Ramsdens Holdings: a sub-£5 stock offering growth and passive income

Stocks that offer both capital growth and passive income are the holy grail of investing. With these shares, someone can potentially build wealth very quickly.

Here, I’m going to highlight an under-the-radar UK small-cap stock that appears to offer this winning combination. Could it be worth considering for a Stocks and Shares ISA or SIPP?

Introducing Ramsdens Holdings

The stock in focus today is Ramsdens Holdings (LSE: RFX). It’s a diversified UK financial services firm that offers pawnbroking services, foreign currency services, precious metals purchases, and jewellery/watch sales.

Founded in the 1970s, it has around 170 stores across the UK today. It’s still a very small company however – its market cap is only around £150m.

A brilliant long-term investment

Now, a pawnbroker/foreign currency dealer may not sound like an exciting investment. But just look at the share price here.

Over the last year, it has risen about 50% (it’s up 7% today). Meanwhile, over the last five years, it has risen about 200%.

It gets better though. This company has also rewarded investors with dividends (including ‘special’ dividends) over these periods.

For last financial year, it paid out a total of 14p per share in dividends. That’s a yield of about 3% at today’s share price of 490p.

Strong H1 results today

As for why the share price is up today, it’s because the company has posted its half-year results (for the six-month period ended 31 March) and they’re strong. Here are some highlights:

• Revenue up 62% to £83.7m.
• Profit before tax up 174% to a record £16.7m.
• Basic EPS up 173% to 37.9p.
• Interim dividend increased by 33% to 6p per share.
• Special dividend of 3p per share declared.

Going deeper, it seems the group is really benefitting from high gold prices at the moment. According to the company, high prices are driving “exceptional demand” for gold buying.

Jewellery retail is also performing very well. Here, revenue was up 26% to £26.1m.

Looking ahead, the company said it anticipates that profit before tax for FY2026 is expected to be in a range of £30m to £33m, ahead of current market expectations. So, not only have we had smashing numbers and a big increase in the dividend (and another special dividend), we’ve also had an increase in guidance.

Could this be a bargain?

The thing is – the stock still looks really cheap. Before today’s results, analysts were expecting earnings per share of 53p for this financial year, which puts the price-to-earnings (P/E) ratio at just nine.

That looks too low to me. It seems City analysts agree – the average price target here is 550p and this will probably rise after today’s brilliant numbers.

Given the low valuation and rising dividends, I believe this small-cap stock is worth a closer look. There are risks around an economic slowdown (this could see money transfers and jewellery sales slow) but all things considered, I see a lot of appeal.

Should you invest £5,000 in Ramsdens Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Ramsdens Plc made the list?

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Edward Sheldon does not hold any positions in the companies mentioned