Collection House Limited (ASX: CLH) has seen its share price sink by more than 6% to $1.31 in afternoon trading after reporting a fall in net profit for the 2016 financial year (FY16).

The debt collector had flagged earlier this year that FY16 results weren’t going to be great, after reporting a 26% fall in first-half net profit. That saw the share price plunge as low as 93 cents in April 2016.

At the time, previous CEO Matt Thomas forecast full-year earnings to be between $15.5 million and $19.3 million – after reporting $8.3 million in the first half. Today, Collection House reported $20.9 million in underlying net profit – well above the higher end of expectations and a substantial improvement on the first half.

Earnings per share came in at 14 cents, placing the shares on a P/E ratio of just over 9x. With a fully franked dividend of 7.8 cents for the year, that equates to a yield of 6.1%.

So why did the share price fall?

It seems investors may have taken the result at face value, rather than considering it against a disappointing first half and a much improved second half. The company also declined to offer any guidance for the year ahead – until its AGM in November.

That could offer an opportunity for investors looking for a cheap stock paying healthy and likely growing dividends in the years ahead.

More good news

Collection House appointed a new CEO Anthony Rivas as well as new directors recently. Of particular note was the appointment of Lev Mizikovsky – who holds more than 15 million shares (around 11.6% of total shares) – as director. Mr Mizikovsky was the founder of Tamawood Ltd (ASX: TWD) and it’s nice to see directors with skin in the game alongside existing shareholders.

Foolish takeaway

Investors may prefer the much larger debt collector Credit Corp Group Limited (ASX: CCP) or even the smaller Pioneer Credit Ltd (ASX: PNC), but today’s result shows that the death of Collection House has been greatly exaggerated.

How 1 Man Turned $10,000 Into Over $8 Million

Discover how one man turned a modest $10,600 investment into an $8,016,867 fortune. Learn more about this man and how you can start down the path toward financial independence. Simply click here to learn more. 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 writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

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.