Sunday share tips: Sainsbury's, Poundland, Hill & Smith

Sell shares of Sainsbury's because the supermarket group's dividend is under threat, Questor said in the Sunday Telegraph. The UK supermarket sector is heading for lower profits and that means Sainsbury's payout is on the chopping block after Tesco's shock slashing of its interim dividend by 75%. Sainsbury's shares may look like good value but the prospective dividend yield of 5.4% is a value trap. Sainsbury's finance chief John Rogers says the balance sheet is strong but Questor is concerned that the payout is funded by debt. Without more guidance from the company's new management, holding cash is a better option.

Sell shares of Sainsbury's because the supermarket group's dividend is under threat, Questor said in the Sunday Telegraph. The UK supermarket sector is heading for lower profits and that means Sainsbury's payout is on the chopping block after Tesco's shock slashing of its interim dividend by 75%. Sainsbury's shares may look like good value but the prospective dividend yield of 5.4% is a value trap. Sainsbury's finance chief John Rogers says the balance sheet is strong but Questor is concerned that the payout is funded by debt. Without more guidance from the company's new management, holding cash is a better option.

Sell shares of Poundland, Danny Fortson advised in his Inside the City column. The Sunday Times writer pointed out that Warburg Pincus, the US buyout house, can start to unload its remaining 37% stake from 8 September. Poundland's business is sound. It generates lots of cash, has little debt and sells cheap goods that capture the mood of the times. Warburg probably won't dump its shares because it does not want to annoy investors that might want to buy its other companies but it will not be around for long. Wait till it has sold before buying Poundland.

Buy Hill & Smith shares, Midas said in the Mail on Sunday. The company makes barriers for use when roads are being upgraded or to stop cars veering off motorways. It also builds sings alerting drivers to speed limits and road works. Overseas sales helped it weather the recession and it now expects to do good business from the UK's £24bn road investment programme. It also makes pipes, metal flooring and other industrial products used worldwide as well as galvanised items with good prospects in the US. Investment in Hill & Smith's industries is increasing and the shares offer good value.

Hold on to shares of RWS Holdings and consider buying if you are not yet a shareholder, Midas said in the Mail on Sunday. Andrew Brode, the company's chairman, is fed up about the share price fall this year and is determined to put things right. RWS translates patents and other complex products and, after firms cut research and development in the downturn, spending is rising again. In time, RWS's Australian acquisition, Inovia, should prove a canny deal, despite recent disappointment.

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