Much of the time, it’s difficult to find good companies trading cheap. A good company needs brand recognition (which affords them some degree of safety), growth potential (to maintain or increase their share price) and dividends.
The next three companies exemplify those characteristics and best of all, are trading at modest prices.
1. Telstra Corporation Ltd (ASX: TLS) is perhaps most famous for its generous 28-cent dividend. However, that’s about to change. Not only is its payout expected to reach 29-cents per share in FY14, but it is becoming a more agile business with huge cash flows. Although individuals’ reliance upon home phones and copper cables is diminishing by the day, Telstra has strategically placed itself as the frontrunner in a number of long-term markets including China, networked-services, cloud computing and unified communications. At current prices it yields 5.5% fully franked.
2. Cash Converters International Ltd (ASX: CCV) has risen 24% in the past three months as investors collected themselves following the company’s disastrous 2013 run which saw almost 50% of its value wiped-out. Since legislation brought about changes to the fees which Cashies was able to charge its customers on small loans, the company has pursued other growth strategies such as its Carboodle business and expansion into New Zealand and South America. At under $1.09 per share, Cash Converters is a standout buy and yields 3.7% fully franked.
3. Village Roadshow Limited (ASX: VRL) is the name behind top leisure and entertainment assets such as Village Cinemas and theme parks Wet’n’Wild, Movieworld, Sea World and Outback Spectacular. Through a 47% investment in Village Roadshow Entertainment Group it is also the name behind productions such as Happy Feet 1 and 2, The Great Gatsby and The Matrix. Village’s earnings and dividends can be expected to increase in FY14. It currently trades on a forecast dividend yield of 4.8% fully franked.
These three companies each hold outstanding long-term value and would fit nicely into a well-diversified portfolio. Of the three, I believe Cash Converters holds the greatest potential at current prices and can be expected to grow very strongly over the next five years.