Now is a good time to review the companies that did well or poorly over the past year and see which are shaping up for a good year ahead.
It's important to identify what were the companies' growth catalysts and consider if they will continue, or were they one-off situations?
Also, what new developments have appeared that could improve business and rally the share price even more? That's how you develop a "story" about the stock and see whether it is getting better or worse.
1- M2 Group Ltd (ASX: MTU): I wrote about this company's great earnings growth previously. Another thing that will help keep profitability up is its cost management. When it signs its Commander business customers up for the NBN service, the company's fees are less. However, M2 Group's NBN service costs are much lower as well, so those earnings margins can stay the same or even improve. The stock is paying a fully franked 3.7% yield and has a 14 PE. With good organic customer growth on top, the next year looks promising.
2- Alumina Limited (ASX: AWC): This company has a 40% stake in Alcoa World Alumina and Chemicals (AWAC), a subsidiary of the U.S. aluminium company Alcoa (NYSE: AA). Since December 2013, the stock has risen from about $1 to $1.70. The aluminium spot market has improved since February. Alcoa has almost doubled in share price in the last 12 months. Further improvement in Alcoa could drive Alumina Limited, so investors should watch that company's progress as well. Alumina turned a profit in the first half of FY 2014, after a net loss in the second half of FY 2013.
3- Brambles Limited (ASX: BXB): The global supply-chain logistics service provider well known for its CHEP brand pallets and containers is close to setting a new 52-week high. Earnings are forecast to increase an average 12% annually over the next two years. After spinning off Recall Holdings Ltd (ASX: REC) in December, it acquired a UK-based company specialising in container solutions for the offshore oil and gas industry. It is focusing on its core business, which encourages my outlook for positive company performance over the next year. It is paying a 3.0% partially franked yield.
All of these stocks have an improving outlook. I prefer Brambles as a long-term investment because of its large scale and market-leader status.
There are other companies that are also performing well. For instance, our top analyst, Scott Phillips, recently identified one cheap but growing ASX stock with a 6.3% grossed-up dividend yield.
The Motley Fool has written a free report on it: "The Motley Fool's Top Dividend Stock for 2014-2015" which it's sharing with all interested investors.
If this is you, simply click on the link here and enter your email address – it takes less than 30 seconds – and we'll send it to you, completely FREE!
