3 cheap mid cap stocks for your growth portfolio

Two of these stocks offer decent relative value, but one is a screaming buy.

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Typically, large caps offer little growth and small caps are high risk, but somewhere in the middle is a happy medium of good growth and moderate risk. Here are three such goldilocks stocks that pay solid dividends.

Earlier this month, debt collection and consumer lending business Credit Corp Group Limited (ASX: CCP) released a strong set of financial results for 2016. Revenue, earnings-per-share and dividends all grew by double digits and the company significantly increased the size of its loan book and debt ledger which will drive growth in future years.

Credit Corp still looks reasonable value even though its shares rose strongly following the announcement. The stock is trading on a forward price-to-earnings ratio (PER) of under 15 and comes with a fully franked dividend yield of at least 3.3% based on management's guidance for 2017.

New Zealand-based CBL CORP FPO NZ (ASX: CBL) is an international insurance provider which only listed in October 2015. Since then the shares have risen 67.2%, but still do not look expensive.

The company has grown strongly in recent years thanks to its focus on niche insurance lines and in June announced plans to acquire Securities and Financial Solutions Europe SA (SFS). CBL will pay $143 million to acquire SFS, which is France's largest specialist construction insurance agent and CBL's biggest client.

Managing director Peter Harris owns 26.8% of CBL and has run the company since 2007. Meanwhile, non-executive director Alistair Hutchison owns 23.4% and so board and shareholder interests are well aligned.

Including an annualised contribution from SFS but without assuming any growth in 2016, I estimate that CBL is trading on a PER of about 13. The company's dividend policy is to pay out 30% of adjusted net profit after tax (NPAT) which implies a dividend yield of 2.3% at current prices.

Malaysian property developer United Overseas Australia Limited (ASX: UOS) is ridiculously cheap quite frankly. The company pays a 6.1% dividend, has a large net cash holding and is trading at a 36% discount to its $986 million net asset value. Based on last year's earnings-per-share (EPS) of 9.9 cents, UOS trades on a PER of less than 5.

Normally you would expect there to be something seriously wrong with a company that is so cheap, but UOS has an exemplary track record as a listed entity. The share price has risen by over 200% in the past 10 years with dividends and capital returns representing a further 169% gain.

In an ultra-low interest rate environment, it seems only a matter of time before the market latches on to this bargain hiding in plain sight.

Motley Fool contributor Matt Brazier owns shares of CBL Limited and United Overseas Australia Ltd. 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.

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