted against cuts in prior meetings, and was tipped by some to do so again today. Thursday’s change of tack suggests a change in thinking, perhaps across the entire MPC, that could lead to swingeing rate cuts in the months ahead.

Share price boost

A sharper-than-expected fall in interest rates would provide a big boost to the UK share complex on the whole. It could potentially turbocharge consumer and business spending, and bring down borrowing costs for British companies.

A strong and sustained drop in interest rates isn’t guaranteed, of course. Sticky inflation — which could be exacerbated by trade wars following US President Trump’s return — may complicate future BoE rate decisions.

But what if interest rates do fall substantially over the short-to-medium term? Here are two UK stocks I think could rise especially strongly and are worth considering.

Berkeley

Housebuilders like Berkeley (LSE:BKG) may be the most obvious beneficiaries of sharp interest rate cuts. The knock-on effect that rate reductons could have on homes demand by boosting buyer affordability may be substantial.

In this scenario, Berkeley shares could rise especially strongly in value. With a forward price-to-earnings (P/E) ratio of 10.6 times, the FTSE 100 builder is much cheaper than its blue-chip peers, which in turn could provide ample scope for price gains.

The housebuilder is, like its peers, already reaping the rewards of recent rate cuts (it said it enjoyed a “a slight [demand] uptick“ in the weeks prior to early December’s latest trading update). This could well continue.

That said, cost inflation remains an issue across the construction industry that could dampen profits. In addition, the benefit of interest rate cuts to Berkeley’s top line could be offset by a prolonged downturn for the UK economy.

But on balance, I think things could be looking up for the Footsie firm.

Assura

Real estate investment trusts (REITs) such as Assura (LSE:AGR) could also turn sharply higher if interest rates fall sharply.

Lower rates can have two significant benefits for these property stocks’ profits. First of all, they can bring down borrowing costs by giving firms an opportunity to find better refinancing deals.

This in turn can also make new developments and acquisitions for growth more financially viable.

Secondly, interest rate cuts could also give Assura’s earnings a boost by driving net asset values (NAVs) higher. The company’s portfolio valuation dropped 1% to £2.7bn in the last financial year (to March 2024), reflecting the impact of Bank of England rate rises. On a like-for-like basis its asset values reversed 4%.

NAVs have improved more recently, and further interest rate cuts would fuel this momentum.

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Bear in mind, though, that future changes to NHS policy could have good or bad implications for the REIT’s profits, regardless of interest rate changes.

A FTSE 250 dividend stock — probably my favourite one recently — spiked 17% today (6 February). It was investment trust BBGI Global Infrastructure (LSE: BBGI).

Surprisingly, this wasn’t enough to top the mid-cap index gainers, as iron ore pellet producer Ferrexpo surged 21% higher.

Normally I’d be delighted to see this type of one-day rise from a stock in my portfolio. And I’m certainly not complaining, especially as it had been drifting somewhat aimlessly over the past year. Yet, it’s still bittersweet…

What happened

BBGI has agreed to be acquired by Canadian pension fund manager British Columbia Investment Management for £1.06bn. 

Under the terms of this proposed all-cash deal, BBGI shareholders like myself will receive 147.5p per share. This is a premium of 21.1% to the closing share price yesterday, and 20.1% more than the previous three-month average. 

On the offer, CEO Duncan Ball said: “Since its launch in 2011, BBGI has grown to become one of the UK’s largest listed infrastructure funds, with a globally-diversified portfolio of 56 low-risk, core infrastructure assets that deliver sustainable and long-term index-linked cash flows. Over this period, we have delivered a total net asset value [NAV] return of 176.3%.”

The actual return has been less, mind, as the trust has been trading at a double-digit discount to NAV. Indeed, just last week (31 January), I wrote: “I think [BBGI] shares look very attractive at 121p.This leaves them 18.4% below the portfolio’s net asset value (NAV) of 148p, as at 30 June.”

I ended with: “If and when interest rates move lower, I think the share price could recover strongly as investors reassess the high-quality income on offer.”

It appears the fund isn’t waiting about to find out — the share price might not have bounced back — and the board is recommending shareholders vote through the deal.

Why am I sad?

For me, it’ll bring this investment firmly back into positive territory. Indeed, when I factor in the dividends I have received, the total return will be around 10% since I invested just under a year ago.

Not bad, but I was expecting a lot more over time. BBGI’s portfolio is made up of high-quality projects like healthcare facilities, tunnels, and toll bridges. The sort of things that aren’t going anywhere and tend to throw off reliable cash to fund dividends.

The forward dividend yield had crept above 7%, while management was recently boasting that BBGI had another 15 years of dividend growth left in the tank from its existing portfolio. Hey ho.

What will I do?

BBGI plans to declare an interim dividend before the deal is completed. If I take that, the offer price will be reduced by the dividend amount. The current share price of 143p largely reflects this.

I won’t be hanging around now, though. I’ll sell up and move on.

Lots of value around

This is the second business in my portfolio in the last couple of months to be acquired at a significant premium. Small-cap AI firm Windward rocketed 70% higher in the days leading up to Christmas.

What this proves is that there is still a lot of unrealised value about today in cheap UK stocks. I expect a lot more shareholder value to be unlocked across the FTSE 350 this year.

Today (6 February) was good for shareholders of AstraZeneca (LSE: AZN). The FTSE 100‘s largest company vaulted 5.9% higher to 11,786p after dropping a strong set of earnings.

