Yesterday, stockbroking firm Bell Financial Group Ltd (ASX: BFG) announced its financial results for first half of 2016 and the market responded badly. The share price closed at $0.69, down 15.3% for the day having risen more than 30% in the week prior to the release.

Revenue rose 2.0% to $84.7 million but earnings-per-share (EPS) were down 4.3% to 2.2 cents. The company increased its interim dividends to 1.75 cents up from 1.5 cents last year and the stock currently trades on a substantial fully franked dividend yield of 6.9%.

Bell had $48.3 million in company cash at 30 June 2016 and no debt except for that used to fund its margin lending business. Finance income, which is largely generated form margin lending, rose 14.2% to $7.2 million for the period. Bell is the only non-bank margin lender in Australia and has never experienced a bad debt thanks to its conservative lending requirements.

The group owns 56.6% of the Bell Direct online broking business and the platform has been awarded Best Online Broker by the Australian Financial Review several times. The division seems to be growing strongly based on a 57.4% increase in profit attributable to non-controlling interests during the half-year but still only makes a small contribution to the group.

Bell has two reporting segments based on client type, Retail and Wholesale. Retail generates profit margins of around 5% compared with 15% for Wholesale, but is responsible for about 80% of group revenue. For the first half of 2016, Retail revenue rose 1.1% to $67.3 million but profit fell 11.9% to $3.3 million whereas Wholesale revenue increased 5.9% to $17.4 million and profit was up 24.4% to $2.7 million.

CEO Colin Bell said that the company has had a good start to the second half of the year, recording a profit before tax (PBT) of $3.7 million in July. For the period from January to July, PBT is tracking 42% ahead of last year and it looks like the second half of 2016 will be stronger than the first.

Bell has a market capitalisation of $184.4 million and so is cheap based on current earnings and dividends. However, the shares are up just 2.2% over the last five years and down 70.2% since the group was listed at the end of 2007. Stock broking is a competitive industry that is heavily exposed to market cycles and so in my view, Bell’s current share price is probably about right.

If you are interested in quality dividend shares, then I would recommend this top dividend share instead. A strong yield and potential share price gains make this a great investment idea in my opinion.

Our Top Dividend Stock for 2016

Our resident dividend expert names his Top Dividend Share for 2016. Not only are the shares dirt cheap, the company is trading on a fat fully franked dividend yield. Simply click here to gain access to this comprehensive FREE investment report, including the name of this fast growing ASX dividend share. No credit card required!

HOT OFF THE PRESSES: Motley Fool’s #1 Dividend Pick for 2017!

With its shares up 155% in just the last five years, this ‘under the radar’ consumer favourite is both a hot growth stock AND our expert’s #1 dividend pick for 2017. Now we’re pulling back the curtain for you... And all you have to do to discover the name, code and a full analysis is enter your email below!

Simply enter your email now to receive your copy of our brand-new FREE report, “The Motley Fool’s Top Dividend Stock for 2017.”

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our https://www.fool.com.au/financial-services-guide">Financial Services Guide (FSG) for more information.

Motley Fool contributor Matt Brazier has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.