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Plenty of UK buyers are likely to favour high-yield dividend shares. Nevertheless, I‘m not convinced this is necessarily the best investment strategy for someone in their 40s (like myself) who’s nonetheless working and, realistically, has a long time till retirement.
I reckon these of their 40s are higher off looking for high-quality shares that may generate substantial wealth for buyers over time by means of each sturdy positive factors and dividend revenue. With that in thoughts, listed below are two prime shares for 40-something buyers to contemplate.
One of many UK’s finest tech shares
First up we have now Sage (LSE: SGE). It’s a FTSE 100 expertise firm that specialises in accounting and payroll software program for small and medium-sized companies.
This firm has been a tremendous wealth generator previously (regardless of having a low dividend yield). During the last decade, its share worth has risen practically 200%. Add in dividends and buyers have acquired complete returns of greater than 13% a yr. There aren’t many shares within the Footsie with that sort of efficiency monitor report.
Trying forward, I see potential for extra engaging returns. In my opinion, Sage is very well positioned to learn as small companies the world over transfer to stand up to hurry digitally. I reckon its earnings are prone to rise considerably over the following decade on the again of the digital transformation theme. This revenue progress ought to result in each share worth progress and better dividends for buyers (the yield is about 2% as we speak).
When it comes to the valuation, the price-to-earnings ratio (P/E) right here is at present about 25. That’s fairly excessive by UK requirements. However for a software program firm with recurring revenues and a excessive degree of profitability, it’s really fairly low.
So I’m comfy with that a number of. That stated, there’s some valuation threat. If progress was to gradual attributable to a weak financial system, or extra competitors from rivals, buyers may determine that the corporate doesn’t deserve the present P/E ratio and ship the share worth down briefly.
Effectively positioned for the digital revolution
One other inventory that appears properly positioned to learn from the digital revolution we’re within the midst of is Gamma Communications (LSE: GAMA). It offers digital communication options (cellphone, video, messaging, and collaboration instruments) for companies throughout the UK and Europe.
This firm’s additionally generated sensible returns for buyers over the long run. Round a decade in the past, it got here to the market by way of an IPO at a worth of 187p per share. Since then, its share worth has risen about 800% (roughly 25% a yr). Buyers have acquired dividends on prime (the yield’s solely about 1% at present).
Regardless of this large share worth rise, the inventory doesn’t look costly as we speak as the corporate’s earnings are rising quickly. For 2025, analysts anticipate Gamma to generate earnings per share of 91.3p. That places the inventory on a forward-looking P/E ratio of simply 18. At that a number of, I see quite a lot of worth on provide.
I believe the large threat right here is the corporate’s latest transfer into Europe. This presents large potential however there’s no assure the corporate will be capable to crack the market.
I’m optimistic that Europe will result in additional progress for the corporate although. Total, I’m excited concerning the potential right here.
