Is this high-flyer set for a shares giveaway?

With marketing products firm 4imprint continuing to impress, Graeme Evans considers whether another special dividend might be on the cards. 

Company-branded mugs, pens and stationery continue to inspire one of the London market's biggest success stories, after 4imprint delivered another impressive trading update today.

The direct marketing business, which sells its promotional products in the United States, Canada, the UK and Ireland, saw shares jump 16% to near the record level achieved in August. At 2,100p, they are up a whopping 624% on the price of 290p at the start of 2012.

And based on current sales momentum, FinnCap analyst Guy Hewett reckons there's room for the shares to go as far as 2,477p. His optimism is shared by Peel Hunt, who moved to 2,400p from 2,050p previously. 

Hewett also upgraded his earnings per share forecasts by 2%, given the company's guidance today that revenues and underlying profit will both be towards the upper end of the range of current market forecasts.

The ultimate goal for 4imprint is to achieve US$1 billion of revenues by 2022, compared with the $627 million recorded for 2017. In July, it said it had stepped up the pace of growth in the first half of 2018, helped by the better-than-expected response to a brand awareness campaign launched in March.

It processed 683,000 orders in the first half, an increase of 17%, while 138,000 new customers were acquired in the period.

Source: TradingView    Past performance is not a guide to future performance

Products range from basic giveaways such as pens, bags and drinkware to higher value items such as embroidered apparel, business gifts and full size trade show displays.

Technology is an increasingly popular category, with Bluetooth speakers, ear buds and other items driven by the increased use of mobile devices.

As the vast majority of its revenues come from North America, the company has benefited from the US economy's recent strength. The US and Canadian promotional products markets together are estimated to total around $25 billion in annual revenues.

Today's brief update offers reassurance that rising US interest rates and geopolitical tensions have not affected corporate demand.

Hewett said:

"We reiterate our view that 4imprint will continue to take market share in its large end market, driving double-digit growth in sales and earnings, with excess cash generated set to be returned to shareholders."

4imprint paid a special dividend of 43.17p in its 2017 results, alongside a 2% rise in its total dividend to 42.58p. It currently trades with a projected 3% yield.

Analysts at Liberum said: "As the cash pile grows, this gives management options for further shareholder distributions, perhaps via special dividends.

"However, we expect the board would like to maintain a cash buffer to ensure that the business can take advantage of any industry downturn."