This stock is getting cheaper… and boasts a 7.8% dividend yield!

Don’t say Mr. Market never gave you anything. Shares of Metcash (ASX: MTS) have fallen harder than the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) in recent months, declining 14% over the last 90 days versus a 5% decline in the index over the same period.

Today, Metcash shares are trading for a shade under 22 times earnings and on an EV to EBITDA basis of 8. Potential investors should also take a look at the impressive dividend yield, currently in the 7.8% range, fully franked.

About Metcash

Metcash operates both distribution and retail businesses. It represents Australia’s third supermarket chain, IGA, coming in behind Woolworths (ASX: WOW) and Coles, owned by Wesfarmers (ASX: WES), and also operates liquor stores such as Bottle-O and Cellarbrations.

Most recently, Metcash moved deeper into the hardware and automotive space, with a Metcash subsidiary acquiring the assets of operations of Australian Truck and Auto Parts Group in May.

“The automotive aftermarket parts retail sector is a large market worth $5.6 billion. The acquisition will provide potential for growth within Metcash’s hardware and automotive pillar,” said Metcash CEO Andrew Reitzer in a press release.

The bottom line for investors

Metcash could be one for your watch list as a business of reasonable quality and one that pays out a generous dividend to shareholders. A tick or two down, and the share price could become attractive.

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Motley Fool contributor Catherine Baab-Muguira owns no shares in any company mentioned in this article.


Forget BHP and Woolworths. This "dirt cheap" company is growing like gangbusters, and trading on a 5.6% dividend yield, FULLY FRANKED (8% gross). With interest rates set to stay at these low levels for years to come, for hungry investors, including SMSFs, this ASX company could be the "holy grail" of dividend plays for 2016.

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