3 surprising buy ideas

If you bought shares over a year ago, you might not have noticed the fall of the S&P/ASX200 Index (ASX: XJO) (^AXJO) in the past month (it’s down 6.3%). The spectacular rise of the market over the past year has allowed even the ‘dog’ stocks to do well.

However, despite the rise, shareholders in Leighton Holdings (ASX: LEI), Coca-Cola Amatil (ASX: CCL) and Cash Converters (ASX: CCL) are almost certain to be less than enthusiastic with their performance in 2013. In the past six months they have fallen 3.7%, 6.7% and 27% respectively.

In my opinion investors have overlooked some truly remarkable returns from these three stocks because of reduced earnings guidance or negative press. In the past 10 years the average annual shareholder returns are 7%, 10.9% and 20.9% respectively, not including dividends.

In addition to a very reasonable share price and forecasted earnings per share growth, these companies offer above average income streams. Coca-Cola Amatil – distributor of one of the most well-known brands worldwide – pays a trailing dividend of 4.8% with 75% franking.

Leighton – one of Australia’s biggest construction companies – pays a dividend of 5.7% with 50% franking. With forecasted earnings per share growth of 20% in its 2013 financial year the full-year dividend will likely increase to 96 cents.

Cash Converters’ recent share price dive has provided a great opportunity for long-term investors willing to overlook reduced earnings growth in the near term. It pays a 5.1% fully franked dividend which will likely remain flat or slightly decrease in 2014. Trading on a P/E ratio of 9.5 and considering its growth potential, Cash Converters definitely deserves a spot on watch lists.

Foolish takeaway

Each of these companies pay great dividends and thanks to a setback in their share prices offer good value for long-term investors. However each face an element of risk and future earnings and dividends could come under pressure if management fail to steer each company in the right direction.

Want one of the ASX's best dividends?

Discover The Motley Fool's favourite income idea for 2014 in our brand-new, FREE research report, including a full investment analysis! Simply click here for your FREE copy of "The Motley Fool's Top Dividend Stock for 2013-2014."

Motley Fool Contributor Owen Raszkiewicz owns shares in Leighton Holdings and Cash Converters. 

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

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 Financial Services Guide (FSG) for more information.