Provident Financial plc is a UK-based sub-prime lender that specializes in loans to the non-standard credit market. This financial service firm provides credit options for those whose needs are not approved by the mainstream credit market.
Since 2015, Provident has been on the ropes and its share price is trading on a long downtrend. So, is now a good time to buy or sell Provident shares?
If you’re a UK investor looking to buy or sell shares of Provident, this guide is for you. We’ll show you how to buy Provident shares online in the UK, suggest top brokers, and take a closer look at Provident financial’s share price and outlook for the future.
Provident Financial is a British company listed on the London Stock Exchange, so in order to buy and sell its shares you will need to find a UK broker that gives you access to shares listed on the LSE. One way to buy Provident Financial shares in the UK is through contracts for difference (CFDs). These are essentially financial instruments that allow you to speculate on the share price of a company without owning the asset.
Below, we suggest regulated brokers in the UK that allow you to buy shares online in the traditional way as well as through CFDs.
1. eToro – Buy Provident Shares with Zero Commission
If you are looking for the most user-friendly and cost-effective way of buying Provident in the UK, eToro is the ideal broker. This platform was founded in 2006 and since then rapidly grew to become the largest social trading platform in the world. With eToro, you will get access to over 800 stocks, including many of the best shares, from a variety of exchanges around the world.
eToro allows investors to both buy shares of companies in the traditional sense or trade CFDs. By trading CFDs, you can speculate on the price of the share without owning the underlying asset. On top of that, you will be able to short sell stocks and use a leverage ratio of up to 5:1 on shares.
Further, eToro is one of the few online brokers out there that does not charge any dealing commissions when buying and selling shares. You can trade Provident shares with no commission, and the spreads are very competitive. You will also have the ability to buy a fractional share of a company from just $50.
But above all, eToro is famous for being the leading social trading platform in the world. The platform enables you to interact with other investors, and use the copy trading feature to automatically mimic the trades of top-performing traders. Basically, you can check the historical trading results of other users before you decide to copy their trading activity, which ensures you only follow traders with a proven trading record.
You can get started on eToro with a $200 (around £160) deposit, which you can make via PayPal, credit/debit card, or bank wire transfer. Regulated by the FCA, ASIC, and CySEC, eToro is a safe and reliable trading platform. To top it all of, eToro offers one of the best mobile stock trading apps on the market.
2. IG – Trusted UK Share Dealing Platform with Competitive Fees
Founded in 1974, IG is one of the oldest and most trusted brokerage firms in the UK and worldwide. This broker is one of the few to offer both share dealing services and share CFDs, meaning you will be able to either buy shares directly from exchanges or speculate on the price of the share without owning the underlying stock. When you trade CFDs, you are trading on leverage and you can easily short sell the shares.
IG Markets is popular because it permits access to over 12,000 shares and more than 17,000 markets to trade on. This broker has a flat-fee commission structure, which starts at £8 per trade if you place less than three orders per month. Otherwise, you can reduce the commission to £3 per trade. If you prefer to trade Provident Financial shares with leverage, IG allows you to do that via CFDs.
While eToro offers investors a social trading experience, IG offers a wide range of market insights, advanced trading tools, and MetaTrader4 compatibility. If you’re looking for a trading platform for beginners, you can opt for IG’s proprietary trading software. Alternatively, IG offers the MetaTrader 4, ProRealTime, and the L2Dealer.
Finally, IG holds licenses with several regulatory bodies, including the FCA in the UK and ASIC in Australia. Investors need to meet a minimum of £250 in order to open an account, which can be funded with a UK debit/credit card or bank account.
- Trusted UK broker with a long-standing reputation
- Spread betting and CFD products
- Access to UK and international markets
- A wide range of trading platforms
- A demo account is available
- Regulated by the FCA and ASIC
- Leverage and short-selling also available
- Over 12,000 shares from international markets
- A minimum deposit of £250
- US stocks have a $15 minimum commission
Since 2015, Provident Financial plc has been facing many challenges and difficulties. The company lost two-thirds of its value in one day in 2017, following a second profit warning in two months. But that’s not all, Provident Financial shares encountered a turbulent time due to the replacement of its chief executive, cancellation of a shareholder dividend payment, and the announcement of an investigation by the FCA. Shares continued the downward trend during 2020 as the negative impact of the COV-19 pandemic weighs on the markets.
However, most of these have been priced into the share price. In this section, we’ll cover all the basics you need to know in order to decide if Provident is the right investment for you.
Provident Financial was established in Bradford, England in 1880 by Joshua Kelley Waddilove who had the vision to provide affordable credit to families and individuals in West Yorkshire. By the time Sir Joshua died in 1920, Provident Financial plc had grown into a nationwide business with more than 5000 employees. The chain has eventually grown to 23 branches by the end of 1982. As of 2020, the company has around 2.4 million customers, and several operations in Central Europe, Mexico, Romania, the United Kingdom, and the Republic of Ireland.
Provident Financial was first listed on the London Stock Exchange in 1962 and is a constituent of the FTSE 250 Index. A glance at the company’s all-time chart shows that the share had an impressive run since the early 90s, but as mentioned before, Provident Financial plc management has been trying to rebuild its business after years of market-share losses.
The share peaked in late 2015 where it hit 2602.33p per share. The Provident Financial share price continued its downward trajectory since 2015 and as the COV-19 pandemic came to fruition, another drop has added fuel to the fire. Today, Provident Financial shares are priced at 175.40 as of August 2020, the lowest level since the mid-90s.
