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3 overlooked and cheap companies with big dividends


When it comes to ASX-listed companies with market caps below $500 million, retail investors can be virtually assured that most of the professional fund managers are ignoring that part of the market.

It’s not because they want to, but because they don’t really have much choice.

When you have many billions to invest, a company with a $500 million or lower market cap is not going to substantially increase your performance – and that’s if the fund manager can find enough shares to buy. There’s also the problem that the more of these smaller to mid-cap stocks you have, the more research and work is required.

When it comes to the property sector in Australia, most fund managers and analysts will focus on the big end of town – the likes of Stockland Corporation Ltd (ASX: SGP), Mirvac Group (ASX: MGR) and GPT Group (ASX: GPT). 9 analysts cover GPT, while 11 cover both Stockland and Mirvac.

These three property companies are under-followed, and it appears that the market is also missing them – an opportunity for investors looking for income.

Cedar Woods Properties Limited (ASX: CWP)

  • Market Capital: $344m
  • Dividend Yield: 6.4% (fully franked)
  • Share price: 92 cents
  • P/E Ratio: 8x

3 analysts cover Cedar Woods – all have a buy rating on the company. Cedar Woods is forecasting a record profit for this financial year and sees the strong performance continuing next year. The company develops housing estates around Australia and has expanded to the east coast and into South Australia from its home base in Perth in recent years.

Peet Limited (ASX: PPC)

  • Market Capital: $450m
  • Dividend Yield: 5.2% (fully franked)
  • Share price: 92 cents
  • P/E Ratio: 11x

6 analysts cover Peet, with 5 out of the 6 rating the company as a buy. Peet is a similar business to Cedar Woods, developing residential building estates around Australia. At the end of December, book net tangible assets per share stood at $1.05, suggesting at the current price investors are buying shares at a big discount.

GDI Property Group Ltd (ASX: GDI)

  • Market Capital: $479m
  • Dividend Yield: 8.7% (Unfranked)
  • Share Price: 89 cents
  • P/E Ratio: 10x

A recent listing on the ASX, GDI is a traditional A-REIT, managing properties as well as a property trust and a funds management business. Just 2 analysts cover GDI Property, both rate the company a buy. Another bonus is that the company’s net tangible assets per share are 99 cents – with the share price being an 11% discount. Significant upside if GDI can increase its occupancy levels beyond the current 84%.

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Returns as of 6th October 2020

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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