This helped push the Footsie up to 8,766, a record intraday high. Interest rates were also cut today, bringing down the cost of borrowing to 4.5%. So more gains could be ahead.

I added to my holding in the pharma giant in early November when the stock dipped under 10,000p. This followed news that some executives were under investigation in China, which I suspected might not matter five years from now. We also got news about that today.

Strong growth and surging profits

In 2024, AstraZeneca’s revenue jumped 21% year on year to $54.1bn on a constant currency basis. That was ahead of guidance for high-teens growth and better than what analysts were expecting ($53.1bn).

Sales growth was strong across the board, with its oncology (up 24%) and respiratory and immunology (24%) divisions leading the way. Cancer treatments account for around 41% of total sales.

Looking at regions, Europe (up 26% at constant exchange rates) and emerging markets excluding China (32%) grew the fastest. Yet its largest market, the US, recorded impressive 22% revenue growth last year.

On the bottom line, core earnings per share (EPS) spiked 19% to $8.21, ahead of forecasts ($8.15), while pre-tax profits surged 38% to $8.7bn.

CEO Pascal Soriot commented: “This year marks the beginning of an unprecedented, catalyst-rich period for our company, an important step on our Ambition 2030 journey to deliver $80bn total revenue by the end of the decade.” 

While growth’s understandably expected to be slower in 2025, things still look solid. Revenue’s set to rise by a high single-digit percentage, with EPS increasing by a low double-digit percentage. It wouldn’t surprise me if those figures end up a bit higher this time next year.

Finally, the dividend was hiked 7% last year, though the forecast yield is just 2.2%.

Ocean-deep drugs pipeline

By my count, AstraZeneca had 14 blockbuster drugs in 2024, which means each one generated over $1bn in annual sales. But a handful of others are also getting closer.

One reason I’m a shareholder is the company’s deep pipeline of innovative treatments and potential future blockbusters. Last year, it delivered nine positive late-stage studies and anticipates another seven potential new medicines this year.

This gives the company many shots on goal, though naturally some will miss the target. Late-stage trial failures are an unavoidable risk here, as is adverse regulation. Donald Trump’s health secretary, the Big Pharma critic Robert F Kennedy, also remains a wildcard.

Meanwhile, a global trade war triggered by Trump’s tariffs might see AstraZeneca facing a bit more regulatory scrutiny in China. Speaking of which…

A drop in the ocean

What about China then? Well, this matter relates to unpaid importation taxes on two cancer drugs. But the good news is that the company sees the fine for this being between $900k and $4.5m.

While it’s obviously not ideal to be in the bad books with Chinse authorities, this amount is small potatoes for a global pharma giant.

As a shareholder, I’m happy with everything I’ve read here. But I’ll wait for another dip before buying any more shares.

As expected, the Bank of England has cut interest rates to 4.5%. This is great news for borrowers, not so much for those with cash savings beyond an all-important emergency fund. Thankfully, there’s an alternative to sticking money in a bog-standard bank account: dividend growth shares!

Strong and stable

One option that jumps out at me is online trading platform provider and FTSE 250-listed IG Group (LSE:IGG). Its shares are currently set to yield 4.7%. This cash return has also been rising in recent years. The dividends look set to be comfortably covered by predicted profits too.

Since IG earns more in commission fees when traders are particularly active, this might also be a good play for riding out periods of volatility in the markets (and even profiting from them).

It’s not all gravy, though. This is a competitive space that frequently finds itself under the spotlight of regulators. So, there’s nothing to say that IG’s share price won’t yo-yo about the place every so often.

For someone intent on getting their money to work harder for them, however, I think it’s a great option to consider to kick things off. Despite the shares rising 50% in the last 12 months, a price-to-earnings (P/E) ratio of 10 still looks reasonable to me.

Massive yield

A second dividend growth stock worth pondering is molten metal flow engineering and technology specialist Vesuvius (LSE: VSVS).

Importantly, this firm operates in a completely different sector to IG Group. Again, that doesn’t mean the dividends are completely secure. But it does help to reduce the risk of no income at all being received. This £1bn cap business offers a stonking yield of nearly 6% for FY25. That’s getting on for nearly double the average across the FTSE 250.

One thing to be aware of is that steel and foundry markets in North America and Europe are expected to stay “subdued” for a while. This means profit from last year is likely to come in “slightly below” that achieved in 2023.

On a more positive note, management is reducing costs where it can and the balance sheet doesn’t look stretched as it stands.

Full-year numbers are due in March but I suspect a lot of negativity is already priced in.

Boring but beautiful

Completing the trio that I think are worth considering is old favourite — consumer goods giant, Unilever (LSE: ULVR).

Now, this isn’t a company that sets the pulse racing. But that’s surely not the goal. What matters more is whether a business boasts a better-than-average record of throwing increasing amounts of cash back to its investors.

Despite the occasional wobble, that’s been the case here. One of the UK’s biggest companies, Unilever has been a reliable source of passive income for decades thanks to our tendency to habitually buy Marmite, Persil and Lynx (and a whole lot more).

When times are tough, there’s certainly an argument for saying Unilever risks losing sales to retailers’ own-brand items. The 3.4% forecast yield is also good but not spectacular.

However, the company’s sprawling operations mean it’s not overly dependent on any one economy when it comes to earnings. I’d also argue that falling rates should mean previously-hesitant consumers will now be more willing to splash out on their favourite brands.