Here’s why Servcorp Limited continues to be an awesome investment

Serviced office provider Servcorp Limited (ASX: SRV) was up over 4% yesterday on the back of profit growth of 24%.

To quote from the report: “Servcorp has more than doubled its size over the past five years, and due to the respective size of the immature losses, it was historically appropriate to segregate the performance of the existing mature business from the new immature business. ”

These days the company reports like-for-like occupancy rates, to qualify for which, a floor must have been open for more than a year. Like-for-like occupancy was 79%, a figure management believe can be improved upon. Pleasingly, the number of occupied offices was up 10%.

Personally, I was also happy to see that the virtual office package deal business is continuing to improve, recording growth of 7% in FY 2014.

Back in November 2013, I was apparently of the opinion that COO, “Marcus [Moufarrige] is known to be a proponent of the virtual office services offered by the company. This is an important part of the business in my view, because it can generate higher margins and demonstrates that the company is continuing to innovate.” 

More importantly, all shareholders expect to benefit from a 22c dividend for FY 2015, which would put the company on a 4.3% (only partially franked) dividend yield. Operating cash-flow was up to over $40 million, although capital expenditure also increased to over $24 million in property, plant and equipment.

Finally, I favour a tailwind investing philosophy: so what is the tailwind assisting Servcorp?

My belief is that the increasing mobility of big business and the global elite will drive demand for both serviced offices, and the top notch telecommunications advantages provided by the virtual office package.

Please Note: Servcorp is a cyclical business with relatively high operating leverage, so it was hit hard by the downturn following the GFC.

In comparison, this growing company pays a whopping grossed up dividend of over 6.2% and has already proven itself with 7 years of growing profits.

Indeed, not too long ago, directors also bought shares and the CEO owns over 15%! However, the share price has crept up a bit lately, so discover this stock now, before it's too late.

Motley Fool contributor Claude Walker (@claudedwalker) owns shares in Servcorp.

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