Sunday tips round-up: Victoria, InterQuest, dividend payers

Investors should take profits in Victoria, the carpet maker, said the Sunday Times' Inside the City column. Since Geoff Wilding took control as chairman three years ago the stock has weaved its way from 190p to 1,390p, with the latest step on the back of the £65m acquisition of underlay group Interfloor. Ex-banker Wilding has rolled up five rivals since taking over what was a loss-making basket case, with turnover last year up 80% and profits before tax and exceptional items tripling.

The exceptional item that dragged on the bottom line was a ballsy bonus deal that gave Wilding a £11m bonus as reward for a £2.92-per-share special dividend last July and 8p of other payouts that triggered the deal. Investors are head over heals, but the latest acquisition ups Victoria's debt to £60m, while cash levels are down to £2.4m, which leaves little room for error.

Shares in InterQuest Group are worth buying, wrote Midas in the Mail on Sunday. The recruiter's market cap dropped after a failed buyout and subsequent departures of both CEO and CFO. But behind this is a business that is growing strongly, providing an opportunity for investors to be "greedy when others are fearful", as Warren Buffett says. Interim results last week showed sales up 11%, pre-tax earnings up by a third and the AIM-listed company even pays twice yearly dividends.

InterQuest's speciality is recruiting for companies seeking staff for digital and technology roles, especially highly skilled workers who can earn it premium commissions, with clients including Dixons Carphone, Cancer Research UK and fund manager Fidelity. The continued recovery in the economy will be crucial, but the technology revolution in business is unstoppable and, with low debt and strong cash generation, the company is worth looking at.

Questor in the Sunday Telegraph examined the equity options for income investors, in light of low bank interest rates and rising fears of a bond bubble. Poor profits are putting payouts under pressure, with Glencore last week joining a list of veritable true blue chips that have axed their dividends. Royal Dutch Shell's agreement to acquire BG is likely to remove another healthy dividend from the list, with the resource sector's fallout from the slumping oil price leading to declining cashflows, while mining giants such as Rio Tinto, BHP Billiton and Anglo American have all seen dividend cover plunge.

Dividend cover, which provides a quick way to check vulnerability of the payment, across the FTSE All-Share is at a 30-year low. GlaxoSmithKline, HSBC, Shell, BP and Vodafone are the five most popular blue chip income stocks, but their dividends are looking less well covered these days, with HSBC having the highest cover, but most Asia exposure. Other options include media giants such as WPP, and insurers such as Aviva and housebuilders such as Persimmon now also returning solid cash.

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