The market might be struggling to gain any momentum at the moment, but for those investors who have excess cash, now might be the right opportunity to accumulate some high quality stocks at a discounted price.
The returns from cash might seem appealing compared to the wild volatility being seen in the equity market, but investors need to remember that this is not something new and is definitely not permanent. While it can be easy to throw in the towel and accept the paltry returns on cash deposits, I would encourage all investors to seek dividend-paying stocks to boost their returns over the long term.
Here are two stocks that investors could consider:
1. G8 Education Ltd (ASX: GEM) – The share price of G8 Education has fallen nearly 45% from its all time highs and now sits just above $3.
Negative sentiment surrounding its acquisition strategy has been the major contributor to this fall and although the company is still growing profits, it appears the market has relegated the stock to the naughty corner. Its recent takeover offer for Affinity Education Group Ltd (ASX: AFJ) has also weighed heavily on the stock and despite the acquisition now being unlikely to go ahead, the share price has failed to gain any traction.
G8 Education delivered a solid first half FY15 result that revealed strong like-for-like growth in its existing centres along with positive contributions from acquisitions completed in the half. This translated into a 60% increase in underlying earnings per share and now means G8 Educations shares are trading on a forward price-to-earnings ratio of less than 13. The company is also offering investors a fully franked dividend yield of nearly 8%!
G8 Education is a leader in its sector and with the demand for childcare services still growing strongly, it's hard to go past the company for both growth and income at these prices.
2. Thorn Group Ltd (ASX:TGA) – Thorn Group might not be a household name but many people would be aware of its core consumer leasing brand of Radio Rentals. The company also operates three other business units including business finance, consumer finance and receivables management services.
Over the past two years, the company has invested heavily in diversifying its operations as the company looks to move away from relying solely on its Radio Rentals business for growth. This strategy has started to deliver growth for shareholders and this diversification should transform Thorn Group into a much larger financial services company over the long term.
The shares are currently trading on a price-to-earnings ratio of just 11 and considering the company is expected to grow profits in FY16, it appears as though the recent pull-back in the share price might be a good buying opportunity. With shareholders likely to receive a fully franked dividend yield of more than 5%, investors could do far worse than consider buying shares at the current price.
Although the dividend and growth potential for G8 Education and Thorn Group look pretty good, the experts at The Motley Fool have found an even better investment that deserves the top spot in your portfolio.
