We all know that money sitting in a deposit account is earning a pittance of what it should. That’s why investors are looking to the sharemarket to boost their income.
When it comes to identifying a stock which offer that “happy” balance between, low risk, solid fully franked dividend yield, and the ability to provide capital appreciation via a growing share price, a stock which looks to have standout potential right now is Primary Health Care Limited (ASX: PRY).
Primary is an owner and operator of medical centres, diagnostic imaging services and provider of pathology services. Much like its peers Ramsay Health Care Limited (ASX: RHC) and Sonic Healthcare Limited (ASX: SHL), the services which Primary provides are non-discretionary and therefore the company’s revenue base is defensive.
Likewise, while there is always the risk of changes to Medicare and government policy, the earnings base of Primary is reasonably predictable and for the most part will grow at least in line with inflation over time. The quality of these earnings are high and in stark contrast to a commodity producer such as BHP Billiton Limited (ASX: BHP) where the earnings can swing widely from year-to-year.
A healthy dividend with more to come
For the financial year (FY) just ended, Primary is expected to pay a full year dividend of 19.1 cents per share (cps) according to Morningstar data. This puts the stock on a yield of 4.1%. However, when we look ahead to the current 2015 financial year the dividend is forecast to rise to 22.9 cps, implying a juicy forecast fully franked 4.9% dividend yield.
With the shares trading near their 52-week low and earnings and dividends set to rise, it could be time investors gave Primary Healthcare a check-up of its own!