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Targeting asset-light cash generators

A £123m market capitalisation financial services provider offers an attractive dividend yield, is in an earnings upgrade cycle and has just declared a hefty special dividend.
Targeting asset-light cash generators

There are multiple benefits of targeting cash generative asset light companies which produce a high return on capital and have modest capital expenditure requirements.

The most obvious one is that a chunk of cash flow from operating activities can be recycled back into the business to boost shareholder returns while at the same time offering the board flexibility to adopt a progressive dividend policy. Investors have a habit of latching onto companies that can deliver consistent earnings and dividend growth, and create shareholder value, too.

Another feature of asset light businesses is that they are operationally geared, so operating margins widen as revenue rise because an increasing amount of operating profit is earned on incremental sales.

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