The Motley Fool

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.

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