1 of the best income shares to consider now

On February 2, manufacturers and distributors of commercial flooring James Halstead (LSE: JHD) issued a positive trading statement. But why should we care about this? After all, in these challenging times, the commercial floor may not be the first sector investor’s mind when thinking about income stocks.

Tough business

But maybe we should. James Halstead’s business is more difficult than it first appears. For example, the company has a multi-year record of increasing shareholder dividend payments. And that includes pandemic years. The company not only maintains its dividend, but also raises it in 2020, 2021, and 2022.

On top of that, City analysts expect a smaller increase in shareholder payouts for this year and next. And that will extend the long unbroken run of annual dividends up into the future.

I think the company’s record on dividends is quite interesting. But close to 203p, the share price has fallen again by just over 19% since last year. And that pushed up the dividend yield to an attractive level. The expected figure for the trading year to June 2024 is 3.9%.

Now, cyclicality is a double-edged sword. And the fear of cyclical effects on the business that I think keeps the stock swinging up and down. However, James Halstead’s earnings are actually resilient. They are down about 9% in 2020. And analysts expect a small easing of about 1% in the current trading year. However, the company has grown its earnings every year since at least 2017.

Sales ahead

In a recent trading update, the company cited the challenges of rising energy and raw material costs. And, on top of that, trade in British manufactured goods is affected by the unavailability of international shipping to some overseas territories. Among the most affected are Australia and America.

However, Chairman Anthony Wild said the sale was “front” in many corporate markets. And for the six months to December 31, 2022, profits will be around 8% to 9% higher annually. We will get the full picture with the half-year results due on March 31.

But looking ahead, there is potential for business conditions to improve. Directors said the cost of goods and raw materials started to fall in December, although energy costs were still high. However, the company’s European raw material suppliers have not experienced production disruptions due to energy shortages.

Meanwhile, destocking by businesses has helped the already strong balance sheet become stronger. And one important thing that is not heard from the director is that the demand for the company’s products is increasing over time.

However, demand patterns can change at any time. And the expected earnings multiple is almost 21 for the trading year until June 2024. So this stock is not without risk. But I think it should be thought about and researched now.