No stock is a buy at any price. Yet, at the moment, it seems all the good companies are already priced-in for their future success. However, if you look hard enough, there?s still a number of great stocks available on the market at reasonable prices. A good company has the following characteristics:
A product or service which creates barriers to entry and provides room for growth
Strong leadership ? directors who own shares in the company are a big positive
Healthy balance sheets (including cash flow)
Valuation ? is it well priced?
Dividends ? have your cake and eat it too
Ticking off all five…
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No stock is a buy at any price. Yet, at the moment, it seems all the good companies are already priced-in for their future success. However, if you look hard enough, there’s still a number of great stocks available on the market at reasonable prices. A good company has the following characteristics:
- A product or service which creates barriers to entry and provides room for growth
- Strong leadership – directors who own shares in the company are a big positive
- Healthy balance sheets (including cash flow)
- Valuation – is it well priced?
- Dividends – have your cake and eat it too
Ticking off all five characteristics before you commit to a purchase can be difficult because chances are someone else has the same idea! However, in investing, there’s no reward for uniqueness – don’t be afraid to grab ideas from someone else.
I’ve already given my top 5 growth stocks for 2014, but they don’t pay dividends as good as the following five stocks.
For the past 10 years, Cash Converters (ASX: CCV) has been an excellent growth story for shareholders – turning a $10,000 investment into $78,000. However recent changes in consumer lending regulations have spooked the market and its share price subsequently fell very hard. In my opinion the fall in price has provided the perfect opportunity for long-term investors to grab a piece of a company that ticks off the five characteristics of a good investment. It’s 5.1% fully franked dividend is icing on the cake.
In terms of total shareholder return, Finbar (ASX: FRI) has been a standout. It has notched up a 10 year average annual shareholder return of 27% not including dividends. Its dividends are nothing to be scoffed at either, its pays a trailing 6.1% fully franked return. The company has many projects in the pipeline and it has a history of cashing in on Western Australia’s demand for high quality apartment style living.
Perhaps lacking the dividend of other stocks on this list, Amcom Telecommunications (ASX: AMM) is still definitely worthy of investor consideration. Although it trades on a P/E of 23, its high quality business model and future earnings potential makes it more than worthy of its current price tag. The company’s core data networks division is a major driver of growth along with its hosted and cloud services.
Up 130% this year alone, Tassal Group’s (ASX: TGR) investment strategy, which focuses on delivering quality fresh salmon to the domestic market instead of focusing on volatile export markets, has been well received by investors. As the company transitions to its new growth model in 2014, earnings can be expected to remain largely flat, but in coming years could jump significantly. Paying a 3.5% dividend (which will likely increase in 2014) Tassal deserves a spot on your long-term watch list.
Lastly Cromwell Property Group (ASX: CMW) is one of a number of property stocks that pays a great dividend to shareholders. After a number of large acquisitions and induction into the S&P/ASX200 Index (ASX: XJO) (^AXJO) Cromwell increased earnings per share despite an equity raising to fund its growth. It pays a 7.8% dividend.
Arguably smaller companies provide more room for growth but must be rigorously researched and analysed before buying. Investment companies, like the Motley Fool, conduct days and days of research just to produce one standout buy idea.