Last week we saw countless companies declare their quarterly dividend, and a select few that elected to increase their yield compared to last year. In this piece I am looking at five that might present a good investment opportunity to shareholders.
For this particular piece, I am using one of the value-seeking strategies found in my book, Taking Charge With Value Investing(McGraw-Hill, 2013) — seeking value in stocks that trade with valuations that are less than the broader market, but with greater growth. Hence if the S&P 500 is trading at 19.23 times earnings and at 1.52 times sales with (0.51%) growth in Q1, then a company that is cheaper with positive growth might indicate upside relative to the S&P 500.
| Company | Ticker | P/E Ratio | Price/Sales | Forward Yield* |
|---|---|---|---|---|
| Orchids Paper Products Company (NYSEMKT:TIS) | 18.39 | 1.76 | 6.08% | |
| Spartan Stores, Inc. (NASDAQ:SPTN) | 12.55 | 0.14 | 2.09% | |
| TE Connectivity Ltd. (NYSE:TEL) | 17.12 | 1.42 | 2.20% | |
| KeyCorp (NYSE:KEY) | 11.96 | 2.42 | 2.09% | |
| Coach, Inc. (NYSE:COH) | 16.01 | 3.28 | 2.29% |
*After dividend hike last week
- Orchids Paper Products Company (NYSEMKT:TIS) is a manufacturer of tissue products, a small cap company with a market capitalization of just $175 million. Yet despite being small, it is stable and profitable, and increased its industry-leading yield by 16.66% last week. The company is currently growing by 3% (outperforming the market) and is valued slightly cheaper than the S&P 500 as well. Thus I say it might make a good investment regardless of the market’s future performance.
- Spartan Stores, Inc. (NASDAQ:SPTN) is a regional grocery distributor and retailer, trading with a market cap of just $375 million. Last week the company increased its yield by 12.50%, making it very attractive considering the discount that it trades to the broader market. If there is a negative to its investment outlook it’s that the company has zero growth and has traded relatively flat since the recession. With that said, the stock is cheap, and with a 2.09% yield (that has increased 80% in the last five years) it should become a better long-term performer versus the S&P.
- TE Connectivity Ltd. (NYSE:TEL) is a $20 billion secular company, one that designs and manufactures over 500,000 products that connect and protect the flow of power and data inside a number of products used by consumers and industries. Aside from increasing its yield by 19% last week, the company also trades at a discount to the market. With it growing near equal to the rate of economic growth, I think its value should equate to upside as a long-term investment.
- KeyCorp (NYSE:KEY) is a regional financial institution with a market cap of $10 billion. The company increased its yield by 10% last week and has strong upside potential with the rest of the financial industry. Unlike the previous three stocks, KeyCorp (NYSE:KEY) is cyclical, needing a strong economy to produce strong fundamental growth. However, with the housing market on the rise, it might be a good addition to your portfolio with deep value being presented.
- Coach, Inc. (NYSE:COH) is also a cyclical stock, as it develops apparel such as handbags and wallets for mostly women. The company has 7% growth (significantly more than the S&P 500) and also greater than the retail industry. Last week the company increased its yield by 12.50%, thus it has become a high-yield investment. In addition, the company trades at a discount to the S&P 500 with a P/E ratio of just 16, meaning it might become a good investment in your portfolio.
Conclusion
Currently, the S&P 500 is paying out a yield of 2.03%, therefore each of the companies on this list have a greater yield (after recent boosts) and trade at a discount compared to fundamentals. This comparison is one of the first steps in determining if a stock might present upside. Next, you have to determine if the investment might fit into your portfolio, with your own due diligence. Overall, I think this individual research of these five companies is worth your time, as you might find a good long-term investment in a company that gives back to its shareholders.
The article 5 Dividend Boosts Worth Noting originally appeared on Fool.com is written by Brian Nichols.
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