As a Provident Financial plc shareholder, you will be entitled to dividends payment once a year. This company generally pays out 57% of its earnings as a dividend, which is equal to a yield of around 5.1% and in the current price, equates to about 0.25p per share. This generous dividend policy is a great incentive for investors who are looking for a fixed income in the form of earning distributions.
Provident Financial’s share price has had a significant negative movement since the beginning of the year, and even more before that. And yet, Provident Financial plc is a constituent of the prestigious FTSE 250 Index and is among the largest companies in the UK with a market capitalization of £459.806M at the time of writing.
With this in mind, it is crucial that you do some research on the company before making an investment. As such, below you will find reasons why you should buy shares of Provident Financial plc.
Strong Balance Sheet
According to analysts, Provident Financial PLC presents a relatively strong balance sheet that will help the sub-prime lender to weather the coronavirus recession and emerge into a market with fewer competitors. Some of the most notable competitors of the company such as BrightHouse, Amigo, and other payday lenders, have experienced difficulties during the past months. This will ensure that Provident Financial plc remains a dominant player in the industry whenever the coronavirus pandemic ends.
A Change in Business Model
The change of business model is seen as a necessary step for the company to overcome the difficulties of the past years. Since 2018, the sub-prime lender has been at the forefront of changing its business model following the FCA investigation. As such, Provident home credit has changed its employed business model and became authorized by the Financial Conduct Authority (FCA) in late 2018. It has also implemented the home credit part of the high-cost credit review in 2019. Moreover, the company announced that it has joined the Northern Powerhouse Partner Programme to increase its involvement in the North of England.
In July 2020, the Board of Provident Financial plc has confirmed the appointment of ex-Minister Margot James as the new non-executive director of the company.
Strong Capital Position
It appears that Provident Financial has adapted well to the COVID-19 crisis and its capital and liquidity positions have remained strong. The company’s P/E ratio stands at a modest 5.48, which simply means that the share is trading at a discount or investors are pessimistic about the company’s future prospects. Nevertheless, Provident reported annual revenues of £998.30 and a net profit of £84.40 in 2019. In the same year, the company also reported EPS of 33.30p and dividend per share of 25.00p.
Provident Financial plc is expected to release its half-year 2020 earnings release on August 26.
Step 3: Open an Account and Deposit Funds
Once you have selected a suitable broker that allows you to trade Provident Financial shares, you will then need to open a share dealing account. As such, we are now going to show you how to open an account with our recommended broker eToro. Bear in mind that the process of opening a trading account remains largely the same regardless of the broker you opt for.
You will first need to visit the eToro website and sign up for a free investment account.
During the registration procedure, you will be asked to provide personal information such as your full name, contact details, national insurance number, trading experience, email address, etc.
Then, eToro requires that you verify your identity. As such, you will need to upload a copy of your:
- Passport or Driver’s License
- Recent Utility Bill or Bank Account Statement
Once you’ve uploaded the documents and your account has been approved, you can fund your stock trading account. At eToro, you will need to meet a minimum deposit requirement of $200 (about £160). Supported payment methods include debit card, credit card, Paypal, Skrill, Neteller, and UK bank transfer.
Now that the funds have been deposited in your account, you can then buy Provident shares straight away. From eToro’s account dashboard, search for Provident Financial or PFG.L in the search box at the top of the page. Once the result pops up, click on it.
Then, you will be transferred to the Provident share page. Click on the ‘Trade’ button to open an order form.
On the order box, set the amount you wish to invest in Provident Financial plc and at what price. You will be able to choose a market order to get an instant execution at the current market price or set a limit order to buy or sell the shares at a better price. To complete your Provident Financial purchase, click on the ‘Open Trade’ button.
Note: If you are buying Provident Financial shares outside of standard market hours (8.00 am to 4.30 pm, UK Time), you will need to click on ‘Set Order’. Your Provident Financial shares purchase will then be completed when the markets open.
It’s hard to be decisive about whether Providentshares are under or overvalued. What’s more, the coronavirus is a double-edged sword for Provident Financial plc. On the one hand, if the economy slows down, the business of Provident Financial also slows down. On the other hand, this company provides personal credit products to the non-standard lending market, which is a market that might be booming during the Covid-19 economic recession.
When taking into account that the share price is on a downtrend since mid-2015 along with the wider impact of the Covid-19 pandemic, it will require investors to be extremely patients when buying this share.
Ultimately, it is a legitimate investment for investors who are looking for a long-term position. This company has a high dividend yield, and analysts suggest a price target of between £195-£459.
In summary, the market sentiment around Provident Financial shares has been anything but positive since 2015. Its year-to-date return stands at -61.01% and its 1-year return stands at -49.79%. While it’s not clear whether the downtrend has reached its bottom, there’s a strong feeling that Provident shares are trading at a discount. If Provident shares will return to its pre-pandemic price levels at around £400 per share, this would represent an increase of 228%.
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75% of retail investor accounts lose money when trading CFDs with this provider.
What stock exchange is Provident Financial plc listed on?
Shares of Provident Financial plc are traded on the London Stock Exchange under the ticker symbol PFG. It also has a secondary listing on the Frankfurt Stock Exchange under the ticker symbol PRVA.F.
Does Provident Financial pay dividends?
Yes, Provident Financial typically pays dividend payments once a year. An interim dividend during November and its final dividend in the following June.
Can I collect Provident Financial dividends when trading CFDs?
Yes, as long as you buy the CFD contract before the ex-date, you will receive a dividend payment from your broker.
What is the minimum number of Provident Financial shares that I can buy?
Each online stockbroker will have a different policy on minimum investment amounts. If opting for CFD trading, you can buy fractional shares of a company. In the case of eToro, this stands at $50 (about £40) meaning you can buy around 27% of one single Provident Financial share.